DISQUS

Ryan Szabo · 1 year ago

Greg, this is a very interesting and thoughtful post and I'm happy you solicited my take on what you're discussing here. If I understand correctly, you're saying that with a potential economic recession looming and the consumer confidence numbers trending downward, that marketers must dream up some new way of communicating with their customers, telling them it's OK to actually go out and buy afterall. It's an interesting viewpoint, but reading s0me of what you wrote demonstrates that you don't understand the underlying phenomena of a recession.

The portrayal of Recession as a sort of Bogey that everyone must fear is misleading I feel. Essentially what a recession is--and it's an absolutely necessary aspect of the cyclical pattern of business's adoption of innovations (ie. new ways of doing things)--is the liquidation of untenable business enterprises. What I mean of course, is that during the boom phase (think recent tech boom of the 90s) of any prosperity you have many new businesses coming into existence. The information/data that each of these entrepreneurs are utilizing to make their profit projections are usually misleading--they see past profit rates of increase and then extrapolate that going forward, sometimes ad infinitum. Of course these profit projections are not sustainable or realizable, and here, once people begin to realize the untenableness, we see the liquidation of these unsustainable enterprises (again, think tech boom, then the subsequent bust where many e-companies failed). So in its basest form, recession is the liquidation of untenable enterprises that were created during previous boom periods. And, your 6th bullet point about inflation could not be further from the truth during times of recession. Recession actually includes a process of DEFLATION. If you can just reimagine the example of the 90s tech boom/bust, you can understand that when a company or companies go poof--out-of-business--you have the evaporation of the paper wealth that goes along with it. This elimination results in fewer $$$ in circulation, which then results in the increase in the purchasing power of each monetary unit in the economy. So, recession exhibits a period of price deflation (things are cheaper in real terms at least), liquidation of unsustainable businesses, temporary surges in unemployment(which I neglected to mention more fully).

I think the idea that the consumer somehow drives the economy is also misleading. The idea was born out of the Keynesian aggregate demand arguments of the early 20th century, which still persist to this day, but surely you'd have some reservations about adopting it. I'm sure that you're aware of the many instances of products being created without a customer base in mind--in many instances in the past the demand for a product had to be created! The role of Marketers in this instance was first to educate the consumer of the benefits of using the product and then why it would be more convenient to do so. Sometimes persuasion was/is the best method of developing a consumer base for a product--regardless it's a stark difference from the idea that somehow consumers plead for a certain product to be produced, then a company steps in to fill that void. So, in short, consumer confidence surveys can be misleading, and certainly they are not accurate indicators to the overall economic climate. It's more like a indicator of the present fear/apprehension resulting from media reports, or whatever.

Anyway, I thought the post was interesting, but overall I wouldn't be worried about consumer confidence surveys or the so-called Recession (no one even knows if we're in one anyway).

Ryan

Greg Bond · 1 year ago

http://www.marketwatch.com/news/story/dollar-pr...

recent article correlates with my argument.