The radical increase in energy prices in the past two years, along with the bursting of the housing bubble and the stock market have caused consumers to pull back in their spending, and caused bankers to focus on their balance sheets, and pull back on lending. The three industries hardest hit so far are housing related, financial and the automobile industry, beginning with the shift away from larger energy intensive vehicles.
The current replacement rate for automobiles, based on recent low purchasing levels, implies that people are going to be holding on to their cars for 21 years on average. Consumers have overshot on the downside, creating the potential for pent up demand to be released. This represents one kind of force, which is the natural replacement level for products. Another key force is the American spirit. The American spirit has existing for several hundred years, giving individuals the opportunity to dream and to realize their dreams. Not only does life go on, but people want to realize their dreams. It is time for this yearning to be recognized, put to good use, and encouraged.
As we move forward through this trying economic time, we must remember to focus on making changes that strengthen our economic well being, keep our eye on the prize, and tap into and encourage the American spirit to shine ever brightly. Fundamentally, our economic well being is based on the value that we each create every day, both singly and in aggregate. There are times when the value we create is real, there are times when the value we create is drawn from our natural resources, and finally, there are times when the value we create is based on surges in capital valuations and markets. These distinctions are critical. In the long term, an economy will not expand without creating true value at its core.
Because of the significant size of the downdrafts in housing and the stock markets, it is going to take time for the economy to claw its way back, a process that will be enhanced and aided to a great degree by true value creation. This is done by individual and collective productivity, innovation and investment in processes and advanced technologies. It is also advanced by encouraging those kernels of value creation that add value to the economy, and not being dragged down by investing in dying industries and value sapping activities. Finally, we cannot forget to lend energy and encouragement to our belief in creating abetter future, our collective capacity to succeed, and an unrelenting belief in the value of the American spirit.
