Bad News, Politics and Investing

Here it comes…

THE SKY IS FALLING! THE SKY IS FALLING!

A presidential campaign is officially coming, and unofficially already in full swing. With it comes political ads, ads that make it sound certain that we are doomed, we will be doomed, or we must fix the doom.

Are things really that bad? Is Washington really ruining the economy?

The answer, as always, is no.

Politics and Investing Do Not Mix

economy politics doom

The reality of America is that everyone, in both parties, wants the same thing: a stronger, better, bullet-proof economy. The only difference is in the ideas on how to get there. Even tougher to follow is that there is not definitive proof that ANY of the political ideas out there do what their followers think they will.

Republicans think cutting taxes puts more money in the hands of businesses and consumers which boosts the economy. Democrats think government spending puts more money in the hands of business, while improving society, thereby improving the economy. Who is right?

They both are. And, they are both wrong. The key to a strong economy isn’t really political at all. It is cyclical.

Go back over the years and you can prove anything you want, because the reality is that the economy always goes up and down. It’s called the economic cycle, and it is a basic concept of all economics. An economy will expand (Whoo hoo! Good times.) and contract (Boo! Hard times.) over a varying period of time, usually somewhere in the 8 to 12 year range.

EVERY. SINGLE. TIME.

The only thing politicians can really do is influence the swing. Even then, the Federal Reserve has much more influence on the economy than Congress and the President.

Don’t ever let anyone tell you this is a bad thing. A table surrounded by economists will do an infinitely better job managing the economy than a roomful of politicians pushing an agenda. Remember when someone says they want to eliminate the Fed, what they are really saying is they think Congress would do a better job running the economy. In the history of the country, has Congress ever done a better job of anything?

But, scary sells.

If you think back, you’ll remember these exact same commercials with the exact same scary music from the last election… and the one before that… and the one before that… and the…

You get the idea.

Whether or not you agree or disagree with whichever political party is a POLITICAL matter, not a financial matter. DO NOT use these ads a reason to question your investments. The economy will rise and fall, no matter who gets elected. In the meantime, stick to your investment strategy and personal finance plan, and let the politicians worry about what is so scary it might make someone vote.

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