(Economic) Reality Bites

I generally write about the economy and the markets from my little ivory tower, throwing stones, feeling frustrated and getting critical even though I am largely immune from the day-to-day impacts. Gas at $3.50 a gallon? It sucks, but I can handle it. A carton of orange juice that costs me $5 bucks? Irritating, but it's not going to change my life. Even a domestic stock market that is down more than 10% from its high isn't going to materially impact my existence. I am very lucky and I am acutely aware of my good fortune. Sadly, my stagflation hypothesis appears to be playing out, and this is likely to have a material impact upon many in my community and beyond.

This really hit home today when discussing financial forecasting in the context of my children's school. I have sat on the Finance Committee for around four years and have largely lived through the good times; I am only now seeing the bad times. Those high gas prices, those rising food prices, the increases in daily living costs even in the face of a weakening stock market, lower short-term interest rates and crimped access to liquidity? These economic realities hurt people, honest, hard-working people, who want the best for their children and their families. And in the context of planning for the next fiscal year, we are coming to grips with several adverse circumstances: the likely spike in bad debt expense (tuition payable that simply can't be paid on time), as job losses and tighter credit markets make it harder to make ends meet, which causes us to think about increasing tuition assistance; skyrocketing insurance costs, which means that staff benefits cost more to both the insured and the school; financing for school construction projects, and on and on. In sum, this simply isn't a pretty picture.

It is easy to get hyper-intellectual about economic circumstances when I read about it in the Wall Street Journal, The Economist, Barron's and online sources. But sitting in a meeting and talking about real people with real children living in my community and anticipating the struggles they're likely to endure in 2008 and for some years in the future, it feels bad. Really, really bad. To those who happen to be fortunate like me, all I can say is be charitable, be prudent and be mindful of exactly how lucky you are. Because you, my friend, are in the minority.