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by John R. Burgess

Calling the outlook unusually uncertain, the Federal Reserve cut its forecast for economic growth and raised the possibility of substantial interest rate cuts if financial conditions don’t improve.

The Fed, releasing the minutes of a December 11th Fed meeting on January 2nd, expects the economy to grow noticeably below its potential in 2008 as high oil prices, low incomes, a deteriorating housing market and constrictive credit markets take a toll. What does this mean to small business owners and individual families?

How much turmoil really exists in the world? How much concern should we have? Should we be concerned that oil is $100 per barrel and gasoline is $3.30 cents per gallon? Should we be concerned that the number of foreclosures has gone up dramatically, although, it is still an extremely small percentage of the overall homes in America? Should we be concerned that the value of the dollar has decreased by 45% in the last 18 months or that foreign investors don’t want to invest in America because of the declining dollar? Should we be concerned that with the 45% dollar value decrease, the real price of oil in the rest of the world is only 55% of $100 per barrel?

The fact that so many don’t understand if all the above is or isn’t a concern is actually the real reason for concern. Worldwide, there is more confusion around the current economic circumstances than there has been at any time in the past 15 years (excluding extraordinary events, such as 9/11).

Should the Federal Reserve continue to cut interest rates? Cutting interest rates would deflate the dollar further, increase profitability of multi-national corporations and help drive down the federal trade deficit while reducing foreign investment. Or, should the Federal Reserve Board say, "Woah Nelly, we have an obligation to support the value of the dollar." There is an obligation to support all the American people, not just the behemoth companies such as the Microsoft-types of the world.

As we go forward into these very uncertain times, it is more important than ever that we do our best to improve the basics of running our businesses and running our personal lives. We must do everything in our power to be as cautious as possible in relation to consuming natural resources such as energy. We must also be as conservative as possible to accumulate wealth and manage any difficulties as they relate to the overall economy and the well-being of America as a whole (based on the value of the dollar, and the potentiality of major fluctuations in future interest rates).

The greatest singular difficulty we have ever seen in our lifetime occurred in the late 1970’s when Jimmy Carter, then President of the United States, declared a "crisis in confidence" in America. At that time, interest rates were rapidly increasing into the mid-teens coupled with an inflation rate higher than I had seen in my lifetime. The inflation rate was rapidly increasing while there were astronomical interest rates. That made it very difficult for the Federal Reserve to deal with the recession which was being occasioned by the increased spike in interest rates, coupled with the increased spike in inflation.

America is now faced with the potential of the same problem. As we continue to lower the interest rates and try to forestall the recession, there are rising commodity prices across the board including soy beans at $12 a bushel, corn at $4.40 a bushel, gold at over $800 an ounce and oil at $100 a barrel. Where does it end— when Americans have to pay $2.50 for a loaf of bread, $3.30 for a gallon of gasoline and $3 for a dozen eggs? At what point do we become rational, again? And the story continues.