Ten year ago I suffered a knee injury while playing basketball. Anyone who has experienced a ligament tear in their knee knows the agony is excruciating. I described it as being enveloped in a blanket of pure pain.
After consulting the doctor, I had to make some honest decisions. My pro-sports career really hadn’t taken off and at age 33, considering the extent of the injury (mild to moderate), taking extraordinary measures to correct the damage was probably not warranted. The doctor prescribed therapy and rest, and told me over time the knee would regain most function.
He was right. Over time the knee healed, and while it tends to get fatigued faster than the other knee, the joint works and I do pretty much everything I want to do on it.
But one part of me never fully recovered. I never forgot the pain of the injury itself, and the thought of going through this type of pain again scares me. This fear has eroded my confidence and the reduced confidence impacts my decision making when it comes to physical activity. I just don’t push it as much anymore.
Confidence is a fragile and precious factor in much of life. Confidence is built slowly over time and yet can be lost in an instant. Once confidence is lost, it can be very difficult, perhaps impossible, to regain.
In the realm of economics confidence is the esoteric tonic that is the source of growth. When consumers are confident they buy, when employers are confident they hire and when investors are confident they deploy capital. Without confidence, none of these things happen.
The 2008 financial system crisis and resulting stock market collapse was no less than a catastrophic injury to our economy. In this drama, the Federal Reserve emerged as the doctor with our economy as the patient. From soon after the injury period the doctor has been aggressively treating the patient with monetary medicine.
Zero interest rates, quantitative easing and other lower profile tools continuously remind us of our injury, remind us of the pain and make us question our confidence.
This week, however, the tone changed. The Fed, as now represented by Janet Yellen, openly acknowledged our economic injuries were healing, and told us in more certain terms soon the therapeutic response to these injuries would end. Not only would quantitative easing conclude, but interest rates would also go up. Soon our economy will be expected to stand on its own.
Two weeks ago I watched my 11 year old son ski the way I used to ski (OK, he’s better). He has all the confidence in the world, and no knowledge or fear of pain.
The next generation of our economy is here. American energy development, social media marketing, cloud computing, rapid prototyping, health conscious consumerism. It’s been almost six years. It’s time to put the pain behind us, and it’s time for our confidence to return. This week the Fed told us they agree.