By: Howard Farran, DDS, MBA, MAGD,
Publisher, Dentaltown Magazine

Business only has three functions. You have to create something or provide a service––think free online CE on Dentaltown.com/OnlineCE. You have to sell something; think more effort with your case presentations, intraoral cameras, digital x-rays, and CASEY. You have to watch the numbers; think going back to school in a brick building or enrolling online and earning your MBA. You only have to manage three things: people, time and money.

When was the last time you sat down and really thought about the business cycle and what it could mean to you? Is the glass half full or half empty? Karl Marx saw the reoccurring economic downturns as proof that free enterprise and capitalism did not work for the masses. Karl saw way too much personal pain and suffering during these nasty regularly reoccurring recessions and depressions. Karl Marx said good times produced bad times, which healed capitalism’s bad investments, and in enough time, would produce wealth.

The Austrian economist Joseph Schumpeter saw the business cycle as the gale winds of glorious creative destructionism; recycling workers from lower-in-productivity, lower-in-value jobs to higher-in-productivity, elevated-in-value jobs. Schumpeter saw recessions as the proof that capitalism was superior and shunned Karl Marx and his proletariat ideas.

Then came the roaring ‘20s led by automobiles and Henry Ford’s new assembly line. By the end of 1921, prices had dropped 50% while unemployment rose to 14%. The next downturn for America was the mother of all downturns, the stock market crash of 1929 and the Great Depression. By 1932, the gross domestic product shrunk over $40 billion, unemployment rose seven fold to 25%, and 12 million workers were unemployed.

Herbert Hoover was the lucky president in charge at the time. On the playgrounds you could hear children singing: “Mellon pulled the whistle, Hoover rang the bell, Wall Street gave the signal, and the country went to hell.” When this cycle turned upwards, America was in World War II with enough economic muscle to build 60,000 innovative new planes, 45,000 new tanks, and 55,000 new antiaircraft guns, creating 17 million new jobs, defeating Nazism, Fascism, and Imperialism.

From 1950 to 1970, America built 60 million new homes, 140 million new cars, thousands of miles of new roads and thousands of new schools. Farm productivity rose 45%, while personal income rose 68%, creating over 25 million new jobs. The next downturn was stagflation; double digit interest rates, combined with double digit unemployment. From 1880 to 1980, America’s gross national product went up twenty fold, increasing life expectancy, while creating a shorter work week, and more leisure time with the family. The end years of Reagan were great, minus the federal deficit, and the Berlin Wall.

Forty-first president, George H. W. Bush’s term ended in a mild economic downturn as William J. Clinton sang, “It’s the economy stupid!” Clinton was the antithesis of Hoover prevailing over the greatest and longest economic expansion in over 100 years, while current president, George W. Bush, led America through 9/11 plus another business cycle downturn.

That leaves us sitting in the present. The dollar has lost 30% of its value, while gold is over $450 an ounce. When gold is under $300, governments around the world are paying down deficits. When gold is over $400 an ounce governments are printing more paper money. Each month the US Treasury Department is selling $50 billion dollars of Treasury Bonds to the Federal Reserve across the street, which then shows up each month with buckets and wheel barrels of freshly printed paper dollar bills. If you and I did this it would be called “counterfeiting,” when our own beloved government does this it is called “inflation.” Each month more money is chasing the same number of people and homes. See Milton Freidman for more details in his book Free to Choose.

What keeps me up at night; dentists who have their home or office building floating in an ARM (Adjustable Rate Mortgage) while the Fed is raising interest rates seven out of their last seven meetings! Hello! Doctor, you can borrow real money at 40-year low interest rates, what are you waiting for? This is the time to buy your dental building or vacation retirement rental property with locked-in low interest rates. Borrow real dollars today and pay them off over the next 15 years with cheaper inflationary dollars. Need an extra operatory, remodel, or expansion, do it today with the cheapest real money that you may never live long enough to see again. When you tell your grand children the price you paid for your land, home, and building, they will not believe you.