Analogy– Rocky Balboa:Ivan Drago :: U.S. Economy:Subprime & Oil Prices
Explanation: The U.S. economy faces headwinds but is still not in recession. According to the Commerce Department’s estimate released this morning, 2nd quarter GDP grew at an annual rate of 1.9% (first quarter GDP was revised 0.9%). The unemployment rate is still at a historically healthy 5.5%. Industrial production also looks good.
If I was going to tell the story of this economy over the last year or so, I’d liken it to Rocky’s epic bout against Ivan Drago in Rocky IV. In this analogy, Rocky is the U.S. economy and Drago plays the part of subprime mortgages and oil prices.
Just before the fight begins, Rocky and Drago meet at center ring, and Drago says with that intimidating glare, “I Must Break You.” As the fight ensues, Rocky is pulverized in the initial rounds. And for several months through last winter and into the spring, it looked like subprime & oil would indeed break the U.S. economy. Since then, and just like Rocky IV, the fight has degenerated into a brutal battle of stamina. Our economy has endured $150 oil haymakers and countless jabs in the form of a never-ending stream of terrible financial data.
But at the end of it all, although Rocky’s face (e.g., the housing sector) was battered, bruised and bloodied; and although his legs (e.g., the U.S. consumer) were wobbly, Rocky was resilient enough to withstand the onslaught and knock Drago out of the ring. Our resilient capitalist economy will withstand the onslaught brought by subprime & oil prices – we will go on to fight another day!
Following his victory, Rocky gives an impassioned speech to the crowd, acknowledging their initial disdain for each other, and how he and Drago came to respect each other during the fight. Clearly the analogy applies once again: without question, this mortgage & oil crisis has opened people’s eyes and established a whole new level of respect for the role of financial prudence in a stable economy and the serious energy challenges we face.