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The Economy: Are You Scared Yet?
Gold at $1,000 an ounce. Oil at $110 a barrel. Record home foreclosures. Steeply rising inflation. Worrisome employment numbers. Personal bankruptcies surging again.
Are you worried about the economy yet? Are you beginning to be very, very frightened? And if not, why not?
Bad times follow good times, just as good times follow the bad. That’s a natural process. It’s what economists call the business cycle. Or if you’re of a religious bent, it’s what the Bible was referring to with the story of Joseph in Egypt and his vision of seven fat cows followed by seven lean ones.
We were due for an economic downturn. It’s natural. It was unavoidable. A shallow recession or a deep one was in the cards one day. The fact that it arrived in late 2007 could thus have been nothing more than the coming of the inevitable.
What makes the recent arrival so terrifying is not the suddenness of the downturn, or even its apparent depth. You fly high for awhile you’re bound to fall a lot. What’s so terrifying is the fact that there seems no way to check the present downward spiral, and the mechanisms in place to keep us all from sinking much further are failing badly.
When it comes to ending a downturn, some kind of financial workout is always required. People who owe either pay, pay part of what they owe, or are acknowledged to be unable to pay anything. Once that part of the process is completed or even near completed, a new upward cycle can begin.
The problem these days is not merely the extent of what is owed, but uncertainty of who owes what to who.
The cunning rascals who have been running our markets in recent years have so thoroughly sliced, diced, parsed and parceled assets in order to artificially boost their market worth and their own “commish,” that ownership of many of these assets has been transferred to endless black holes, disappeared into the realm of the unknowable. If you don’t know who owns what, who’s supposedly insuring a given asset, there can’t be settlements between owners and lenders. And without such workouts, the debt bubble can’t shrink and a new upward cycle can’t start.
The rationale for all the slicing and dicing, parsing and parceling, was risk management. It was supposed to spread the risk. Another “sure-fire” risk management tool that was supposed to limit any market meltdown but hasn’t was the new world economy — an economy in which not only the US but countries around the world shared economic burdens. The expectation was that if worst came to worse our own defects and defaults would be compensated for by still prospering foreigners.
Alas, the simple fact here, one that is only now becoming clear, is that we haven’t so much spread economic risk with a new world economy, as exposed us all to new sources of instability. A major oil producer somewhere in the world won’t produce more, a big lender is forced to change its lending priorities for domestic reasons, competition for basic food and energy stocks by nations that can finally afford to compete for these commodities, they all work to compound rather than alleviate American spawned market problems.
On the matter of leadership to meet all these challenges, there’s Fed Chairman Ben Bernanke. An economy saving messiah? Not yet. Probably not ever. The Fed under Bernanke has pretty much shot its bolts and missed its targets by a mile. As for leadership from people in the Bush administration. Not even a bad joke. Tax cutting ideologues and special interest errand boys all.
I have no grand solutions to these problems. No grand proposals to make it all right. I merely report.
And hope, nay pray, that somewhere in the mist someone with great knowledge, compassion, and force of personality appears who can save us from the consequences of what we have all, to one degree or other, brought upon ourselves..
Cartoon by Pat Bagley, Salt Lake Tribune
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10 Responses to “The Economy: Are You Scared Yet?”
[...] Original post by The Moderate Voice – Domestic and international news analysis, irreverent comments, original reporti… [...]
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[...] CLEAR: left PADDING-RIGHT: 0px PADDING-LEFT: 0px FLOAT: left PADDING-BOTTOM: 0pwww.bollywoodblog.comThe Economy: Are You Scared Yet? Gold at 1,000 an ounce. Oil at 110 a barrel. Record home foreclosures. Steeply rising inflation. [...]
The immigration deal that congress cooked up last year was a cure for what we are seeing now. The fact that they wanted to open our borders too 100 million new immigrants, legal immigrants, but still massive quantities was their way of dealing with the economy.
To grow the economy you need to keep growing the base of people using disposable goods. The only way to do that rapidly is to increase the influx of adults who can earn wages and have disposable income to buy disposable goods. Birth rates dont accomplish that. Immigration does.
The economy is always a mental frame of mind. The border states are toughening up on immigrants. Businesses are checking more carefully their employees. The Government is making some attempt at regulating and enforcing existing immigration laws. As a result there are fewer immigrants steaming into this country ready to continue the expansion.
A recession is simply a day of reckoning. A time when we have went on a spending spree and now must pay back what is owed. A time when we no longer have the available resources to continue to purchase. It is a natural correction. It happens regularly in a capitalistic society that is consumer driven.
I am all for raising taxes to punishing numbers. Lets tax everyone mindlessly so that we can have universal health care. Lets eliminate the military down to say the size of Canada's and let the rest of the world take up the slack. Lets go back to running military exercises with wooden sticks instead of guns.
Lets balance the budget. Lets let oil reach 300 dollars a barrel so that we ultimately find a will to develop alternative energy that renders the middle east inconsequential.
Im all for this. The problem is. Its never going to happen. We blog about it, talk about it, gripe about it then we flip a switch and turn on the computer, turn on our sattelite radio or turn on our plasma tv with 300 channels and watch live coverage of riots in Kosovo 12,000 miles away. Later we fire up our 35,000 dollar automobile and cruise in comfort to the store and shop in a supermarket filled to overflowing with the best and healthiest food in the world.
This is why it will never happen. We want to keep all this and have these other things too. The problem with all this is that these other things have been sacrificed in order to have what we have now. We can have one or the other. We cannot have both.
Not in the short term anyway. It took us roughly 100 years to get where we are today it will not be something Hillary Clinton or Barak Obama can accomplish with a few speechs or bipartisan love fests.
LIke most things in life suffering is a function of expectations. Comparing what we have or need to what we want. While it will be painful for most of us it may be healthy for our society as a whole to ponder a wiser management of expectations.
I have been paying down debt, eating more modest meals, increasing my insurance deductibles – we each will travel our own path.
What many of us may discover is that happiness is unrelated to our physical world.
Paul,
If there was going to be any pondering of those things you might barely be right. But that isn't going to happen. And losing your job and/or home is more than simply painful. I agree with most of your posts but it really bugs me when people minimize what the kind of downturn we're about to see means to people.
whocares,
Unless you have not noticed, those illegal immigrants are employed in fields like construction, food service, lawn care, etc that are highly sensitive to economic downturns. The housing bust has cause many homebuilders to cut back. That means fewer jobs for illegal aliens.
Having, more poor illiterate illegal aliens in your country during a recession is a very bad idea. The crime rate goes up. The welfare rolls increase. and they make it tougher on everyone else.
Superdestroyer: But they are future (if not, illegally, present) Democrats.
Paul Silver: “[I]t may be healthy for our society as a whole to ponder a wiser management of expectations.” Yes, and not in the way liberal activists view this wisdom, but more old-fashioned, boring sensibility, such as you listed that is being exercised in your own case. It goes for others as well, such as my brother's replacement of a medium-size vehicle with a small vehicle with a small engine that barely sips fuel and is perfect not only for driving in town in heavy traffic, but on the highway without any large load (40+ miles per gallon is nice savings indeed). Many of us never did things like take on excess debt, often to get rich quickly in the real estate bubble, and we correctly resent any demands that we be asked to “contribute” to the bailing out of others, who are suffering mainly because of their own poor, deliberate choices.
It would be remarkable in this country but a deflationary recession like Japan's after its real-estate bubble-burst that featured the “liquidity trap” brought about by people tending to save more than before (complicated by any behavior that was learned once deflation was in process, of delaying purchases in ancipation of lower prices) would be emotionally depressing here and painful, but wouldn't be out of the question and yes, could be said to be even overdue. (It's just that we who behaved ourselves shouldn't have to suffer along with those who earned their fates.)
A related economic subject is something Pew reported on long ago and is reporting again now, the current experience of journalists and how the media and its economic changes are affecting them.
http://people-press.org/reports/display.php3?Re…
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Very interesting post, you've given me quite a lot to think about. The economy just seems to get shakier every day.