Letters to the Editor
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the economy
Of course with every economic downturn the country thinks it is 1929 again. Our tolerance for a little pain is very low. It used to be under Eisenhower, for example, that downturns were understood as normal. But since then every slight contraction of the economy denounced as dangerous and 1929-like. Hell, if we can withstand 9/11 and the Iraq war and George W. Bush -- we can withstand a little economic pain.
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There was no recovery
For most Americans, the 7 years under Bu$hco has been a constant recession. Few people saw their incomes increase, while costs have only gone up. Many people were supplementing their earned income with credit cards, home equity loans, etc.
The subprime crash and subsequent credit market implosion cut off that source of funds for many as housing values declined and the rates for personal credit increased.
At the same time, the safety net is full of holes - less severance when laid off, no healthcare coverage, crappy pension/retirement plans.
How many people can say "Yes", when you ask if their personal financial situation is better today than it was in 2000?
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What "credit crunch"?
It's a question of liquidity. Have all the big banks actually figured out who owns all that worthless paper from the insanely inflated real estate market? Can you say "house of cards"?
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Economics is often hindsight
I think it's too early to say anything for two reasons:
*The first is the simple fact economics is often hindsight. We can speculate, and that may be fun, but that's all it is and that's all its going to be. Speculation is important of course as, if nothing else, you might just catch onto a trend early, but still.
*The more important reason is right now we've got a huge amount of factors colluding at once: gas, food, weakened dollar, home market collapse, Iraq, etc. Sure many of those are inter-related, but the sheer complexity means we can't say much at all. We're not only through the Looking Glass, we're having tea with the Hatter.
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Come on, Gloomy Gus
At least you admit it (lol). Seriously, though, the credit/housing/jobs issues are beginning to get resolved. While the MBS problems were worse than anyone predicted (not should have predicted, but did), the root of the problem--housing prices--was widely known, at least in my office, since 2001. Every appraiser I knew at and since that time has been incredulous at the sales figures in some pretty marginal neighborhoods, but the numbers spoke for themselves: people were willing to pay $500,000 for a triplex firetrap in Lynn MA, despite the fact that I wouldn't send my worst enemy's kid to public school there (he'd come after me with a Glock someday). So when trouble started coming in, yeah, the lenders put on the brakes in a hurry--maybe too late for a lot of them, but not for all by any means.
Another thing to remember is that the housing crisis is a local one, not a national one. Factors like supply/demand, attractiveness of the area and economic viability are what saves or damns you. The Boston area, for example, has a pretty bright outlook (www.bostonherald.com/business/general/view.bg?articleid=1090902) and the predominant market here is resale, not construction, so supply here has a limit, as opposed to Florida, Arizona or whatever Erik Estrada is pitching this week.
As for jobs, I heard on NPR that many employers had felt there was a recession due for the past couple years, and purchasing managers and HR people had become more cautious anyway, ordering less inventory and hiring fewer non-exempts. The result is less turbulence in the business/employment cycles--which you may be seeing in part from the jobs report.
But who knows...
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The Jobless Revolution
Oil prices are pretty rational. Global demand is strong, and the dollar is weak. There is none of the volatility you see in gold, just a relentless rise. The gold bugs on the other hand are a paranoid group, who feel the Central Bankers have been manipulating gold prices since Bretton Woods. SOme still remember when Roosevelt took their gold. They are sure that this time it will be different, but it is just more C. Brown and Lucy. This most recent rally in the market is probably money coming out of the gold ETF and going back into stocks.
Lets give credit to McCain, in Michigan, he said, those jobs aren't coming back. America is becoming a jobless nation, unless you call the food service industry gainful employment, (Even Bourdain opted out for the gritty world of television).
How is America going to handle mass joblessness? Good question. I suppose we'll go on the dole, like Europe.
And of course the more money we give the jobless, the better the economy will look, and the more likely you are to be reelected if you are a politician.
Ditto the credit crunch. What do people do when they have two of everything? The common wisdom goes that there is never enough, but Americans have never been good at avarice, and gluttony. (most obesity in this country is related to poverty, and when some wheel makes a billion he gives it all to starving kids in Africa.)
Here's a stark prediction. The Consumer Confidence number will be reconfigured within a year, to reflect the new reality. Fifty will be the new One Hundred. No one wants to look at these paltry numbers, it makes you feel, well, poor.
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@ aveutter
We need to get something straight about Europe. All European countries count everyone not employed as unemployed. We count maybe 50%. Our unemployment rate is roughly the same as France or Germany or Belgium. In contrast to what most Americans believe, the Belgians and the French have the highest productivity per hour of all nations on the planet. They choose not to work the hours that Americans do. It's not on the dole, it's life beyond just work.
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Energy bubble? I don't think so.
For years I've been watching the oil situation in terms of peak oil, rising demand, and volitile politics/war in oil-producing regions. I do not believe there is a bubble in energy prices, ESPECIALLY if the US economy is moving back into high-growth mode. Supply is so tight and refineries are at near 100% capacity that any little hiccup in the system sends prices up. Try to imagine if an oil rig got blown up or we bomb bomb Iran--you'll see $200+ oil in no time.
My strategy is to invest in domestic gas and oil, which there is still a LOT of and more is being discovered all the time. We get nearly half our gas and oil domestically still--and cheaply compared to what it takes to get it elsewhere. Next time foreign imports are interrupted, can you guess what will happen to the value of domestic production?