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Tuesday, November 18, 2008

Everybody, step one rung down

The recession is starting to take a heavy toll, and it will be a deep and long economic trough. Some prognosticators warn that we won't fully recover in our lifetimes. I tend to agree.

Bean over at The Vig had a great post about this on Friday -- a YouTube video of Peter Schiff, who called the recession with uncanny precision. Bean also linked to Schiff's current outlook, which is grim indeed:

We believe that the growing imbalances in the U.S. economy, its twin budget and current account deficits, its lack of domestic savings, and the erosion of its industrial base, have now reached a point where a severe recession, culminating in a substantial decline in the over-all American standard of living, is imminent. The Federal Reserve, Congress, and the President, for political expedience, are likely to continue seeking to delay this adjustment, unfortunately in ways which will exacerbate its severity, making the inevitable recession that much worse, and increasing the probability of a hyper-inflationary outcome, which would render the U.S. dollar, and all U.S. dollar denominated financial assets, practically worthless in terms of real purchasing power, potentially creating a situation of extreme financial, political, and social unrest.
The New York Times' token conservative, David Brooks, sounded similar themes today (although he didn't mention which administration has presided over the unfolding disaster):
In this country, there are... millions of people facing the psychological and social pressures of downward mobility.

In the months ahead, the members of the formerly middle class will suffer career reversals. Paco Underhill, the retailing expert, tells me that 20 percent of the mall storefronts could soon be empty. That fact alone means that thousands of service-economy workers will experience the self-doubt that goes with unemployment.

They will suffer lifestyle reversals. Over the past decade, millions of Americans have had unprecedented access to affordable luxuries, thanks to brands like Coach, Whole Foods, Tiffany and Starbucks. These indulgences were signs of upward mobility. But these affordable luxuries will no longer be so affordable. Suddenly, the door to the land of the upscale will slam shut for millions of Americans.

The members of the formerly middle class will suffer housing reversals.... Suddenly, the home of one’s own is gone, and it’s back to the apartment complex.

Finally, they will suffer a drop in social capital. In times of recession, people spend more time at home. But this will be the first steep recession since the revolution in household formation. Nesting amongst an extended family rich in social capital is very different from nesting in a one-person household that is isolated from family and community bonds. People in the lower middle class have much higher divorce rates and many fewer community ties. For them, cocooning is more likely to be a perilous psychological spiral.

[I]t won’t only be material deprivations that bites. It will be the loss of a social identity, the loss of social networks, the loss of the little status symbols that suggest an elevated place in the social order. These reversals are bound to produce alienation and a political response.

At one time, I dreamed of being rich and independent -- in a mansion, traveling to all manner of exotic locations, able to live without working, living off investments, and keeping myself busy with discretionary worldly pursuits of my own choosing. That was then. Nowadays, I'll be happy to keep my excellent job and stay relatively comfortable working to the end of my days.

Already I've had it better than my parents could ever have pictured having it themselves. Every generation hopes that its own children will be able to say the same thing, but now it seems that we'll just have to settle for handing them off something that's not too much worse than where we are today. May the Lord help us make it so.

Comments (44)

Wow. What a buzz kill. It's too bad Reagan didn't live to see his legacy.

But, hey, we sure beat the Soviets didn't we?

Maybe this is why gun sales have been going up so dramatically lately. People want to protect their property and loved ones from the lawlessness of the desperation that is coming. (Or maybe some of them just want an out when things get really bad.)

Yeah, and Ronnie lowered the tax rates for a few years to vindicate his bitterness over paying super-high rates when he was making all his money doing B movies.

Whoopdee frickin' doo.

We're going to have to redefine our lives as artists instead of consumers. If you're an artist whether it be a musician, painter, etc...or just engaged in the art of surviving, society becomes a backdrop to your life. Fulfillment is still there - maybe even more so than with the consumer rush that has dominated the American Dream. But it will not be a soft existence. How fondly we will talk about the age of oil.
The one thing that could turn this around is a new energy system that harvests the energy all around us. Similar to what could propel the UFOs so many have seen zipping around.
If we crack the energy problem, we could get past this. Then we bag the artsy-fartsy stuff, and go right back to the mall.
Good luck, everybody. See you around the campfire.

Some interesting analysis from someone who's lived through one societal collapse already, and who makes some chilling predictions about our readiness for this one:


This is the big one kids. I think this round will make 1930 look solid. We are entering into the baby stages of this implosion.
In 1930 the people did not own all the toys we have today...cell phones, fancy cars, computers at high speed, vacations, homes we cant afford, apartments we can't afford....etc etc. WHAT HAPPENS WHEN THE TOYS GET TAKEN AWAY?????? I read a piece on this in New Yorker a while back. It sent shivers down my old spine. This will be full of wild crime, beatings, shootings, home robberies. This will not be pretty ladies & gentleman, dogs & cats and mother in laws too. All kidding aside. We are F&#@**

“This is the big one kids. I think this round will make 1930 look solid.”

I could be worse. Far worse.

For instance Oregon could double the price of energy and cause the State to lose a few more tens of thousands of jobs by imposing carbon controls.

Such a plan will be presented to the State legislature in January.

Obama is also getting suckered by this scheme. He already told the San Francisco Chronicle that coal power generating plants will be bankrupt energy prices will skyrocket under his plans.

I smell a one term president.


How pitiful. I smell a sore loser.

"I smell a sore loser."

Not me - I voted Libertarian.

As to the financial aspects of cap & trade, even the Oregon Global Warming Commission is admitting to the reality of job losses. In their November 6 subcommittee meeting, they were discussing how to spread the pain amongst Oregon's industries.

At the Nov 18 meeting, one major Oregon employer's rep said (privately) that they would leave Oregon if the present proposal passed. Not to worry it is only another 1500 stinkin family wage jobs.

Who need jobs anyway, when we can hope for all those green jobs that will come our way - like the windmill manufacturer and bio-tech and, according to last nights TV, homeless toilets (thanks to fireman Randy.)


This is not just a dip in a graph. This is not something like a recession or depression that happens to an ongoing entity. This is the end of the entity. The American Empire is about to crumble.
People are talking like we can find a way to fix this. Well, someday decades from now, there may be another house built on this same foundation, and it could be called America.
But it'll be different than the house we're in now.

"This is the end of the entity. The American Empire is about to crumble."
JK: History shows that such dire predictions usually fail (there is always a first time.) The real disasters tend to be unseen.

My guess is that we will muddle though this over a few years UNLESS the government does something really stupid like they did in the 1930s: Let bank depositors lose everything. Start a trade war by hiking tariffs on imports. Raise taxes (think CO2 tax.) My guess, at this point is that Barrac will pay lip service to the far left and move to the center. (Like Regan did with the Christian extremists.)

I also guess that inflation may not be a problem because we have just had a massive loss of money, so the Fed can pump a lot of $$ into the system and they are just making up for the loss. Maybe we will have deflation, which by definition, will reverse the decades long slide in the value of the dollar (absolute value, not relative to other currencies.)


I also guess that inflation may not be a problem because we have just had a massive loss of money, so the Fed can pump a lot of $$ into the system and they are just making up for the loss.

I agree, we have deflation in the short run, six months to a year to year-and-a-half out.

Where I disagree is, eventually, some of those trillions of dollars that are being printed up will (pardon the phrase) trickle down to us poor slobs. The Fed banksters and the other pigs at the trough won't be allowed to steal all of the "Bailout" being printed up, due to growing outrage. You've no doubt seen the absolutely hilarious news clip by now, of Representative Cummings asking Kashkari if AIG thinks he is a chump:


One of the funniest parts of that clip is when, after that Mini Me-looking little weasel tells Kucinich how he's been "working hard" (sound familiar ?), Kucinich tells him that no one doubts that he's been working hard, but "Our question is, who you're working for."

Now if only more of our congresscritters would grow a pair and put a stop to this looting.

Unfortunately, in the long run, what I see happening is an attempt to print our way out of this mess, and that means eventual steep inflation in the midst of a really awful recession. Hope I'm dead wrong about that.

Uh, people, try to remember the neighbor/parent/friend who was always walking around assuming the world is coming to an end and had a perpetual cloud and ask if you want to be remembered like that.

I realize being a Pollyanna is not reasonable, but assuming the future is nothing but gloom doesn't help either. I will support Pre Obama as much as I supported Pres Bush and hope he does what is best for America. However, thinking politicians can solve our problems is a pretty far-fetched hope. I offer up the incredibly gifted people who are our politicians all the way from CoP to Congress as evidence. I really think we all need to work together as people to find out how to make this a better place instead of depending on others.

I mean six months back everyone thought oil was going to be $200/bbl, however, life is never what we plan or assume.

Yes, it's an amazing world and right now we seem to tumbling towards a depression. Who will it hurt? It will strike VERY hard on the Gen X and Gen Y groups who rarely had lean times. It will hit hard on folks who never learned (often out of necessity or because your dad sat you down and taught you) how to fix a faucet or toilet. How to cook, how to clean without overly expensive cleaning products and/or aids.

I don't think I understood Bill McDonald's remark "We're going to have to redefine our lives as artists instead of consumers." I understand and agree the age of the consumer is over (at least in the short term) but if I'm strapped for money the LAST thing I care about (and the last thing I will be spending money on) is a new song, poem, painting, etc. I think we will be redefining ourselves as tradesmen and survivors - but I'm probably reading it wrong.

I never bet against America.
But I am betting against the American Empire. Historians are quick to go back to Ronald Reagan as the beginning of our current problems, but I always think about 1989, when the Wall came down. We became the world's only superpower and we had an opportunity to restrain our power and live a certain way. Instead we became a bunch of trigger-happy thugs while we rotted from within financially. Ike was right. The military/industrial complex was the problem.
The plan we've followed didn't work. We're about to get really polite, especially with the foreigners whom we'll be asking for help.
When people say they can't imagine America without General Motors they are really saying, "We can't imagine America as it is now."
Self-image is the last thing to go, but the new America will happen whether we can imagine it or not.

Maybe it's just me, but I suspect by early in 2010 the US economy will show signs of recovery. The biggest hurdle will be getting housing under control. I'm personally appalled that programs that allow some buyers to get into homes with little or no down payment are still around. One program was just featured a couple weeks ago in the Oregonian's real estate pages. There is nothing that will stop people like this from simply walking away from their homes when their finances get strained; as they have no real equity in their homes.
Keep in mind that this is a GLOBAL slowdown/recession we are in right now. It's not just the US that's facing financial problems. And like most past recessions, we will come out of this in due time with a stronger economy and likely a lot less marginal businesses.

The barter system is about to skyrocket.

Native Oregonian,
The artist remark referred to ways to get through this. I sense a lot of people who've focused on material gains their entire lives are going to be quite depressed. Even billionaires will have new fears about their security, and will also have to deal with the gnawing guilt that they helped plunder the greatest country in history right to the brink.
Being an artist is a way to turn the situation into something positive. Great art comes from great pain and we're going to have a lot of pain in the years ahead.
But even if you're just strumming your guitar in the basement, it is a tremendous way to calm a troubled soul.
We've come through an age of number crunchers shifting information around computers to create a false feeling of wealth. At least artists make something, and sometimes you can clear your head while you're expressing yourself, and then the next great idea in your life hops out.

Not me - I voted Libertarian.

Q: What's the best way to identify a Republican who just lost?
A: Ask everyone who voted Libertarian to raise their hands.

Well, finally we learn about the "change" Barry was talking about.

Well, finally we learn about the "change" Barry was talking about.

yep--not even in the WH and the righties already blame Obama for the economy. Suprise, suprise--didn't see that coming.

Schiff was *among* those who called the early wave housing-derived deflation but he was spectacularly wrong about decoupling. His investors got massacred by bric and emerging market losses.

Nouriel (aka Dr. Doom) has an incredibly accurate take on this unfolding financial apocalypse.

Here is his latest missive:


Bill M.~

I tend to agree with you about finding new and better ways to spend the free time we're suddenly going to have a lot of.

I think it's a common misconception that folks in economic hard times work night and day to feed themselves and have no spare time. That may be true in a short recession, but in a depression or financial collapse, it's all the free time that'll be the real killer.
When there really and truly are no jobs to be had, how will an ultra-responsible, 40-something, pull-yourself-up-bootstraps types cope? If they don't change their thinking and accept that some things truly are beyond their control, I think the suicide rate is going to go up.

If you want to stay mentaly health through these times, get involved in a close-knit community of people your like that have good social skills; and learn how to tell a story, be musical, grow a garden, or work with textiles.

Folk have to have community and stay busy to right in the head.

OK boys and girls I want you all to go out and buy Margaret Atwood's new book
It should be required reading for everyone who can read.

Well, finally we learn about the "change" Barry was talking about.

Thank you. We always appreciate hearing what the pathetic losers among us have to say.

"the American Empire is the first empire in history to deny that it is, in fact, an Empire. Unsurprisingly, it is also the only way in which a modern empire can exist."
--Winston Churchill

and given that 13% of my countrymen own 90 cents of every dollar, I'm not sure why the other 87% are surprised that bailout and protection of the wealthy and powerful is the norm. if things continue to worsen, that practice can only grow more frequent.

How to come out of this recession? It won't be pretty.

There's a lot of wading into the financial details of the week which muddies the waters pretty quickly. The reason for this crisis is actually quite simple:

We spend half a trillion dollars a year that we don't have.

The solution is quite simple. Bring tax revenues and spending into balance (i.e. a balanced budget). (Actually we need a surplus to pay down the existing deficit as well.)

Of course, despite running around like chickens spending $700 billion on this and that, I still hear no one in a position of power talking about this simple formulation of the problem, and the simple formulation of the solution.

No one in Washington, on either side of the aisle has any sort of explanation of how we're going to meet our entitlement obligations ten years from now.

The momentary trevails of an automaker are a blip (with due respect to the families who are directly affected.)

This guy's book ("Reinventing Collapse" by Dmitri Orlov) should be right next to the Atwood book. The link above (and now below) was to a talk he recently gave on living after economic collapse.

Some interesting analysis from someone who's lived through one societal collapse already, and who makes some chilling predictions about our readiness for this one:


Bill and Annie: If, after we hit bottom, we can still afford a place to live that is not on the street I will give serious thought to strumming a guitar, working with textiles and planting a garden . . . in the moments I'm not relocating my tent and trying to survive.

If people don't fall too far I'd like to think that this process will bring us closer together in a spirit of support, community and sharing of skills.

However history teaches us that arts, education, vacation, etc. are often the first things to go when all energy has to be invested in survival.

And - to our discredit - we live in a "me first" society increasingly made up of masters and serfs.

I hated Brooks' piece. It seems to be the eulogistic equivalent of Bush's post 9-11 exhortation to "go to the mall and shop" to be patriots.

What Brooks (and the readers of this blog?) completely overlooks is that, even in times of prosperity, the middle class (and the aspiring lower classes) had access to subpar access to medical care at exorbitant prices, a subpar educational system, government that was neglecting the nuts/bolts infrastructure of cities, the environment etc etc etc.

And yet Brooks seems to primarily mourning the loss of the middle class ability to afford social status luxury items?!?!?

I look at something like the Fremont Bridge and I think: "Can you imagine any level of government putting up the money to build something like that in 2008?"

Fly around the world and you see new airports, new freeways, new infrastructure. Whole new cities springing out of the ground.

America used to be a place that would build something like the Fremont Bridge. Why? Because it was needed. Because it was progress. Because it aided industry and commerce.

Now America is not the type of place that would build something like the Fremont Bridge. Our roads are cracked, our school buildings are 70 years old, our gutters are filled with garbage. The idea that, after decades of tax cuts, even millionaires would be asked to pay even marginally more to invest in these things is now openly called "socialism."

Sometimes it's hard to avoid the conclusioon that we deserve for our society to be crap, because that reflects how much investment we're willing to put into it.

NW Portlander,
If it really hits the fan, I'm going to strum my guitar on the street. I've got enough chops to be a street musician and besides I can play tambourine with my foot so I'd have an advantage over the competition.
And no, I'm not kidding.
Your version of gardening sounds like a hobby, but it's also a way to eat.
Your version of the arts sounds like a class in school.
You even say history teaches us that art is among the first things to go when survival is a factor. Go to the caves in France where ancient people drew pictures on the cave walls. I assume survival was quite time consuming for them, too.
Incidentally, you could tell it was in what would be France, because the drawings of the game the people hunted also had little drawings of the recommended wine that went with it. That's a joke.

My main point is that if you define yourself as a consumer you could be in for a very tough stretch here.

Bill, you made me chuckle. I am the FURTHEST thing from a consumer. No cable, no cell phone, no car, no scooter, no new clothes or shoes, no heat until it gets pretty cold - well, you get the idea. I have a computer because I am - wait for it - a freelance writer, a 40/hr/wk bookseller and an artist. I have a garden at the back of my apartment and I grow honest to gosh food in it.

When I say art is one of the first casualities in hard times perhaps I should qualify that as "support of the arts" by government, taxes or the public, since artists will continue to create whether or not there is a market or any backing for their creativity. But there will be less public art, less support for art in schools, less people buying artwork, etc. Truly a "make your own kind of music . . . even if nobody else sings along," sort of world.

Can you post a photo of yourself playing tambourine with your toes? It would make my day.

I got a shotgun rifle and a 4-wheel drive
can catch catfish from dusk till dawn
We make our own whiskey and our own smoke too.
And we can skin a buck; we can run a trot-line.
Good luck city Folk.
Vote for Sam!

NW Portlander,
I think we can agree that the United States is a consumer oriented country. I mean we do use a quarter of everything while only being 5% of the population.
Maybe we'll go in a different direction. The Great Depression sure turned out some good people - maybe it'll happen again.
I play the tambourine with a shoe and though I haven't been in a trio or duo in over 18 months, the last group did make it to the main-stage of the Seattle Hempfest a few times.
We also played at the Rose Festival, Sand in the City, and at a party for Bill Walton. In short, we had some chops.
Playing guitar is recession-proof.

Shoe, toes, it's all good. Busk on!


Time to head to the gun show, all you liberals!

I was all depressed during the first read through of these comments now my dark heart is humored by the scene of a gaggle of liberals, who just cashed in what was left of their 401 Ks to buy new guns, taking aim at something in the bushes that might just be the rural folk harvesting their home-grown smoke or firewood for the still.
So the point being that I will share my garden produce for some songs from Bill M. when I'm in the city and barter something in exchange for learning how to make shine when I'm in the country.
Somebody please educate the new gun owners!

"... who just cashed in what was left of their 401 Ks ...."

USA: Proposals to Confiscate Workers’ Personal Retirement Accounts, by Karen McMahan -- Global Research, November 19, 2008, from The Carolina Journal - 2008-11-04

RALEIGH, NC — Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.

Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.

The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration.


"RALEIGH, NC — Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts"

JK: Does anyone have a mainstream news source reference for this story?


"... a mainstream news source reference ...."

Did you read it, such as it is? Information Clearinghouse (dot INFO), like Global Research (dot CA), is a HIGHLY credible and qualified, if eclectic, 'news source' -- much SUPERIOR to massmind media.

The 'seize your 401K' report transcribes testimony in House hearings, so, uh, maybe try the Congressional Record ! ... if that's believable enough for you ... or congenitally disbelieving skeptics.

P.S. Bonus info -- Global warming is happening all around you ... and those with eyes who do not see, weather memories they do not remember. Also, the planetary purse of petroleum is quickly nearing empty, bankrupt ... believe it or not.

Tenskwatawa: The 'seize your 401K' report transcribes testimony in House hearings, so, uh, maybe try the Congressional Record ! ... if that's believable enough for you
JK: The question is wether or not such a hearing occurred, so that would be the primary source. Why would you expect me to question the believability of the congressional source?

Tenskwatawa: ... or congenitally disbelieving skeptics.
JK: Just being a realist who likes to see evidence instead of rumor.

Tenskwatawa: P.S. Bonus info -- Global warming is happening all around you ... and those with eyes who do not see, weather memories they do not remember.
JK: How is that relevant to anything? The question is wether man is causing a significant portion of the alleged global warming. Perhaps you could show us the proof that man is causing warming - peer reviewed stuff only, as I’m sure you have heard Al baby recommend.

Tenskwatawa: Also, the planetary purse of petroleum is quickly nearing empty, bankrupt ... believe it or not.
JK: Got any proof of that wild claim? How is it different now, compared to every few years over the last hundred years when we were always about to run out of oil?

Further, why do we care? We have lots of oil shale, tar sands and coal. Did you know that most of Germany ran on oil form coal for a couple years in WWII?

It is amazing how easily people fall for this stuff.

I suppose ignorance of basic science helps. For instance one local group was in a thither about starvation when we run out of natural gas since it is used to make fertilizer. The fools were too illiterate to realize that natural gas was only used because it was the cheapest way to get hydrogen. They didn’t know that you can also get hydrogen from water using coal or nu-clear power.

Ignorance is the foundation of irrational panics.


Just in:

(Thanks to junkscience.com/)


Just in:

doesn't look peer-reviewed, Jim, so it can't be credible. or so you told us.

or is it okay if we call it credible? if so, this site has some good "facts" on "global warming".

not peer-reviewed, though. but kid-tested and mother-approved.

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