Depression Year 6: The Shoe Finally Drops

 

By Alexander (Sandy) Prisant

(Reuters) - U.S. consumer sentiment ebbed in August and residential construction rose less than expected last month, potentially dimming (US economic) hopes…” (8/16/13)

The beginning was 5 1/2 years ago. It was January 2008. And it was Chicken Little's Moment.  The sky was actually falling. 

One morning on the radio, they indifferently reported that in the middle of the night, the Federal Reserve, in conjunction with Europe had cut interest rates a whopping two (2) percent "to stabilize global markets".  Two Percent. In the middle of the night.

My wife Susan and I were in South Florida, seeking a home for retirement.  We looked at each other across coffee in bed, with wide eyes.  We're just writers and teachers and like good interior design.  We're not economists.

"This sounds like a Depression, " I said. Susan nodded. We talked about ramifications. The first would be the huge real estate bubble in the middle of which we were sitting. It would collapse just as we were buying.

 We drove to our agents, Coldwell Banker. Susan went in and sat down with the manager. She explained In basic terms about the Fed and what was about to happen and that real estate prices would go first.   The agent rejected every word of it. "South Florida prices" she declared,"  are very strong and will not drop."  We never talked to Coldwell Banker again.

One university defines a Depression as: "a severe and prolonged downturn in economic activity... a depression is commonly defined as an extreme recession that lasts two or more years...(it) is characterized by factors such substantial increases in uemployment, a drop in available credit, diminishing output, bankruptcies, sovereign debt defaults and reduced trade and commerce..."

 Does this sound like the country you're living in?

 A noted economist confirms: "A depression is a sustained and severe recession. Where a recession is a normal part of the business cycle, lasting for a period of months, a depression is an extreme fall in economic activity lasting for a number of years...some economists believe a depression encompasses only the period plagued by declining economic activity. Other economists, however, argue that the depression continues up until the point that most economic activity has returned to normal."

 Bottom Line: We are year #6 of a Depression.

·         A smaller percentage of the population  is working today than in the frightening days of 2009 (59% to 64%)

 •       At current growth rates, employment will not come back to "normal" until between 2020 and 2025.

•       In the July 2013 jobs reports, over 60% of jobs created were in those positions classified as "the lowest paying jobs"

•          The UN Industrial Development Organization reports "a sharp fall in production in North American in this period."

 

And yet only now is the White House grasping this is NOT another cyclical,short recession, but an upheaval requiring structural change to rebuild the economy. Reports are they are thinking about this only now. In Year  #6 of this Depression.

David Brooks of The New York Times, notes  " We have politicians talking about very small fixes to enormous problems that are structural."

No one is being more honest than Mr Brooks.  He is talking about the need to create new economic engines. About transforming the workforce and the way we work--not just one or two retraining courses.

He suggests:

"Part of the problem has to do with structural changes in the economy.  Sectors like manufacturing, agriculture and energy have been getting more productive, but they have not been generating more jobs. Instead, companies are using machines or foreign workers.

 "This is a big problem. It can’t be addressed through the sort of short-term Keynesian stimulus some on the left are still fantasizing about. It can’t be solved by simply reducing the size of government, as some on the right imagine. “

 You won't hear a single politician talk like this. Or about this. The White House, only now, is beginning to THINK about this. But this, dear reader, is the huge challenge we are facing for years to come.

 Beginning in Year #6 of this Depression.

The Galapagos Islands: Lessons From the Locals

All Photos: Sean & Tracy Haling

By Sandy Prisant

Santa Cruz Island, Ecuador—In less than four hours you can escape the empty calories of American politics and arrive in Ecuador—where the jewel in the crown is the Galapagos Islands.

Don’t misunderstand. Ecuadorian politics are full of empty calories, too. (Now, wide-ranging daily blackouts are causing havoc everywhere in the country—the direct result of 20 years’ gross negligence in maintaining/expanding the national electric grid.) After all, this was one of those Banana Republics.

But that electricity havoc is in the regions dominated by man and his ways. In the Galapagos, 550 miles offshore in the Pacific, and the one Federal State largely controlled by wildlife, there is a calm, serene and rational world. The difference is striking. Here, there really is the Law of the Jungle. No pretense. Mother birds abandon their eggs to save themselves. Bluntly, cute things are eating other cute things the whole time. But there is no neuroses about it.

Yes, I know, underneath our suits we’re running the same Jungle-based system, but somehow, it’s not the same. Rather than harmony and effectiveness, our revered free will and political liberties have given us unsolvable Afghanistan, Iraq, Iran, and an inability to engage each other in discussion on profound social issues:

1. Congressional members have government health coverage they shamelessly deny to the very people they were allegedly elected to serve. We’ve been patiently awaiting a real solution since the 1st national health bill was proposed in 1917.

In the Galapagos, no vermillion fly catcher, no sea lion has had anything vital awaiting action since 1917.

2. Years too late, we still don’t know how to kick-start a real legislative discussion on the first timid attempts to control a small fraction of carbon emissions.

In the Galapagos, not a single species needs to burn carbon to function. When its cold, marine iguanas pile up--lying on top of each other to keep warm, for the common good (a concept we’ve relegated exclusively to campaign speeches). When it’s too hot for a pregnant sea turtle to come ashore, they simply hover in the cool Pacific, a few feet out, waiting patiently for the sun to go down and the temperature to drop below 70F naturally, so they can come ashore safely and build their nests.

I’m unaware of other species that need to make unrecyclable waste or burn fossil fuels to survive or flourish. Not even ones like the woodpecker finch here, that use tools. Why is that?

3. And in the “the community of nations”—our specie’s own system—corruption thrives. From corruption we know about in Afghanistan. To corruption we don’t. Ecuador for example. As ire and shame rise with the electricity fiasco, there are a million excuses. One features the international shrug of helplessness, accompanied by the lament, “Ecuador is poor.”

And then one day I met a man who has lived his life in the Galapagos. Just a normal man. But he was adamant.

“Ecuador is NOT poor. Ecuador is rich. In natural resources and corruption.”

Possibly he’s been effected by all the creatures literally around him—none of whom are corrupt; none of whom risk the future of their tribe for personal gain.

We often hear our own failings glossed over with the words, “it’s a messy system, but we’re free.” Well, we’re now reaching the point on a dozen fronts that make “messy” a poor euphemism for melting ice caps and a melting middle class.

The word “free” is losing meaning, too. The unspeakable fact is we’ll never return to 5% unemployment. (And if you can’t work, you can’t eat and that leaves little room for new ideas or creative individual action.)

So here’s the balance sheet: on the one hand we have thousands of species, most having prospered for eons longer than humans have existed, by doing sensible things every day—no frills, or greed or egos.

On the other hand, we have just one race in which a few hundred years ago, some presumed wise leaders gave away all of Manhattan for beads. And less than a decade ago, almost 50% of American voted to get 2% of them a tax cut. Such folly does not occur within species endemic to the Galapagos.

What really makes places like this so rare and appealing to us is that we are in the presence of other sentient beings who act without guile, contempt or hubris in their dealings with others. It’s not only unique to have a giant tortoise and every other species one foot away from you and not hiding. It’s also that they do not, unlike humans, change behavior in any way. Not scaring you or impressing you or wanting a damn thing from you. No contempt. No fraud. No games. In short, none of the falseness that informs initial meetings between most humans. It is this that is the most rare of experiences and actually explains why tourism to these volcanic islands doubled in recent years. And then doubled again.

It is what we crave and cannot find amongst our own kind, anywhere. This difference begins with all other species naturally or through evolution, being able to live in complete harmony within their environmental system; where all is based on rational, efficient instincts that allow the system—their world—to flourish. Every penguin, every finch looks energetic and well-fed. Apparently their system is in balance.

Only we are evolving in exactly the opposite direction, allowing less and less in our lives—and theirs—to thrive. Why is this happening?

In explaining what went wrong with the US economy, former Federal Reserve Chair Alan Greenspan testified that it was shockingly simple: “It never occurred to me that CEO’s and CFO’s would not act in a rational manner and in the best interests of their companies. All Fed policies hinged on that one premise.”

If Mr. Greenspan had spent 5 weeks here as Darwin did, it might have helped.

For sadly, the Federal Reserve could only work on Greenspan’s premise if it were purpose-built for the rational, efficient locals of the Galapagos.