The New Economy

When I was a child I never quite believed that tunnels had openings at the other end. It takes to this day a real act of faith to venture into tunnels that are long or go under water or are totally unfamiliar to me.

Watching yet another Sunday talk show on the economy yesterday it struck me that this dark recession is a tunnel and that the economists haven't a clue about where the end is or what the other side will look like.

They keep relying of phrases like "our economy will be stronger than before" or "we have some models of what has not worked" and "where FDR went wrong." But the one question they all tap dance around is what this new stronger economy will look like? One thing becomes increasingly clear is that it will not look like it did before.

The robber barons of the new century have proven that we cannot let them drive the train. The Republicans chant that to not let the capitalists drive is to have a socialistic country. Wake up we already do. When any government owns 90% of the leading economic factor (banks in this case - trains in England a while back) they are socialistic. We would like to pretend it is temporary. But if the G8 in the world are too big to fail then life support is called for.

We want to all to pretend that life support, be it in a hospital for a loved one or the economy for the country we live in, is temporary. But let us be honest here. If we are being constantly gouged by the utility companies wouldn't regulation be nice on pricing in the midst of winter. A cap? And if gasoline prices rise to the point that Exxon is making insane profits and nobody has the money to fill their tank to drive to work? Or the airlines have so totally cornered the transportation market that there are no light rails to fill in for routine commutes or freight when another 9/11 grounds all air traffic?

What seems to be different in the recession/depression is the population is not merely angry with the banks like AIG, but they are pissed at Parker Bros for lead based paint on toys they no longer make but only import. We don't want to go Vista whether Bill Gates says it is the best or not. We don't want to talk to someone in Pakistan about a technical problem. And we definitely distrust Exxon and any product produced in China. And food producers because of artificial protein and raised prices they will not lower. And what we think of credit cards cannot be gone into here.

Even if suddenly we had available credit and excess money in our budgets there is a question about whether we will even spend it. One of the reasons they have not given us one of those tax rebates to stimulate the economy. It is believed we would just save it.

So what will the new economy - the other end of the tunnel - look like. I think it is safe to say nothing like what we left behind when we went where no country or global economy has gone before.

Anyone have any thoughts on this?

Not Our Fault

As we navigate through these perilous economic times there seems to be a lot of name calling and finger pointing. In a recent OpEd on the New York Times website the following was said by US Treasury Secretary Henry Paulson about talks with China: "the talks as 'robust' and characterized by 'straight forward back-and-forth' exchanges."

They yelled at each other a lot. China blames the US Administration for the falling exports to our country. Well, in some cases the exports have happened. Goods are sitting in containers on our shores with no takers. I assume that means China is paying storage fees.

Seems the Americans are fretting that China might be losing the stomach to let its currency keep rising in value and China voiced concern about Washington's management of the world's largest economy -- in which China has a huge financial stake. (We owe them tons of money.)

And it appears that daily we are more and more unable to pay that debt. Could China foreclose?And what would it gain by doing that? World indebtness is really the Emperor's New Clothes. It exists only on balance sheets.And if China is upset about the American people buying less of their goods whose fault is that? Consumer confidence in Chinese goods is at an all time low due to their manufacturing (make that poisoning) debacles. Why should we continue to buy poisoned pet foods or leadbase painted toys? So they won't yell at your Treasury Secretary?

And what do we buy these flawed goods with? Money the banks will no longer lend us though I have read in the same article that interest rates will drop again. And could get to zero. Frankly I am waiting until they start paying us to borrow money. I like the falling gas prices. And my e-mail alerts keep me posted on deals on items I need. Finally jumped at the last 20% off plus 10% to our subscribers deal and bought the winter boots I needed. Today I could have gotten free shipping.

I suppose if you are sitting with huge wharf fees for boxes of goods that have been shipped to the United States but not distributed to potential wholesalers it will sooner or later be cheaper to pay us to take them. I am willing to wait. Meanwhile, China, don't depend on the United States to buy just anything your produce. Improve your quality, meet your EPA and safety standards, and cut down on the junk.

Besides with our people losing jobs daily we are not to thrilled with countries that took a lot of US jobs away. Or with US based companies that took tax breaks to go over there. And now we are suppose to bail them out with our tax dollars. Well, we are mad as hell. Take your goods and shove them.

What I Do Know About the Economy

I know very little about economics even though for several years I worked as a cost control engineer for a major construction management firm on projects ranging to two billion dollars. But I figured this experience would help me to understand what is currently going on. One thing is clear at this point: Money and economics seem to have little to do with each other. Economics and debt do have a close relationship unfortunately.

Other things are also clear to me. ONE - The first President Bush presided over the savings and loan debacle and bail out. And now GW, son of Bush, is presiding over the investment bank debacle and bail out. Coincidence? I think not. Both of them were against regulation of corporations (including credit cards companies, mortgage lenders, investment banks, and savings and loans) and both said the economy was substantially sound until we were all treading water in debt.

TWO: Continuing to do the same thing and expecting different results is a really good definition of insanity - AND unstable economic policy.

THREE: You cannot plan for just two years. I found this out with cash flowing a three year construction project. And it had a beginning, middle and end. The economy of the world does not. It goes on. And decisions made today effect the future 10, 20 or 30 years down the road. Economic policies don't fare well in quick change mode. It makes investors uneasy and that makes them do stupid things as we have seen in the last week.

FOUR: Presidents are elected for four years and begin running for re-election in two if we are lucky so we could say that 50% of their job is running for office. Senators are elected for six and Representatives (the US House of Representatives is where all money bills originate) are elected for only two. Ergo they are always running for office ant it can be said that is their job.

FIVE: Only economists understand the economy and get four of them in a room and you will get at least eight opinions. They spend lifetimes understanding this stuff so what chance does any of the above in number four have of getting a handle on it when it is at most 50% of their job.

SIX: You cannot fire the SEC head Senator McCain. He does not serve at the pleasure of the president. If you are running for the office you might at least learn that much about it. The Presidency does have control of the Secretary of Treasury but maybe it shouldn't. Maybe that ought to be independent too so we can go for the long view needed in economics and not the short view needed in politics.

SEVEN: It is tax and spend. Not spend and tax. That, like credit cards for us lowly citizens in these perilous times, is doomed to failure.

EIGHT: No problem, be it economics or citizen unrest or an infection in your foot, goes away by ignoring it. In fact, continuing to say,"the underpinnings of the economy are strong," just makes people nervous. (see number three).

NINE: We are in a global economy and so what is bad for the United States is bad for everyone around the world. Supposedly the G8 meet and discuss some of these things yearly (or more) but there is not an economist among them. They make decisions for the world based on their view and interests.

And last but not least, TEN: WE ARE IN THE DEEP SHIT. And all in the same boat, up a creek without a paddle. With only a hoped for quick fix and no long range plan. (see two and three).

Changes

As I sit here this morning debating the necessity of making a 50 mile round trip into Taos I realize how times have changed. This was once a twice a week routine.

I belonged to a gym in Taos. I had friends there I met for lunch. I did almost all my shopping there except for the trips to the more distant Santa Fe with a Sam's Club, a Lowe's and a Home Depot. Now I seldom go to Santa Fe and only a couple times a month to Taos. And that usually with a friend so we can share gas expenses.

I live in a rural community which depends upon tourism for its livelihood. That is down and the resort has made layoffs. Because of that the tax base for the village is down and they have made layoffs. I have a rental unit which is seldom empty, but it is now. So are lots in the area which once had a shortage of affordable rental housing. So my income is suffering there. And I am an artist. Less art being sold these days.

It is not a new story for many people and yet a CNN news poll said that 3% of the country still felt the economy was strong. G.W.Bush has to be one of those 3% and I would assume his cabinet the rest. And isn't the margin of error on most polls 3%?

What hit me this morning as I looked at the must get list which has been growing beside my computer is the gap between the forced shopping local and the local stores being able to accommodate our needs. They are getting better but not quite there yet. All the little retail stores switched to bare essentials when the big box stores in bigger towns sprung up. Now they are having to reconsider their market needs. The grocery store here is doing a pretty good job of it. So is the local hardware. Can't always get it when you want it but they can order it in for Thursday.

And there are the friendships. I have quite a few friends in Taos. We met rather routinely when I was over there for errands. We did lunch. Now that I am there less frequently my list grows to the point that lunch just isn't possible time or money wise. So once close personal relationships are now e-mail affairs. Taos and Angel Fire used to be neighbor cities and now we are rapidly becoming strangers. With the help of blogs I have closer connections to friends in Australia. We have not quite gotten it that the high price of gas is changing not just our economy but our friendships. It is difficult to think regionally let alone globally.

I definitely don't have any warm and fuzzy feelings for the oil companies or OPEC or the current administration. I remember being in this place in the 70's and everyone talked of solutions that obviously nobody put into effect because of the huge political clout of Exxon, etc. I certainly hope this time will be different but somehow I doubt it. That 3% that think the economy is solid are the ones pulling all the strings.

Oh, and I am having a difficult time even feeling sorry for the rest of the country with the announced $4.00/gallon prices. We have been over $4.00 for weeks.