Just getting to Vancouver was a revealing trek. Despite the ongoing Great Recession, it never ceases to amaze me how busy are the major airports. My trip took me through Atlanta and Seattle, and both airports were wall-to-wall travelers. The waiting areas were full, the planes were packed and the baggage areas were filled. Even the rental car counters had lines out the door.
Busy airports may or may not be a sign of life in the larger economy. Even unemployed people can buy a ticket and fly somewhere. All you need is a credit card, if you can still get credit. Meanwhile, airline profit margins are tight. Fuel prices are creeping upwards. The airlines are still nicking you for things like $15 baggage fees. And as I flew over the heartland of the nation, I looked down and pondered our collective fate.
Last week, for example, the Federal Reserve predicted that the U.S. unemployment rate would surpass 10% in the coming months.
That’s no big surprise. The true U.S. unemployment rate as at least 15% already when you factor in the long-term unemployed who are not carried on the “official” books.
Then the Fed made a shocking prediction. It forecasted that the U.S. economy would add NO NET NEW JOBS over the next five years! Whoa!
No net new jobs? That ought to scare you. The Census Bureau predicts that the U.S population will grow over five years. But the numbers of new jobs will remain static. That is, for every job gain there will be a loss.
This job-stagnation is a recipe for all sorts of bad things at the local, state and national levels. Government budgets won’t balance, so I guess we can plan on more “cost saving” measures such as releasing prisoners early and closing schools. Yep, that’s how to build a great nation… More criminals and fewer well-educated citizens.
The Fed announcement is basically an admission of monetary and policy malpractice at the highest levels of the U.S. political class. I witnessed it first-hand a couple weeks ago when I was in Washington, DC. I met with some Congressional staffers who were just clueless. But they sure were full of themselves. They had all the answers, too.
As my Delta flight flew over eastern Washington the other day, I looked down and saw a familiar sight. It was a long, narrow body of water, with a stark, linear feature at the end of it. It was Lake Roosevelt, impounded by the Grand Coulee Dam, of which I wrote last year.
From 36,000 feet, Grand Coulee Dam sure looked small. But it’s the largest manmade structure in North America. It’s three times the height of Niagara Falls. It’s larger than the Great Pyramid of Cheops, times a factor of three. It has enough steel in it (9 million tons) to build about 225 World War II-era battleships, at 40,000 tons each. Today it’s rated at about 6.8 gigawatts of electrical power, or the equivalent of about seven large nuclear power plants.
Grand Coulee was built in the 1930s as a government “stimulus” project. This was back in the good old days when the government knew how to “do stimulus.” Y’know, build big dams. Kick-start the steel and cement industry. Employ tens of thousands of skilled workers. Do some heroic engineering and create an energy project that will benefit the nation for decades into the future.
No, Grand Coulee by itself didn’t solve the issues of the Great Depression. But it sure did come in handy when it started spinning power in 1942, just as the U.S. entered into fighting World War II. One lesson is that if you dream big dreams, you never know what will come out on the other side.
And today? Congress’s idea of “stimulus” is to pass a $787 billion pork-bill. But most of the money won’t get spent until 2010 and 2011. Oh well, we’re going to have to borrow it all anyhow.
I drove across part of southeast Washington and northwest Oregon during my journey to Vancouver. I haven’t been up in these parts in many years, so this was my chance.
As I motored around the two and three lane back roads, I sure saw a lot of stuff for sale. It seemed that many households wanted to sell one item or another, often parked prominently along the highway.
I saw cars for sale – old, not-so-old, and nearly new. There were vans, SUVs, trucks, campers and trailers. There was farm and construction equipment. There were boats and ATVs. Then there were dozens of homes and lots with “for sale” signs. Plus many yard sales, with all sorts of household, workplace and institutional goods waiting for buyers.
It was entirely clear that many people are trying to raise cash. So everything’s for sale.
Remember that old expression, “Shop ‘Till You Drop?” Well, people are dropping. Where’s that Grand Coulee Dam project when you need it, right?
I drove along the Columbia River for quite a ways, following the trail of Lewis & Clark, from their expedition in 1805-1806. Today the Columbia is a well-regulated, controlled body of water crossed with dams and dredged as necessary. Large ocean-going ships float serenely in the water next to downtown Portland.
In their journals, Lewis & Clark described a wild Columbia River of raging rapids, filled with gigantic log snags. Some of the logs floating down the Columbia of old were up to 7-feet in diameter and 200-feet long. Big trees, huh? It was a different world back then. Speaking of a different world, I was impressed by the old U.S. Customs House in Portland. Now THAT building also represents a different world, one where the federal government raised its revenues from duties and imposts.
In the olden days a ship captain would dock at Portland, or another locale on the Columbia. Then he’d walk over to the U.S. Customs office to declare the cargo and pay the taxes due. This was how the federal government funded its operations. And when the funds were spent, the government had to observe its own fiscal limits.
In other words, the original U.S. government had to take an interest in growing and maintaining the economy. Today, with the fiat dollar, the feds think that they can do anything. Until, of course, the nation spends itself into national penury.
Until next we meet,
Byron W. King
for Markets and Money