The depression is alive and well!
Unemployment claims just came in higher than expected.
And new house sales in January were at their lowest ever. Pundits were quick to blame the snow. But sales were off even in areas that had better-than-usual weather.
Household income has gone nowhere in 10 years. Stocks have suffered a lost decade too. And now Ben Bernanke says we’d better be careful…because the recovery ain’t no sure thing.
The Fed chief has no idea. But average people know what’s going on. They know how hard it is to find a job. If you’re in the building trades…or you have only a year or two of college…you’re pretty much out of luck. You may have to retire before you ever start work again.
That’s why there was such a big drop in consumer confidence.
But look on the bright side. Building more houses for people who couldn’t afford to live in them was not exactly the greatest business strategy. And all those people who were appraising, mortgaging and selling houses can now find more useful work. Real jobs. Doing something more useful. What are those real jobs going to be? We don’t know yet. But it could take a long time to find out. And in the meantime, we have a depression on our hands…
So, let’s enjoy it…
How do you enjoy a depression? Well, the first thing is to make sure you’re not in its way…
Dear readers may not know this, but in addition to writing Markets and Money your editor also has a serious job…
Yes, in the morning he is a moral philosopher…gratuitously insulting public officials, whole professions, and entire nationalities. He is grateful to them all…they make life so entertaining! Imagine what kind of world we would have if people minded their own business and got on with their lives… People would be richer and happier, we don’t doubt it…but at whom could we point a finger and laugh?
No, dear reader, the world needs its bumblers, fools, politicians (are we repeating ourselves?), grifters (sorry…we did it again!), and megalomaniacs. It needs someone to challenge the gods from time to time. Otherwise, the gods wouldn’t have the fun of whacking them. And we wouldn’t have the fun of watching.
But getting back to the point…what was the point? Oh yes, the point is we have a serious job to do too. In addition to writing about the world of money, we actually have to live in it.
You see, we have a Family Office…a little group of researchers and analysts that actually has to make decisions… In the afternoon, we have to decide. What to do? Long or short? Buy or sell?
One thing we need to be on guard against is allowing our emotions to take over. For all our deep thinking and cynical detachment, we’re human too. We get emotionally attached to our own ideas. Then, we’re very reluctant to give up on them…no matter how bad they turn out to be.
We remember…sadly…our own feet dragging after the bull market in gold of the late ’70s. We didn’t want to sell. So we delayed…we hesitated… By the time we realized how wrong we were we didn’t have to sell. The bear market in the yellow metal was over! Gold had hit bottom. Gold was down 70% from the top. Much more in real terms.
This afternoon, your editor’s aging aunt called from Pennsylvania.
“This economy has been very hard on my family,” she explained. “I’ve got two sons-in-law…and they’re both laid off from their jobs.”
“What do they do?” we wondered.
“One drives a truck for a steel producer. The other is in construction. There’s just not much work, I guess.”
And that’s why, despite all the recovery talk, real people are turning real gloomy. Consumer confidence just registered its lowest reading since 1983. People don’t have jobs…and they’re beginning to worry that it could be a long time before they work again. Mortgage demand just fell to its lowest point in 13 years. State tax receipts are still falling – for the 5th quarter in a row. And the number of problem banks just rose 27%.
Recovery? Forget it. There is no real recovery. This depression has to run its course, like it or not.
You’ve heard us say that a depression is a period of transition from one economic model to another. You might ask: what’s an economic model? And what economic model are we leaving behind? What economic model are we going towards? And what’s this got to do with monetary and fiscal stimulus?
Good thing you didn’t ask those questions before. We didn’t have any answers. But here is David Goldman with a partial explanation:
“There is some analogy to the Great Depression in the present situation. Between 1918 and 1939, American agriculture was in permanent decline, because the end of the First World War reduced demand for American exports, and because the substitution of the tractor for draught animals freed up an enormous amount of land set aside for animal feed. There was nothing to be done but to get the farmers off the land into other occupations, and that was not accomplished until the Second World War.”
The farmers found work in wartime factories…and in military service. After the war, they took up new jobs, in a new economy with new factories and new professions.
What work will today’s laid-off construction workers find? Darned if we know.
for Markets and Money