Tag Archives: economy

Superpower America (or How’s that for Mixed Metaphors)…

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The actual future is going to look different than the future we thought we were going to have. That’s true if only because we’re notoriously bad at predicting the future – We’re all still waiting on our flying cars, right? I don’t think it’s going to be radically different to the point that Canada starts being cool or Hollywood starts making good movies (that would be some kind bizzaro universe). I actually have a sneaking suspicion that the future is going to be painful. Painful in that we’ve spent the last 30 years binging on cheep booze and grease ball cheeseburgers and now we’re about to wake up with a national hangover the likes of which none of us has ever seen. The fight to raise the debt ceiling ain’t nothing compared to the battle that will be joined when we realize we’ve got to actually start paying down the debt itself.

The future is going to seem painful because there’s every possibility that we’re about to experience a world where Superpower America isn’t. Those of us who grew up beyond the shadow of the cold war are going to have the hardest time adjusting because we’ve never had to moderate our expectations about anything really. You guys know I’m not exactly an alarmist, but my read of the situation is that bottom line: Superpower America is too expensive. How we go about fixing that with the least pain possible (the no pain option is well off the table), remains to be seen. So too does whether we have the national will to collectively make hard decisions about what is in the long term national interest and what isn’t; what we can pay for and what we can’t. These decisions matter. Economic realities matters.

Don’t believe me? Ask Superpower USSR how it works out when you pretend economics is an imaginary science. Spending ourselves into oblivion isn’t an option, but I wonder who’s going to be the first to offer up their sacred cows so we can try to avoid slaughtering the whole herd.

40 hours…

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The 40-hour work week where everyone arrives and departs at the same time each day probably made eminent sense when it was instituted for a country with a massive manufacturing sector committed to assembly line methodologies. When you’re living in an electronic age and the output product of your efforts live in a storage device as a series of ones and zeros, a fully regimented work schedule is a little harder to understand. In a plant where they build cars, you can expect X number of frames to roll by a given point on the line each eight hour shift every day of the week. OK, a standard 8-hour day makes sense there. In the information sector, Wednesdays might be the heavy volume day and represent 11 hours of required work while Monday only requires five hours of work. Even though the requirements have shifted, we largely cling to that magic eight hours a day, five days a week concept.

If I were king for a day, I’d propose a new standard for information workers. In this system, you’re paid your base salary for 2080 hours a year. On days when you get the work done in 5 hours, feel free to go on home. On days when workload is high, plan on staying a little longer to get it done. All things being equal, I’d be willing to bet that in most cases, the time would even itself out over the long term.

Of course we know that all things are not equal. Some people are going to abuse a system based on them being honest about their workload. Some people will work half days every day and others will put in 12 hours every day. So yeah, I intellectually understand that there are pretty high barriers to getting away from the standard work week. I get that my new system is a managerial nightmare and completely impractical, but on those days when I blow through my assignments in 4 hours, it sure would be nice to have the option of punching out for the day rather than sitting around watching the clock tick on towards the end of the day…. because let’s face it, when their actual work is done, no one is sitting around dreaming about what other great things they can do for the overlords, right?

The Long Game…

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As you’ve noticed by now the pace of posting has slowed a bit lately. To be honest, I’ve been absolutely engrossed in watching the ongoing economic meltdown. I’ve sort of moved beyond the point of being stunned to the point of being fascinated in seeing how the market unravels from a more academic point of view. I want to try to understand the fundamentals at work – particularly those that failed. Obviously, the overextended home lending market has a significant share of the blame here, but I can’t make the jump to that being the only or even the root cause. I have to think there is something more basic at work here. So far, I’ve seen a lot of “the sky is falling” from the media, but they’ve been a little short on the serious economic analysis. Hopefully as we gain some perspective on the events of the last two weeks, someone with a far more developed sense of economics than mine will connect the dots.

While I’m thinking on the overall economy, I can’t escape the precipitous fall of stock prices over the last seven days. I’m the first to cringe when I look at the daily carnage inside my retirement account, but then I realize that I have 25 more years before I can even consider retiring and it starts to dawn on me that having the market down 50% means my IRA contribution is buying almost twice as many shares as I could a year ago for the same amount of money. Given that the historic trend of the market since its inception has been to move upwards and the ridiculously long horizon involved, the long game is looking pretty positive. Yeah, I know that thinking like that probably makes me a bad person, but I’m OK with that.

Cry Havoc…

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I’m the last person on earth I ever thought would be screaming for massive government intervention in the free market, but for god’s sake the financial sector is taking a pummeling whose only precedent was before most Americans living today were born. Not to sound like a complete alarmist, but if the Congress allows liquidity to dry up any further it’s entirely possible that the entire financial engine of the country could seize. Our economy on the macro level is based on big institutions providing short term loans to one another. If that suddenly stops happening well, then God help us. I hope you’ve stocked up on lots of canned goods.

Feel the power…

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ABC News ran a feature tonight about the “greedy” power companies who were turning off the utilities of people who were not paying their bills. Of course they trotted out the usual suspects… The family of 6, the old woman raising her grandchild, etc. All they said of the companies was that they were stopping service because delinquencies drive up the price for paying customers. Yes, Mr and Mrs Dontpaymybills and all the ships at sea, that’s how it works in this country. We trade goods and services for money or the promise of money at some predetermined point in the future. That’s what allows us to not all raise corn and cows to feed ourselves.

I know I rant on this a lot, but I just have a hard time getting past the idea that our countrymen are surprised that they’re expected to pay for the goods and services they consume. I was raised believing that this country was about the right to pursue happiness… Not necessarily the right to have it. In economics, there’s a principle that everyone learns in their 101 class that says “there’s no such thing as a free lunch.” The consequences of basing an economic system on the premise that everyone should have a free lunch if they want one died off with the Soviet Union. Cuba stays afloat because of the tourist dollars generated from capitalist Europe. China’s Communist party stays in power because they have adopted measured amounts of capitalism and that trend is increasing over time.

But, you say the top 1% of earners are running away with the pie. It’s true that their part of the pie has grown, but the entire pie has gotten larger too. There are more millionaires per capita today than at any time in the history of the Republic. That doesn’t mean that these individuals have jobs making $700,000 a year, just that they were smart with what they did with their money. Get out of school making $35k a year, max out your contribution to your IRA and 401k, live under your means, and in 35 years when you’re eligible to retire, guess what… You’re a millionaire too. Work another 5 or 6 years past eligibility, guess what… That’s right, another million. Compound interest and long-term market growth are beautiful things, friends.

So next time you’re watching the nightly news and tempted to sign onto the bandwagon that all our problems are caused by the big, bad corporations, take a look around at the decisions individuals have made that contribute to where they find themselves. The Invisible hand doesn’t just guide the market up, it guides it down too. Get in tune with that and you’ll really feel the power.

The “R” Word…

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I’ve been watching this on the news for the last several weeks and think we need to clarify the fact that there is a definition to what a recession is and is not. By definition, a recession is 2 consecutive quarters of negative growth in gross domestic product (GDP). This week’s report shows growth for the first quarter at .6%. That’s GROWTH (i.e. GDP increased). If you’re a talking head and go on television talking about the current recession when the last two quarters show economic growth, you look like an idiot. Suck it up and face that fact that the American economy is simply robust enough to endure the “shock” of high oil prices, the collapse of the housing bubble, and increasing prices on commodity and manufactured goods while continuing to grow. Stop looking like an idiot. That is all.