Thursday, November 20, 2008


In 1990 the Dow Jones began flirting with 3,000 for the first time ever. The internet and the computer revolution led the market to heights of euphoria, and the Dow Jones passed 10,000 for the first time in 1999 - a stunning rise from less than 3,000 to over 10,000 in less than ten years.

It took over a hundred years for the Dow to go from 100 to 10,000. It went from less than 3,000 to over 10,000 in less than ten years (1990-1999). This is an unsustainable rise in stock prices, just like during the first depression - and since then we added more than 4,000 more points, reaching the peak in October of last year.

The Great Depression saw similar markets before the '29 crash. It took nearly 22 years for the Dow Jones Industrial Average to rise from 100 to 200. But it took barely over a year for the average to vault the next hundred points. The industrial average hit precisely 300 on the last day of 1928. It had soared 48% that year, making 1928 one of the best in history. The only better have been 1915 and 1933 - until now, of course, when the market tripled from 1990 to 1999, and then added another 4,000 or so.

The market added more value from 2000 to 2008 than the worth of the entire market in 1990. Thus the stock market has proclaimed that from 1990 to 2008 (before this crash), the worth of American companies has gone from an index of less than 3,000 to over 14,000 - that is to say, it doubled, then doubled again, and then some more. This did not make sense in the 1920s, and it does not make any sense now - but unfortunately, the reasons for the rise in the '20s - the adoption of electricity for mass production - undoubtably had more impact on society than the adoption of computers and the internet in our time, but our market went crazier than it did back then. The first doubling of the Dow Jones took 22 years, and the last time the market doubled in less than a decade led directly to the Great Depression. This time we tripled the market in less than a decade and kept going. While market crashes are not the only reason for a depression, there is a real possibility that this Depression may be worse than last time, just as WWII was worse than WWI despite how much humanity thought it had learned from the World War, now called the First World War.

The Dow Jones website asks:

Why the huge increase in the 1920s? ''I call it the final fling upward,'' says Richard Stillman, a former professor and author who has written a book on the DJIA. ''This was a great era of euphoria. Prosperity was an explosion: Automobiles were in mass production, radios were in mass production,'' and telephone and aerospace industries were taking off.

And I would add that the rise of easy credit led Americans to add more debt in the 1920s than ever before, resulting in a large part of the American market being rooted in loans that were unlikely to ever be paid. Sound familiar? No-money down for cars, washing machines, telephones, you name it. And Americans bought and bought, and then the bottom fell out. It was the 20th-century version of the "sub-prime mortgage mess." Except we have more debt than Americans did then (in % terms and per capita) and that debt is not for things we could do without back then - phones, cars, etc. - but for our HOMES. In other words, this time the data looks worse.

Dow Jones' website adds

Professor Stillman thinks that Herbert Hoover's victory over New York Governor Al Smith in the 1928 presidential race also helped the Dow industrials surmount 300. ''The political climate continued to be highly favorable to business,'' he says. Mr. Hoover favored ''rugged individualism,'' and the less interference in business, the better.

This is strikingly similar to "compassionate conservatism" and the withdrawal of government regulations since 1990 and especially since the beginning of the Bush era.

Dow Jones provides that "after hitting 300, the Dow industrials would soar further in 1929, peaking at 381.17 in September. But in the crash of 1929 and the Depression, they would plummet. It would take a quarter century -- until 1954 -- before they would surmount the 300 barrier again." We peaked at 14,093 on October 12, 2007. Today the market closed at 7,552. We don't know when the market will again reach the peak of 14,093, but it is not unreasonable, even though we hate to think it, that it will take another quarter century to return to that valuation. That would be the year 2033.

Most people know that "the Dow Jones Industrial Average did miserably during the Depression of the 1930s. It began the decade at 248.48, down from a high of 381.17 before the crash of 1929. By July 1932, the depths of the Depression, the industrial average was crawling at 41.22. It ended 1939 at 150.24." If we apply the same percentage drops, the peak of 14,093 would reach all the way down to 1,524 if it dropped as much as the market did in what we may begin calling the First Great Depression. That is, 41.22 to 381.17 is the same percentage drop as 1,524 to 14,093.

If the market merely should have doubled from 1990, then it would be at a mere 6,000 today - perhaps not an undervaluation. In terms of market history, doubling the market from 3,000 to 6,000 in 18 years is a good performance. We moved from 3,000 to over 14,000 in that time. In short, it does not make sense.

Those investing now at 7,552 hoping to game the market when it reaches "bottom" should reconsider and perhaps protect their own bottom instead. We don't know where the bottom is, and by that I mean WE WON'T KNOW WHERE THE BOTTOM IS UNTIL AFTER WE GET THERE. If this Second Great Depression is only half as bad on stock market prices as the last one, then the bottom will be 3,048. The market is more than twice as high today. WE DON'T KNOW.

We keep telling ourselves "it won't be as bad as back then" but few economists or reporters can explain WHY. I don't see why it should be easier this time, and as discussed above, many factors look worse.

From the Dow Jones website:

What many investors don't know is that the 1930s were also the most volatile decade on record for stock prices. Investors, their nerves rubbed raw by the Depression, were prone to fits of euphoria and despair. Thus, the industrial average plunged 52.7% in 1931 and 32.8% in 1937, but it rose 66.7% in 1933 and 38.5% in 1935. Daily volatility was also intense. Strange as it may seem, seven of the 10 biggest up days in history, on a percentage basis, occurred during the 1930s.

The volatility we have seen in the past few months is the most volatile in the history of the market. We have seen day after day of triple-digit gains or losses - usually losses - and we are now almost halfway down from the peak. The idea that the bottom is near is comforting, but it is not supported by the evidence.

This kind of turmoil led to the rise of fascism and world-wide conflict last time. This kind of turmoil (albeit on a lesser scale and not world-wide) led to the fall of the Soviet Union. What will this kind of world-wide turmoil lead to now? Add in global warming and corresponding famine/massive migration, the end of the age of oil, our staggering national debt (which we should not even worry about balancing at this point, not right now), and the fact that many nations now possess nuclear weapons, and we are in for quite a ride.

I want to believe those pundits and economists who say that this time won't be as bad as the 1930s, that this is a "bad recession, possibly worse than the one in 1981-1982." I want to believe them. But I saw this coming long before they spoke out about it, and they have been wrong, consistently wrong, and they give no reasons for their belief that this time it won't be as bad, that we are not due another Depression on the scale of the 1930s. They believe that, but they believed the "fundamentals of our economy are sound" long after I saw the fundamentals were clearly indicating otherwise.

I want to believe those who tell me it won't be as bad, but at this point I don't. Buckle up, it will be rougher ride than any of us have ever taken in our lifetimes, and most people don't have any idea how bad it is going to get.

[I took much of my information on the 1920s and 1930s from the Dow Jones website found at]


Charles Gittings said...

Well this is something else I saw coming a long time ago, and here some numbers to think about...

1900 - Total population: 75,994,266; farm population: 29,414,000 (est.); farmers 38% of labor force; Number of farms: 5,740,000; average acres: 147.

1930 - Total population: 122,775,046; farm population: 30,455,350; farmers 21% of labor force; Number of farms: 6,295,000; average acres: 157.

1960 - Total population: 180,007,000; farm population: 15,635,000; farmers 8.3% of labor force; Number of farms: 3,711,000; average acres: 303.

1990 - Total population: 261,423,000; farm population: 2,987,552; farmers 2.6% of labor force; Number of farms: 2,143,150; average acres: 461.

1900 - 41 percent of workforce employed in agriculture

1930 - 21.5 percent of workforce employed in agriculture; Agricultural GDP as a share of total GDP, 7.7 percent

1945 - 16 percent of the total labor force employed in agriculture; Agricultural GDP as a share of total GDP, 6.8 percent

1970 - 4 percent of employed labor force worked in agriculture; Agricultural GDP as a share of total GDP, 2.3 percent

2000/02 - 1.9 percent of employed labor force worked in agriculture (2000); Agricultural GDP as a share of total GDP (2002), 0.7 percent

The data here is one of the reasons this thing could potentially be a lot worse than the great depression.

Publius said...

Spot-on analysis, JD. I'm also inclined to agree with you that it's going to get much worse before it gets better. If it ever gets a whole lot better. We may have to come to grips with a reality that DOES NOT include ever-increasing standards of living. IMO, we're actually in danger of seeing a brave new world where all humans' standards of living may kind of take a path where, say 50-100 years from now, everybody's about the same.

Valuable input from Charly, too. What really strikes me about his figures is that not only are fewer Americans involved in agriculture, not a whole lot of Americans even possess the skills necessary to feed themselves. This old guy is already planning the garden plot for next year; it will be extensive. I know how to grow veggies, and I also know how to hunt game. Just haven't done it much in recent years because I haven't had to do so. If I have to, I will. Unfortunately, many of our fellow citizens, especially the younger ones, do not know how to do these things. We really have become a stupid nation, not just in academics or in critical thinking, but in other ways as well.

In a nation of 300M where most do not possess the tools to survive on their own, I think we can expect a serious increase in crime. We already have too many who'd rather steal from others than work for it on their own; Maslow's hierarchy of needs and common sense inform us that we'll see more crime as the unemployment figures rise.

One silver lining may be that our government's propensity to try to police the world will likely come to a screeching halt. If we're lucky, we'll see the end to foreign adventures, with the military emphasis being on protecting what we've got. Another piece of potentially good news is that all of the "potential adversaries" (read boogey men) that cause our government to try to make us look under the bed every night are going to be in the same boat that we're in. China? Russia? They're going to have feed their people. Further, I recently saw some interesting figures addressing how much oil producing nations have to get per barrel to support themselves. The lowest, Iran, needs $70 a barrel; Venezuela and other troublemakers need even more. Oil closed today under $50 a barrel. It might be that some "potential threats" may find it more in their interests to worry about staving off revolution at home rather than looking for trouble elsewhere. Just like us.

Looks as if we've finally gotten into the new millenium. Who would've thought it'd be so exciting? A thrill a minute.

FDChief said...

Well reasoned, JD. Ugly, but there it is...

I think the reason that so many of the pundits keep saying "It wn't be as bad as 1932" is the conventional belief that we "learned the lessons of the 1930's" and will be able to Keynes our way out before we hit a 1932-type bottom. But some of the analysis I'm reading suggests that the solutions we have - nation-level fiscal policy - doesn't match the problems we have - global-level economic dysfunction...

And I've been worried about the precarious way our economy has balanced on finance and consumer spending for a while now. The bottom line on wealth is that "real" wealth is grown, fished, mined or manufactured from the products of the above. That's not to say that the geologists, attorneys, doctors and economists among us can't "create" wealth. But when so much of the GNP comes from non-primary business...brrr.

I'm with Publius: I'm planning to channel my inner Scot and grow taties and neeps and a bunch of victory garden veggies this year. We've already set up our rain barrel to cut down on the watering costs. And we're looking to try and cut expenses by eating cheap and local. I think you're right. We've had a long growing season since 1941 and wild hot summer for the past twenty-some years. But winter is coming.

pluto said...

As you'll recall, gentlemen, I first started predicting something like this in 2005. I need to tell you that, speaking as an experienced doom-sayer, you're all a bit too pessimistic.

Your eyes are opening to the world but don't look just on the bad things that are going to come, look also for the good things because they will be there as well.

JD's analysis of the stock market is very well reasoned but, by using the Great Depression as a model, he's underestimating the effect of the national government this time around. I haven't been able to come to any rational conclusions yet but the ruthless government expansion during the Bush years plus all of the take-overs and buy-ins of the last few months, the government now controls somewhere between 25-50% of the economy. What effect will this have? I don't know but it's definitely going to have some impact.

Let's take a look at another area, food production. Modern agriculture is a very energy and technology intensive industry that employs a fairly large percentage of the workforce if you count all the people designing new crops, creating fertilizer, building new tractors, moving product to market, and even stocking the shelves at the local grocery store. Do you honestly think that is going to wither away? I don't, but I live in an ag-heavy zone of the country and don't expect these troubles to affect my life at all. After all, those oil sheiks like to eat too. I'll trade them $4.00 per bushel of wheat for $75.00 per barrel of oil and we'll both still be happy until they run out of oil, but by then I expect we'll have another energy source.

The Chief is right, as usual, that we are now facing the economic winter of our discontent, made worse by the memories of our foolish actions in times of plenty. But global warming does seem to be happening. For example, we've got thousands of Canadian geese living with us through the winter because we don't get cold enough anymore to drive them further south. This is a mixed blessing as these birds can each produce two pounds of guano per day but the grass sure is green the next spring...

Warmer weather can also mean more severe weather, possible droughts, and longer growing seasons. Our winters are now predictably six weeks shorter than they were 20 years ago so we need less heating oil and can use the longer growing season to get multiple crops from the same fields.

As all of you have commented, we are in for a major change, but it is an evolutionary change rather than the end of the world. Keep your eyes open for both the pitfalls AND the possibilities of the coming change and you should all do well.

It's the people who blindly trust the reliable older institutions that are going to get smacked about the head really hard and really frequently.

basilbeast said...


One silver lining may be that our government's propensity to try to police the world will likely come to a screeching halt.

Hell yes, we may even see cuts in the Pentagon budget, maybe investigations into the ( most likely ) criminal use of taxpayer money!

I would like to see that.


Publius said...

"Your eyes are opening to the world but don't look just on the bad things that are going to come, look also for the good things because they will be there as well."

Pluto, I think you're being a little condescending here. If you look back over the years, I think you'll see that most of the regulars' eyes have long been opened to the world and have seen this trainwreck coming for a long time. Now it's here, and now is the time to reevaluate some fundamental premises.

To begin with, I think you're being far too sanguine. ISTM that using the Great Depression as any sort of guidepost is akin to accepting perhaps a decade of pain. Is that your version of optimism? Plus, inasmuch as this crisis isn't all that much like the depression, I'd hold off on thinking that happy days are just around the corner.

Americans are different these days. We're far softer and far less capable of taking care of ourselves. You want to use the Great Depression as a model? Well, while digging out of that, our parents and grandparents didn't have the burden of multi-trillions of dollars in required transfer payments to THEIR parents and grandparents to worry about. Not to mention a voracious national security establishment demanding enormous sums of money to deal with real and imagined threats.

My greatest fear is that Obama will not be able to make much headway in the next four years, perhaps because the political establishment won't hunker down and work, perhaps because the problems are so severe that four years won't be enough. The American people are ignorant WRT our institutions and what we're supposed to be all about; they're impatient to boot. A polity, IMO, always ready for a man on a horse. There will be no shortage of scurrilous politicians who will offer comfort in return for power. We went one way in the Great Depression; Germany went another. There is no guarantee that things won't flip this time around.

IMO, we're in deep shit and we'd better recognize that.

Aviator47 said...

Publius: "IMO, we're in deep shit and we'd better recognize that."

Ah, and therein is the crux of the problem. A society that really has know no privations for two generations. A society that has been led to think that "sacrifice" is low taxes while a volunteer military is worked to the bone. A society that talk about what "we" suffered on 9/11, yet over 90% suffer no real personal loss or hardship.

Hard times are an abstract and distant thing for the bulk of the population. Hard times is a 45 year old's 401k losing value "temporarily and thinking that "sacrifice" is waiting for it to go up again, while buying new shares at "bargain" prices.

We just lived through 8 years of an administration that successfully spun an alternate reality, and a majority bought it. The transition to the real world is going to be slow and painful.

People use the pronoun "we" loosely, and typically when they mean themself and the mouse in their pocket. All of our woes were cause by "them", and it is up to "them" to fix it.

Fasten you seat belts, gentlemen. We are in for a rough ride.


Aviator47 said...

WOW... I need to either proof read more carefully or not post before I've had 2 cups of coffee.

My apologies for all the errors in the last comment.


sheerahkahn said...

In my earnest desire to understand why our economy seems to crumbling around our ears, and to actually come to understand the mechanics of that collapse I found this article. The highlight of the article is over midway through, but I think it does explain how the Home Mortgage industry was the lynch pin that, once pulled, began the tumbling of the house of cards that was built...

"And short Eisman did—then he tried to get his mind around what he’d just done so he could do it better. He’d call over to a big firm and ask for a list of mortgage bonds from all over the country. The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000."

"More generally, the subprime market tapped a tranche of the American public that did not typically have anything to do with Wall Street. Lenders were making loans to people who, based on their credit ratings, were less creditworthy than 71 percent of the population. Eisman knew some of these people. One day, his housekeeper, a South American woman, told him that she was planning to buy a townhouse in Queens. “The price was absurd, and they were giving her a low-down-payment option-ARM,” says Eisman, who talked her into taking out a conventional fixed-rate mortgage. Next, the baby nurse he’d hired back in 1997 to take care of his newborn twin daughters phoned him. “She was this lovely woman from Jamaica,” he says. “One day she calls me and says she and her sister own five townhouses in Queens. I said, ‘How did that happen?’ ” It happened because after they bought the first one and its value rose, the lenders came and suggested they refinance and take out $250,000, which they used to buy another one. Then the price of that one rose too, and they repeated the experiment. “By the time they were done,” Eisman says, “they owned five of them, the market was falling, and they couldn’t make any of the payments.”"

BTW, ARM means Adjustable Rate Mortgage.
Anyway, here is the link if you wish to read the entire article.

btw: Did you know that the entire world GNP collectively is ~54 trillion dollars?
And did you know that the entire American debt load, you, me, and anyone else with debt here in the United States is ~56 trillion dollars.
We, the United States of America, owes more money than the entire world produces.

FDChief said...

Pluto: "Your eyes are opening to the world but don't look just on the bad things that are going to come..."

To back up what Publius said, here's the entry from my blog back in November 2007:

"Economic Policies: IMO the real ticking bomb. With a nation increasingly dependant on foreign investment, a nation losing the ability to manufacture or grow what it needs, a nation hostage to an inevitably-peaking (and possibly post-peaking) petroleum system for everything from transportation to agriculture, my guess is that we are within a generation or less of a major economic meltdown.
One of the least-covered of the GOP revolution that has changed American life since Reagan has been the massive deregulation and devolution of oversight over everything from power generation to fuel economy to food production. The "subprime mortgage" mess is just a symptom; the real illness is that over the past thirty years the brakes have been taken off our economy. The entire farrago has been profitable predominantly for the rentier class that is largely insulated by wealth from the impacts of their economic choices. As at no time in living history since 1929 our economy is driven by short-term profit-taking and leveraged paper profits. The entire structure balances on the financial sectors (banking, real estate, insurance) that are, in fact, creations of a mass confidence scheme (that is to say, it depends in large part on the confidence of investors and financiers on the stability of the system) but one that is ever more bubble-driven while being overseen by fewer, and weaker, impartial outside controllers than (yes, again) before the Great Depression.

I don't pretend to be Paul Krugman, but when I read about sweetheart deals like today's Citi "bailout" and the assloads of the earlier Wall Street cash going to dividends, executive bonuses and buyout deals, I'm not so sure that there's going to be anything "good" coming down the road for those of us not in a two-yacht family anytime soon.

Eisenhower famously warned about the "military-industrial complex". Dave Hackworth liked to include "-congressional" in that formula to emphasize the degree to which the legislative branch had been corrupted by the influence of contractor cash. I would go further than that: our political system has been thoroughly corrupted and debased by a combination of incestuous public-private intergrowth and an entrenched politicoeconomic royalty increasingly insulated from the nation at large.

This ruling class, though, I believe, has utterly underestimated the scale of this disaster. Tom Friedman's "flat earth" has enabled financial and economic interdependence to a degree inconcievable in the 1920's. Back then the combination of economic collapse and tariff protections helped punt much of the global industrial North into Depression. But there were exceptions, and much of the world was still off the economic "grid" at that time. We're much more closely interlocked now, but the means and methods of fiscal stimulus and Keynsian "levers" are still locked down at the national level. Entire nations - Iceland, now perhaps Switzerland - are going to be overwhelmed by this. And yet our "leaders" are still honking and flapping like geese in a barnyard while the fox kills them one by one, afraid to admit to the sheeple how bad this is gonna be.

I still believe that human societies, like human organisms, go through cycles of which this is one. And those cycles aren't often fatal - this is more likely to be a cold rather than smallpox.

BUT - the down parts of the cycles are miserable to those not insulated by wealth. A lot of people, including some of us, may find themselves in the breadlines and living under bridges before this cycle passes. So I will have to excuse myself from trying to look past the bad stuff to get to the good...

On a completely unrelated subject - it appears that Phil Carter has no immediate plans to return to Intel Dump, and his stand-ins have stopped standing in. Anyone have any idea what's going on with the Big Guy? Is he prepping to be Obama's Secretary of Veteran's Affairs?

basilbeast said...

PE's press/presidential conference:

And a commenter below that who echoes chief:

You must be kidding.

Mon, 11/24/2008 - 11:27 — woody
Militarism has any President by whatever balls s/he has.

At least one piece of the b-2 stealth bomber is either 1) designed or 2) manufactured or 3) inspected and polished or 4) installed by at least one company in EVERY Congressional district in the country.

And that's just one 'program.' There are thousands upon thousands upon thuosands of military or military-related programs employing millions of people in every state in the country. New Mexico's budget for the whole year is LESS than the amount the Govt spends here on its three airbases and three labs.

The entire USer economy is indentured to militarism. Nothing is gonna change that, short of the total collapse of the country...not that couldn't happen. But if it does, the milirtary is gonna be well-served to the very end...

FDChief said...

basil: While I'd be the last one to belittle the influence that the defense industries have, what I was driving at is that business in general has managed to insinuate itself into the government ofthe U.S. to an unhealthy degree.

Let's just take one example: the way we manage our agriculture.

When you look at it from overhead, the issue is a continuum; from the farmer/rancher/producer through the processor and the shippers to the vendor to the consumer who actually eats/drinks/wears the stuff.

But when you look at it from the federal government perspective, you have a Department of Agriculture that has always been staffed by people from the farming industry: agribusiness. Our "food policy" isn't made by or advised by people who are interested by or knowledgeble in food processing, food storage, food distribution, food retailing or, especially, food purchasing and food consumption. They come from the producers: farmers, growers, ranchers, and the related businesses that do all three.

So, not surprisingly, for example, we have a "food policy" that subsidizes and promotes things like cheap, hormone-injected, feedlot-grown beef. Now I have no idea, honestly, whether this sort of meat is the best, most healthy, most economically, socially and environmentally sound way to put meat on people's tables. And you know what? I'll bet the people at the USDA in charge of meat production DON'T EITHER.

Because their brief isn't to get beef on the table in a way that's best for the nation in general or the beef consumer in particular. It's to do it in a way that benefits the beef producer, especially the large, wealthy, politically connected producer(s).

Multiply that by corn, sugar, gasoline, electricity, fighter aircraft, pickup trucks...and you have the way our federal government deals with industrial and agricultural policy.

Periodically someone shits the bed - as the financial sector has this past year - and there's a hue and cry to seperate the government from the industries. Then we forget all about it.

I lose little sleep thinking that, short of the sort of collapse your commentor points out, basil, anything is going to change in the near future...

Publius said...

You know, IOTM on reading some of our comments here and on other posts over the years, there seems to be one resounding difference between us, now in 2008-09, and our forebears in the 30s. We "average" Americans, albeit in the better educated percentile, seemingly have virtually no faith in the ability of government at all levels to act in our best interests.

Cynics? Or realists? Whatever. The fact is, our governments have pretty much lost us. Yes, a crisis of confidence. Who here really has any confidence that our government boys are looking out for us little guys? Not me.

FDChief, I, too have been wondering about Mr. Carter. Perhaps Mr. Henderson, who seems to swoop on in periodically and then disappear for weeks, can shed some light on the situation. If, that is, Mr. Henderson hangs out here at all. Frankly, I've given up on Carter. I think we've seen the last of him. I'm also a little surprised that the WaPo hasn't already pulled the plug on Intel Dump.

What does one term a "blog" that hasn't had any action for two months? I'll tell you by recalling one of my favorite old Monty Python sketches, the one about the dead parrot: "Dead, deceased, expired, former....."

FDChief said...

"...pinin' for the fjords."

Yep. Lovely plumage, though, the Norwegian Blue?

I'm afraid it's flown up to the Halls of Great Power to preen with the other eagles, leaving us chattering starlings down here. The sad, deserted Dump website makes me think that the WaPo doesn't take their bloglines seriously.

Sadly, Publius, I can't but agree with you about the disconnect between us and our government. I don't think it's an issue of competence as much as confidence. Even the local governments, which you'd expect would be closer to the People and as such more in tune to and responsive to their ideals and goals are locked up by a combination of filthy lucre and partisan spite. Oregon's state gov. has failed something like half a dozen times to reform our taxation setup, so as a result we hve the most income-dependent, recession-vulnerable fiscal policy of the Lower 48. Why? The same-old, same-old. Powerful special interests. Public ignorance and indifference. Republican refusal to so much as consider anything starting with "tax"...

And meanwhile the economy continues to implode.

As Lloyd Bridges would have said (in the movie "Airplane"), I picked a hell of a time to stop sniffing glue.

sheerahkahn said...

I think that we, and that we being you, me, and our neighbors, have to stop viewing government as a nice shelter for the village idiot for the winter.
One of the key things most of you should know already is that, historically speaking, those seeking government go in for one of two reasons:
1: They know that there are millions, if not billions of dollars to be just need to know how to do it.

e.g. A friend of mine watched congress, both houses, and made his financial decisions from there. The way he reckoned it is that if he allows for the Congress-critters greed, they will pass bills that will benefit themselves.
And the sad thing is I should've followed his lead because sure enough...I'm a scientist living in the burbs, and he's is now a business owner living in an upscale part of town.
I have a degree.
He has a shit load of money.

The second reason is the do-gooder, and without a doubt these guys, with all their noble sense of family, community, and nation....don't last. They soon become players, or they get sidelined.

e.g. Another friend of mine had grandiose visions of being a congressman, representative after Don Edwards left office, and he ran for his seat.
Tried as he might he found out the real meaning of politics and soon became disillusioned by the entire process.

As he described it to me..."it's all about money. If you have the money, you'll get the backing, and once you get the backing, you'll get the power, and once you have the power you will do as your patrons tell you too because its all about money."

So yeah, I'm cautiously guarded about Obama...on the surface he seems to be doing the right thing which is a positive step for him.

seydlitz89 said...

Agree with the usual suspects . . .

I would comment on a couple of things:

First, perhaps the greatest difference between 1929 and 2008 is that the stock market DID actually reflect - in whatever limited way - the US economy of that time. Consider that industrial output, agricultural produce, the state of the railways (best in the world in the 1920s), the housing market, and other areas, did have a relationship with the price of stocks. The companies on the NYSE and AmSE did have real assets behind them.

How is that the case today? Rather the stock market reflects the current bubble which is what the US economy has become, essentially a confidence game in which nobody currently has much confidence.

In 1929, the political power was not concentrated solely among the financial interests, but was more evenly distributed (manufacturers, farming interests, Railroads, shipping lines, etc). Compare that with today, where they pretty much sign their own US government checks made out to themselves with Johnny Mac, Idiot Bush and Obama/Clinton smiling in the background.

Second, and I could go on but I won't bore ya'll with more pessimism, the IEA has come out with their long-awaited report estimating an annual decline of oil output of 9.1%. This from the world's 400 largest oil fields. . .

pluto said...

First I want to apologize to anybody who felt I was being condescending in my last post. I've spent a lot of time thinking about the economic downturn and the logical ripple effects and I sometimes get way too carried away. Just ask my wife if you don't believe me.

You have all been focusing on the unknowable and I think I've now got a pretty good idea as to what needs to happen in order for us to get out of our current slump (note that this is not necessarily what WILL happen, more on that later).

The current economic situation can best be described, I believe, in evolutionary terms. Evolution is normally a slow process with lots of dead-ends and incremental developments (look ma, no fins!). But every once in a great while a catastrophe occurs that empties out big ecological niches and suddenly species start mutating like crazy to cover missing areas because if they don't the whole ecology is going to melt down. Sound familiar?

The overuse of debt by approximately 1/3 of people and businesses is the economic catastrophe that will empty a bunch of niches. Roughly 2/3 of all people and businesses are in good shape but the remaining 1/3 (which includes some of the real high-rollers and big spenders) is crippled and dying off fast.

This rapid die-off, which is hurting thousands of innocent people who are employed by these corporate dinosaurs, is poisoning the economy for the rest of us as the overall economy is going into a tailspin.

As you already know, the government is lunging to the rescue with lots of good intentions and not much else. One writer has estimated the total amount spent so far in the neighborhood of $4.3 trillion.
By comparison, WWII cost the US $3.8 trillion after you factor in inflation.

Not all of this money has gone down the rat-hole, a lot of it was spent buying stock in companies that are expected to survive so there is a good chance we will recover much, if not most of it in the long run.

The two big things we need are:
1) Time: I estimate that we are one year into a 10-25 year crisis. Most years will probably be better than this year (only lose 10% stock market value instead of 40%), but there is a good chance that at least one year will be worse.

2) Government intervention is unavoidable but can either help or cripple the evolutionary process. We need to minimize the bad and maximize the good from the government.

Money spent to keep "dinosaur" companies alive is poorly spent because they can no longer survive in the current conditions regardless of the quantity of money given to them. Far better to let the companies die and to assist workers in finding new jobs via retraining and tax credits to start-up companies.

Government solutions similar to Fascist Italy, where the companies essentially become wards of the state, are also counter-productive. Companies need to be nimble to stay alive these days and I don't think anybody has ever classified a government bureacracy as nimble.

There is going to be a tremendous amount of pain in the next decade but, barring extreme government intervention, we will have a more stable and reliable economic system when we are done and I hope (but do not predict) that we will be better off as well.

1138 said...

Try reaching back to 1837, I think you'll find that depression more useful in relation to what is happening now.

1138 said...

Publis, I think Jack & Jill Average still trust the government as evidenced by FDIC deposits and the general apathy.
When the apathy goes and people do more then grumble then, and only then will people have really quit trusting the government.

1138 said...

"Modern agriculture is a very energy and technology intensive industry that employs a fairly large percentage of the workforce if you count all the people designing new crops, creating fertilizer, building new tractors, moving product to market, and even stocking the shelves at the local grocery store."

Actually it's a very very small percentage of the workforce and smaller every year since the dawn of the industrial age.

pluto said...

1138: "Actually it's a very very small percentage of the workforce and smaller every year since the dawn of the industrial age."

You're right that the people directly involved in agriculture is a very small number and is generally shrinking.

I'm speaking more of the people NOT directly involved in growing and harvesting crops who are involved.

For example, would you count all of the high school kids who work at your local grocery store? Or how about the people at the refinery who produce the fertilizer and fuel for the farmers? How about the truckers who move the food from the field to the grocery store? Stretching a bit, I could even throw in every person who is involved in the restaurant business.

If you include those people, you're looking at a LOT of people who are involved in making sure that you have access to everything from White Castle hamburgers to organic foods.

1138 said...


You could do all that stretching and twisting, but it would produce a number that would only be in proportion to the growth of the population, nothing else.
Oh perhaps you are right in transportation since half of the produce consumed in the United States is now imported.
Nope, I'll stand by what I said until you produce actual numbers that can be examined and challenged.
You conceded an edge, the whole page turns as easily.

pluto said...

The number of people involved in agriculture was not really part of my thesis, just a side comment. So I take it that you agree with the rest of what I said?

Doing a few minutes of research on the web, I found the following:
Walmart is in large part a grocery store chain these days and HIRES 600,000 employees annually (Frontline: Is Walmart Good For America).

I couldn't get a decent estimate of head counts but there are 11 grocery store companies in the Fortune 500 list including Kroger, Walgreens, Albertsons, and Safeway.

As examples of other food-related companies, Starbucks has 97,000+ employees (Wikipedia) and the National Restaurant Organization estimates that there are 13.1 million employees in the industry in 2008.

I'd say we are both right, there's tens of millions of people in food-related industries but its not a huge part of the total US employment picture.

To repeat the question that I was building up to: Do you honestly think that food-related industries, as a whole, are going to wither away because of this economic slowdown?

FDChief said...

Hey, JD...are you gonna post something here or what?

Lotsa good political news out there and lots of us ready to discuss it, but we're looking for some sugar.

With PC apparently done over at the new "Dump" and you guys over here so quiet, it's like the "Closed" sign is up at our favorite local watering holes. Where's a fella gonna go for some red political steak around here?

1138 said...

And so Cofee becomes a food and Walmart and it's entire staff become part of the "food" supply chain.
End of "discussion".
Hundreds of thousands I might have given you, even millins, 10's of millions no.
You reach for the silly.