Just checked in on a blog I read sometimes, and the guy’s last couple of posts are along the lines of what I’ve been thinking and posting:
Talking Us Into A Drepression February 6, 2009, 1:59 pm
At what point do politicians bear some public accountability for their public statements and the effect those statements have on the economy? I almost want to ask Obama and Pelosi — what is the minimum size of pork-spending bill you will accept so we can just go ahead and pay the money and get you and your cohorts to shut the f*ck up on trying to convince everyone we are in the Great Depression. Because, to some extent, such statements can be a self-fulfilling prophesy. Seriously, the biggest stimulative effect of passing this stimulus bill will be, almost without doubt, that it will end the felt need for Washington weenies to create an atmosphere of panic.
Now, I suspect that I would have a different observation if I lived in Detroit, but I ask every business owner or manager I meet for the personal evidence they have of economic cataclysm. Is their business down? And in a surprising number of cases, I get the answer that their business is doing OK, but they are cutting back because surely the worst is soon to come, based on everything they see in the media. And do you know what? I have done exactly the same thing. I had one bad month, but since then things have been pretty steady, but I am cutting like crazy anyway, because I can’t ignore the only other information source I have on the economy, which are pronouncements in the media.
I strongly believe that public pronouncements of doom, starting last October with Henry Paulson and continuing now to almost daily excess by Obama (today’s statement: the economy is in a “virtual free fall”) have measurably contributed to job losses in this country. Many people who are on the street without a job today can probably trace their unemployment to “just in case” cuts made more in response to government assurances of doom as on actual declines in output.
I can’t prove this, of course, but I will present one pretty good pointer that I might not be totally full of it. With the January jobs report, the recent recession has become one of the five worst since WWII in terms of jobs losses as a percentage of the work force (I know you may, from reading the paper and listening to Obama, think it is the worst, but it is still only the fourth or fifth worst). Let me compare the job losses and the output declines at this point in the recession for these 5 recessions:
As you can see, we have had far more job losses relative to output losses than any major post-war recession. This does not mean that more output losses are not coming, but it means that, perhaps unique to this recession, job losses are *preceding *rather than following output losses — in other words, job losses are occurring more than in any other recession based on the *expectation *of output losses, rather than in reaction to them. I wonder who it is that is setting these expectations?
Wow, using panic to achieve political aims and in the process accelerating job losses. And they say we libertarians are heartless!
Data updated by the Minn. Fed here. They actually have job losses through 13 months, but I jused 12 months because there are only quarters for the output numbers. Tags: bailout, financial crisis, obama, recession, stimulus bill, unemployment
Category: Economics | 7 Comments http://www.coyoteblog.com/
Good lord, but you’re right. Admittedly, I have a bit more to fall back on than the average slug who’s in danger of getting broomed out the factory door these days, but the fact is, better than ninety-two out of a hundred folks can still get a job (or jobs, if multiple income streams are the wave of the future), if worse comes to worse.
Me? I’m bailing from my airline in April (I have got to do something more fulfilling) and starting up a medical transcription company, and also going balls-to-the-wall on my writing gig (I’m doing content work for a number of web sites and the like, at the moment, while simultaneously trying to finish off my much-delayed novel). To sum up my thought processes lately, I think there’s an Arab saying which goes like this:
“You’ll never be somebody as long you’re working forsomeone.”
What?? you don’t like being part of my “family”? Taking the package? I’m sticking for now, but looking to clear financial responsibilites enough that other options are a reality. Good luck on that whole devine enlightenment thing.
I’m running like I stole something, to borrow a phrase from one of the other denizens of the LR. This last little jaunt around the world cemented things for me. And I just don’t think putting up with at least 2 more years of what we’re being told is going to be a “bumpy ride” is in the best interest of my ever-diminishing sanity
Many people who are on the street without a job today can probably trace their unemployment to “just in case” cuts made more in response to government assurances of doom as on actual declines in output.
Tell me when we have have had this insane level of financial fraud since '30… answer is never. IMO they are understating the problem not overstating it. It is the worst since then, if not even worse.
Also, your graph is meaningless since this recession did not get onto full swing until a few months ago, so 2008 stats don’t tell the story. Also for employment to drop more than output means the companies are working more “efficiently”… which is a smart move in any case.
When Oct '09 comes around let’s see what the stats show.
I briefly read your post but I didn’t read all of it because of my latest strategy. Since December, I’ve been trying to avoid all economic news. Since then, I’ve felt so much better since ignorance is bliss and everything. I just wish I could get rid of the economic news at work because my company is greatly affected by it. I do agree that this may be a self fulfilling prophecy and a lot of the panic is being instigated needlessly by the media.
I’m not in the average because I have 3 jobs, but the one that really pays the bills is down about 30% this year in comparison to last. Although last year was a record setting year. We do professional services so your theory of cutting back could fit into why our business is down as much as it is. We don’t publicaly report much of anything as a private company but, we can usually predict a real downturn in the economy based on our business and can usually see the recovery coming in the same trends. Aug - Dec were the worst months since the 2001/2002 bubble, but January looked a bit better. Hopefully optimistic that February will continue the up-trend
I am seeing the effects of this “mental depression” on a daily basis. As the owner of a couple of restaurants at a ski resort which relys heavily on foreign tourism and is largely a “luxury” I can tell you categorically that people are spending less on luxury. My fine dining restaurant was off 28% in December over 2007. January was down 11%. I will still turn a profit this season, but my income will be off somewhere around 35-40% I expect. (Part of that is because I am having to pay a manager to replace my wife while she is recuperating from a head injury).
This has such a cumulative effect as well. All my travel and purchases this summer will be budgeted a little tighter. I cringed when I booked my hotel rooms for Ultraman. My managers will see smaller bonuses, hence have less to spend. I have 4 less staff this year than last. The salesman from my main food supply company is under constant pressure to explain his decline in sales. His commissions will be lower.
Reagan was at least partly right about the whole “trickle down” effect. There won’t be a whole lot of trickling down from me this year.
"From crisis to catastrophe. Off a cliff. Dark, darker, darkest. Mortal danger of absolute collapse. Armageddon.
President Obama and top Democrats on Capitol Hill are deploying these and other stark predictions of doom and gloom to push through their economic-stimulus package. In terms not heard in Washington since the late 1970s under President Jimmy Carter’s watch, the new president has sought to terrify Americans into supporting the $800 billion-plus bailout bill. "
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Mr. Obama has gone much further than that. Just Friday, Mr. Obama said a report that 600,000 jobs were lost in January meant “it’s getting worse, not getting better. … Although we had a terrible year with respect to jobs last year, the problem is accelerating, not decelerating.” Last week he said, “A failure to act, and act now, will turn crisis into a catastrophe.”
But he isn’t the only Democrat ramping up the rhetoric while talking down the economy. House Speaker Nancy Pelosi of California said last month that our economy “is dark, darker, darkest.” Rep. David R. Obey of Wisconsin said, “This economy is in mortal danger of absolute collapse.” And Sen. Claire McCaskill of Missouri said of the economic-stimulus bill, “If we don’t pass this thing, it’s Armageddon.”
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I also read a “worst economy since the second world war” quote from Lawrence Sommers somewhere today. There’s a number of things they could be going for here, but it is definitely a message they’re trying to get out.
Excellent post. This is some seriously thought provoking shit.
I strongly believe that public pronouncements of doom, starting last October with Henry Paulson and continuing now to almost daily excess by Obama (today’s statement: the economy is in a “virtual free fall”) have measurably contributed to job losses in this country.
But……Obama campaigned on the word “Hope.” It was the cornerstone of his campaign. Now he says “catastrophe” and the economy is in a “virtual free fall.”
I thought Obama was against “fear mongering?”
Obama is a veteran charlatan. He’s also a rookie politician, who according to my sources never wrote one piece of legislation. All he has ever done is sign his name (I think it is referred to as ‘co-sponsoring’) other charlatans bad ideas.
So now he’s President and hands over his ‘stimulus’ plan/program to the democrats who load it up bullshit. He provides no guidance, urges no restraint, he just says ‘here you go, do what you wish.’
At his impending undoing, Obama will learn the great maxim of leadership: “You can delegate authority, but you cannot delegate responsibility.”
If we didn’t have all this bad news to report, then the news industry would fall on hard times. Why do you have it out for them? I’d do pink, but that’s so '08…
So the quadrillion dollars worth of debts floating around in the worldwide banking industry, additional 2-3 million bad mortgages that are due to reset in the next 2 years don’t worry you at least a little? Is this the emotional recession the Mccain campaign talked about? Go to seekingalpha.com and read the market blogs. Not exactly run by the liberal media (Obama is a dirty word there), people are REALLY scared. A lot of industries are tanking, no orders coming in, including international orders. But if your little corner of the world looks good, then by god it must all be a fabrication of the media. I suspect the economists advising Obama gave him the the worst case scenario and he is toning down the message. I bet a lot of wealthy folks in 1929 thought things were great right up to the point when people started jumping out of windows on Wall St.
"I bet a lot of wealthy folks in 1929 thought things were great right up to the point when people started jumping out of windows on Wall St. "
I bet for a lot of “wealthy” folks, things still looked good by 2Q of 1930 when the bear market rally was in full swing after they bought “near the bottom”. Things were still great until the DJI dropped another 75% from the 1929 low (or over 80% from the high of the 1930 bear market rally) by 1932.
Interesting post. Total speculation but the effect you describe could be partially explained because of the leverage involved and the nature of credit squeeze. All these companies suddenly had the supply of money cut off. If you can’t get credit how do you get your hands on better supply of money? Cut your costs. In this way employment did front run the production but don’t worry, I’ve got no doubt production will catch up.
Read some interesting commentary this morning along the lines that a recession is a natural part of the business cycle (no doubt) but a depression is created when people try to forever avoid recessions. I think this is interesting and arguably true. All the government attempts at keeping afloat companies that don’t deserve to survive, rewarding bad behaviour, punishing good behaviour, printing money, running up the deficit blah blah blah. It’s hard to see how it can possibly end well.
And I just don’t think putting up with at least 2 more years of what we’re being told is going to be a “bumpy ride” is in the best interest of my ever-diminishing sanity
I completely agree. I’m starting to think my company is run by the Lions front office. “We’re not a great team, we’re a a a good team” and “its a rebuilding year” keep running through my head.
The book is a quarter done and the business plan is in full swing.
It’s really wierd. I keep hearing all this talk about recession and depression and all that but I go to the mall on the weekend and I couldn’t even find a parking spot. The place was packed.
Aside from the news, I haven’t really seen anything to make me believe there are hard times for my city…yet.
I agree with you. Their comes a point when the psychology of this takes over. And people start to panic and pull back just because, they keep reading and hearing that it is horrible. I am not saying it’s bad - their are some parts of the economy that are going through some rough patches, to be sure. But their are other places, that are doing well and have been more or less un-affected - ironically, given that this is a triathlon website and forum, one of those areas is the sport and business of triathlon!!
Now, that being said, I think a lot of this has to do with some very distorted expectations and entitlements of many North Americans. I realize this is an extreme view, but somewhere over the course of the last 30 years, I think that many North Americans have felt that they are entitled to and have grand expectations of a certain kind of lifestyle - detached well furnished home, two cars, kids in college, nice vacations every year . . . and so on. I caught the tail end of a radio discussion about this several months ago that laid the blame for all this, firmly at the feet of the advertising business and also the media. Why? That’s the lifestyle image that they have pounded away at people with relentlessness for the past 30 odd years. If you are not living that aforementioned lifestyle you were some type of looser! What was failed to be mentioned was that, that sort of lifestyle takes a lot of work to achieve and a certain level of income. It does not come easily. It does to some, but most have to work very hard to achieve it. And that’s the other part that get’s left out, you actually do have to work very hard, plan and be very organized, to achieve and maintain that lifestyle. Living it on your credit card or loans from the bank, will only work in the short-term and really should not count. At some point the piper is going to come calling!!
