If you’re old enough to remember the TV show “Hee Haw”, you’ve been through a couple pretty big recessions in your life. There was a recurring skit on the show where four hillbillies surrounded by moonshine jugs would recount tales of woe, accompanied by a song:
“Gloom, despair, and agony on me; deep, dark depression, excessive misery! If it weren’t for bad luck, I’d have no luck at all; gloom, despair, and agony on me!!
I thought of that old tune yesterday while glancing through the morning news items. Everywhere I looked I got another dose of gloom about the economy, with predictions that we’re headed for the feared “double-dip” – a recession where the economy takes a nose-dive, comes back up a bit, and then takes another big nose-dive.
The National Bureau of Economic Research officially decides whether the economy is expanding or contracting, and the NBER, despite urging from a number of politicians and public officials will not say the recession is over. Nor will the NBER predict a double-dip, but that doesn’t stop the pundits from doing it.
Near as I can tell, the tea leaves some of the financial pundits are reading concern housing, employment, the bond market, and a few other intangibles.
Housing is still way, way down. You don’t need to know that last week’s official housing numbers were horrible, with a steep drop in new home sales. If you have anybody in your family or in your neighborhood who works in the building trades, you know housing isn’t “back” yet.
Unemployment is still very high, and “under-employment” is rampant. Everyone interprets the weekly unemployment reports differently, it seems, but Monday Vice President Biden said there’s no possibility to restore 8 million jobs lost since the beginning of the recession, a remark easily interpreted as gloom and doom.
Another sign of the world economic climate came last weekend at the G-20 meeting, where most of the policymakers disagreed with President Obama about more stimulus spending, and said now is the time to cut spending and pay down debt, rather than launch more new programs and create more debt.
The bond market’s not exactly roses: the yield on the 20-year Treasury hit its lowest levels since 1962 last week.
All these things lead some of the economic tea-leaf-readers to predict that dire times are ahead.
I’m no economist, and while my native tendencies run more toward pessimism than optimism, I’d prefer to believe that the worst is behind us, but the road to recovery will be long and twisting, and it’s going to take a while to get to whatever the “new normal” is.
the road to recovery will be long and twisting, and it’s going to take a while to get to whatever the “new normal” is
ReplyDeleteThat would seem to be the optimistic take. ECRI is almost certain that 2011 will be less economically-energetic than is 2010.
In other words, blech to the negative 2nd power.
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ReplyDeleteHappy days are not here again, just yet? I'm shocked! Shocked!
ReplyDeleteResearch is an examination of the facts. It is not directly predictive. So It is not surprising that the National Bureau of Economic Research won't risk its credibility by singing happy songs or gazing into a crystal ball and prognosticating in cryptic quatrains.
Politicians suffer no such compunctions. Those who would benefit from rosy optimism are sure to see it. The beneficiaries of pessimism readily detect it in abundance. They would rather maneuver and jockey for power than advocate innovation and sensible action. (It's probably just as well. Historically they've never shown much talent for that sort of thing.)
The manufacturing sector - the great engine that drove our economy for a hundred years - has gone off the rails. It will never again be as we knew it. It is important to understand that, and to stop looking for that sort of a recovery.
Think of it as economic climate change. We cannot directly reverse it, but we can, indeed we must, adapt. Then we will see the rainbow just around the corner, and we can all have another cup of coffee and another piece of pie.
That said, I would not count on Big Corporate, with its profits-uber-alles mindset, to pull off such a transformation either.
My money's on the entrepreneurs and the risk-takers and those long-suffering good folks who are still willing to give a day's work for a day's wages. That approach - making things of value and selling them for more than they cost to make - takes a long time to build big numbers, in terms of wealth and jobs, but it is fundamental to a robust economy.
The rainbow Irving Berlin wrote about may indeed be just around the corner, but I quite agree with our blogger. We are still a way down the block from that sunny turn.
>> Gloom, despair, and agony on me; deep, dark depression, excessive misery! If it weren’t for bad luck, I’d have no luck at all; gloom, despair, and agony on me!! <<
ReplyDeletehttp://www.youtube.com/watch?v=FQ5ob9B9yD4
Something Hieronymous wrote got me thinking:
>> My money's on the entrepreneurs and the risk-takers and those long-suffering good folks who are still willing to give a day's work for a day's wages. That approach - making things of value and selling them for more than they cost to make - takes a long time to build big numbers, in terms of wealth and jobs, but it is fundamental to a robust economy. <<
Unless the product is so loaded down with costs of doing business that a company can't be competitive anymore, e.g., GM and Chrysler.
What kept American manufacturing competitive was high productivity. A corollary of that, though, was a smaller number of workers needed to produce the same amount of stuff.
So where's the balance point between high wage, long-term jobs and high productivity and good profits?
The Town Crank
Well done, Crank! You've answered your own question. Products "loaded down with costs of doing business" certainly cannot be competitive when the marketplace includes similar products unencumbered by such costs.
ReplyDeleteUnlike the socialism-abhorring United States, Japan and Germany, to name a couple of formidable auto-making competitors, did not have to factor the full cost of health insurance and employee retirement into each car they produced. Their respective governments consider those programs to be part of the social compact with their citizens. It's expensive, sure, but so is recession and the loss of millions of jobs.
In 2005, GM reported the cost of each car it built included $1,525 for health care. That's considerably more than the steel cost. The company lost $1.1 billion in the first quarter of that year.
If we as a nation want to let the political talk machine scare us silly with labels like "socialism" instead of devising a sensible solution, we'll continue to run the economic race with one foot in a bucket (probably made in China).
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