Trickle up economy

There are many good arguments for buying from locally owned businesses. The foremost is that your dollar goes much further in strengthening your community's economic base when you skip the Big Box or chain store and buy from a local retailer (see this summary of several recent studies). In the current economic crisis, supporting your community's economy is even more crucial. Vital communities  require a diverse range of businesses to maintain higher wages, yet local businesses are the most vulnerable in this economic climate. 

One reason for buying local has not generally been discussed (here's a list of the more persuasive arguments). Instead of waiting for bankrupt state governments, or the often ineffectual federal government, to fix the global economic tailspin, economically vigorous communities can contribute to a global solution through their philanthropy, sustainable socioeconomic models and their tax contributions (Big Box stores often receive tax breaks that border on the criminal). 

So, when you make the effort to bypass one-stop shopping, or the convenience of the drive-thru chain restaurant, and buy local, you are not only strengthening your community's economy in ways that will ultimately reward you--you are also making a contribution to the institutions of state and federal governance that, like it or not, are key for stabilizing the overall economy.     

Life without financiers?

While it is too early to declare the death of the American Financial Industry, it is not too early to think about life in a post-financier age. In fact many of us are learning to cope without credit, to think of retirement less as an investment strategy and more as a savings plan and to temper our expectations for a gold-plated future. As we stand around the hospital bead of our comatose rich Uncle Wall Street, perhaps we should take some time to think about what life would be like without him...

It is often stated that without fluid credit markets the American dream of owning your own house would be out of reach for most of us, that college education for the masses would be a thing of the past, and that business would close without access to easy credit. Perhaps, but we have to question the extent to which easy credit has simply driven prices up. There is a parallel correlation between the loosening of credit markets in the early 1990s and the dramatic increase in housing prices. If this is the case, is it reasonable to assume that without easy finance, and with a glut of empty houses on the market, that home prices would go down? Perhaps becoming much more affordable through private mortgage arrangements via the homeowner? Considering the damage to the world economy, we have to ask if the 15% increase in home ownership since the beginning of the 20th century (see Smeins 1999) was actually worth the trouble--especially since that very increase (once a point of validation for the finance industry's late 20th century alchemy) is slipping away at an alarming rate.

College education is easier to address as modern finance has little to do with students getting the necessary loans to attend college. I am case in point. I managed to run up fantastic debt in college without appeal to non-government backed loans. Of course there are other issues here. College endowments will shrink and that will affect scholarships and plans for college expansion--hopefully, it will force colleges to decide what their purpose is, are they a business or an educational institution? Often enough the two are at cross purposes. When tax revenue falls off, it will become harder for Uncle Sam to extend education loans in the same quantity, or so one would imagine. But I think that the Obama administration will place college education for the next generation high on its list of funding priorities. 

As for the infamous "bridge loans" businesses apparently require to operate, perhaps businesses should, like households, operate within their means. For example, if a business owner regularly needs a quickie loan to make payroll, then perhaps she should stow that amount into savings and make it a part of her financial plan. If that doesn't work, maybe she needs to narrow the scope of her business. Business around the world are currently making these kinds of adjustments.

My point is that easy credit, as is now glaringly obvious, has been more of a problem than a solution (to paraphrase Uncle Marx, Groucho not Karl, "with a solution like that, who needs problems"). From multinational corporations to my house and your 401K, the current financial crisis is a re-evaluation of everything. Through across the board deflation, prices, salaries and futures will find a new level. My question is, will we be better off without Uncle Wall Street? Should we leave him in his coma, and get on the best we can? I think many of us already are.

Destruction of wealth

Recent numbers:

1) According to a report issued by the Fed: In the third quarter of 2008, U.S. households lost $647 billion in real estate; $922 billion in stocks; $523 billion in mutual funds; $653 billion in life insurance and pension fund reserves; plus $128 billion in private business interests. 

2) The Treasury reports that $330 billion of the TARP have been allocated to banks, yet by far most of this money has gone into the "re-capitalization" of these banks. That is, this lump sum of taxpayer money has not worked as planned to loosen credit markets. 

3) The amount of household wealth destroyed in the third quarter alone amounts to $2.8 trillion--apparently the worst quarterly loss in recorded history (although sources don't claim to adjust for inflation).

4) Deflation is here. U.S. consumer prices fell at an annual rate of 12%; producer prices fell at an annual rate of 26.4%; commodity prices are down as much as 70% from their peak.

All of this indicates that we are about to witness depression era levels of unemployment, business closings, bank failures and scarcity in the coming year. 

What does this all mean? Things will likely be changing on an unprecedented scale. Make it a priority to create stability in your home, your community and beyond. Think about self-sufficiency and, beyond that, what you can do to make your community better able to withstand the shock of dwindling government largess. By all means, stock up on canned- and dry-goods, learn to bake and cook from scratch, put in a garden, etc., but also take time out of your week to donate time, money, goods and good will to community projects. Instead of "battening down the hatches" or "hunkering down," we'll get through this mess far better working together.

Social unrest

Regarding yesterday's (12/18/08) post on increased global social unrest:

Wall Street Journal:
Oil's Crash Stirs Unrest in Russia as Slump Hits Home
Russia's oil-fired economic miracle is unraveling as industry shrinks and job losses mount. Now the first stirrings of social unrest have the Kremlin groping for a response.

Reuters
China jobless "much more grave" than official figure
Rising unemployment has fed Beijing's fears of unrest as forecasts for China's growth next year fall below 8 percent, seen as a minimum to maintain social stability.

AFP
Greek activists call for Europe-wide protests on Thursday
Several thousand activists from the Communist PAME trade union marched in Athens in the evening behind a banner reading: "The plutocracy must pay for the crisis!" The civil service trade union ADEDY is also organising a demonstration and a three-hour work stoppage Thursday, three days before lawmakers vote on the budget. Yet another union has called on supporters to gather before the parliament on Friday.

With unemployment skyrocketing in the US, and forecasts point to a very gloomy outlook for 2009, it won't take long before people take to the streets in Detroit, Chicago, New York, Philadelphia...

Global Depression

It has spawned many names: financial crisis, economic meltdown, depression 2.0, depression 2009, financial armageddon, economic catastrophe, TSHTF... you get the idea. I insist on the label "global depression," because one of the distinguishing features of this financial downward spiral is that it is the first of its kind that will touch each of the 7 billion people on our planet.

Globally, markets are linked together in an intricate web of trade and transaction, so much so that an event in one sector quickly spreads throughout the system. Early on, in September and October of this year (funny how that seems so long ago...way back when I had a retirement nest egg), there were some economists speculating that China, that dynamo of economic growth, might pull markets out of their tailspin--today there are few such optimists left. China's growth has come to a screeching halt: AFP reports that China's growth has slowed to a 20-year low and millions of urban workers are returning to the countryside in one of the largest outmigrations in the nation's history. Even for countries peripheral to global high finance the impact of the economic downturn if being felt. According to IMF reports, the financial crisis is severely impacting the countries of Africa.

The global extent of the coming depression is disconcerting in that social and political instability are sure to increase as markets and prices fall (as it turns out deflation can be more destructive than inflation). Today a full 50% of the world's population lives in urban areas. City dwellers are dependent on the currency for their very survival. As unemployment rises and money becomes scarce, what will these billions of marginally employed people do to live? The future could get very bleak very quickly for many. The depression of the 1930s was bad enough, but at that time the vast majority of the world's population lived an agrarian life where sustenance was not an issue. If you grew crops for your livelihood, your harvest might have fallen in value, but at least you had something to eat. If the global financial crisis does not turn around very soon there will be first a major shift in migration patterns for the millions who still have an option to move out of the cities (as noted above we are already seeing this in China), and then an unprecedented degree of social disintegration as our swollen cities convulse with violence and unrest.

As our financial system is not localizable, the political unrest due to poverty will not be contained within national borders. It will have effects here as well. Take a walk around downtown Philadelphia, Baltimore, New York City (just beyond the gentrified sections of the city)...the millions living at the margins are in a precarious position. With no savings, no jobs and dependence on a bankrupt state, their options are few. As Bob Marley so aptly put it: "a hungry man is an angry man."

One way to avoid potential social collapse is to support poverty fighting measures in your own backyard. Speculate on worst case scenarios for the next few years. As jobs become scarce and state largess evaporates, how can your community put those most at risk in a less precarious position? I suggest developing or radically expanding community agriculture projects that would at the very least ensure a local supply of fresh food for the most at risk families. If the downturn turns around, and the darkest of outcomes is avoided, you have contributed to the development of a diversified local economy (mixing agriculture with other industries), added to your region's green cred and created jobs to boot!

Speculation, thy name is Ponzi

A Ponzi scheme, named after 1920s financier Charles Ponzi, is an investment operation that offers high returns to investors based on an increasing influx of money from new investors. It is a classic pyramid scheme based on speculation, greed and naivete. Since the Madoff scandal a few days back, this term has been thrown around a lot (Bernard Madoff apparently lead an investment firm whose Ponzi investment strategy began to fall apart in the face of the financial meltdown--some 50 billion dollars evaporated). But, really, the Ponzi strategy is not all that different from what was happening in the housing market, the financial sector and even in the average American household these last 15 years.

Based on speculation, rather than economic fundamentals, we all have been deluding ourselves that a) the stock market can only go up, b) the value of our homes can only go up, and c) we can live on credit indefinitely. But when the economy goes in the tank, our savings and the equity in our homes vanishes, while the bills keep rolling in. This crippling delusion is connected to all boom/bust cycles and underlies the vast social devastation that occurs when the bubble pops.

There are other kinds of value that do not decline with the markets and we might start investing in those rather than placing our savings with the running dogs of Wall Street. What, other than the almighty dollar, has value? you may ask. Let offer a few examples:

1) personal talent: invest in your inner musician, artist, architect, gardener, inventor, tae kwan do master, sculptor, etc...
2) education: nothing can enrich one's life more than broadening one's mental horizons
3) experience: a rich life means an active engagement with world around you
4) vital communities: support your community institutions, festivals and businesses with your presence as well as your wallet
5) local arts scene: work to support or develop a regional musical/artistic/theatrical identity--know who is who on the scene and attend and/or sponsor events
6) local cuisine: support local restaurants, bakeries and chefs
7) world travel: not everything worthwhile is local, get out of your town or, better, country to know the world in which you live
8) the commons: support efforts to conserve local forests, wetlands, mountains, rivers, etc... quality of life is inseparable from our natural environment (most of us, I think, would rather live on the edge of a forest than on the edge of a strip mall or sub-division)
9) end poverty: actively engage with the causes of poverty in your area and support organizations that address these issues
10) get religion: support, through your attendance and wallet, a religious organization of your choice. Church, temple or mosque, many of these organizations gather local resources and invest heavily in items 1-9 -- even the non-religious can recognize the positive effect of local religious organizations on soup kitchens, food banks, scholarships, global initiatives and environmental stewardship.

But, some may contend, money must be made to support most of the above items. And I heartily agree! Communities cannot be supported on good will alone. The modest suggestion being made here is that instead of throwing good money after bad into speculative industries, allocate some of that (we can now call it for what it is) gambling cash into endeavors that will enhance the quality of our lives and the lives of those around us. So, reject your inner Ponzi and support the vitality that flows from personal accomplishment and active and supportive communities.

Points of connection

This is a reaction to an increasing number of comments I have heard in the past few weeks about the growing importance of television during an economic crisis. It goes something like this: Because family incomes are decreasing and our ability to make discretionary expenditures is shrinking, inexpensive or free entertainment becomes even more important during an economic contraction. It gives a down and out population of millions something to do. There are a few problems with this reasoning. 

The first is the assumption that television is inexpensive or free.  In fact, I can buy a week's worth of groceries with my family's monthly basic cable bill. If I pile on netflicks or blockbuster expenses for the month, I can afford quality of life necessities like good coffee and wine. The alternative to this monthly expense is to lose the cable, the netflicks and the blockbuster and instead visit my local library for free dvds and high-speed internet.

The second is the assumption that television is actually entertaining when, in our heart of hearts, we know that it only provides us with an alternate way of being bored. 

Third, it is my opinion that, presently, discretionary income is better used in buying up a large reserve of dry and canned goods, or stashing into a "rainy day fund" that protects against job loss. After you have a good year's worth of food in your pantry and six months to a year's worth of savings to replace potential income losses, then you have discretionary income once again.

Economic contraction does not need to mean social contraction and isolation. Get out and connect with people--this can be so much more fulfilling than sitting at home watching the tube. And points of connection can be very inexpensive. Here's my short list:

1) meet over a cup of coffee

2) hiking a local nature trail

3) book club meeting

4) volunteer...anywhere

5) religious gatherings

6) a potluck celebration (winter solstice is right around the corner)

7) see a local band

8) organize a byob wine tasting

9) join a writers/musician/dance/theater troupe

10) start or join a political action group to influence local government

11) gather some friends and attend a local sporting event (high school or local college events tend to be quite cheap)

12) host a game night at your house (cards, scrabble, risk, sudden death checkers...)

13) organize an environmental clean up party

14) start a monthly dance party--reserve a free space (at city hall, a park, a library conference room "after hours," or at someones home) every couple pitches in $10-$20 or so to provide refreshments and pay the band.

15) organize a star-gazing party (a telescope, a clear sky, a blanket to lay on and refreshments) 

The possibilities are really endless -- the point is to fight the urge to isolate yourself as the economy shrinks. Most of us organized our weekly outings around consumption--it became a habit that when we "went out" we were going out to spend money. But when money gets tight, we are at a loss as to what to do with ourselves. TV is not the answer. Getting out and expanding our social network of friends, family and acquaintances is not only more rewarding than an evening spent watching TV, it may become vital to the short-term survival and, when the time comes, renewal of our communities.  

Recession, depression...it's not as bad as you think

This is a rejoinder to my earlier post "unemployment, it's worse than you think." I try to steer clear of downer posts--there is enough negativity out there as it is. So, here is more optimistic look at economic disaster...

As everyone knows, a recession is a period of economic contraction--the opposite of what we have been experiencing since the mid-1990s. Economic indicators like the GDP, consumer spending and interest rates head south, while prices and unemployment rise. As bad as this is, economic contraction does have its up side, let me enumerate:

1) Recessions and depressions are a reality check. When speculation, "irrational exuberance", hype and insanity create a bubble, economic downturns remind us that market value, while not divorced from our mental states, cannot be separated for long from some kind of base reality. For example, that house you bought for $120,000 ten years ago probably is not really worth the half-million zillow.com would have you believe. The stock market does not only go up and probably does not make for the best retirement strategy. And China will not always and forever manufacture cheap goods for our stores.

2) Economic contraction is an opportunity to rationalize our household spending habits and adopt a boy-scout attitude toward future instability. Just because credit is easy to come by doesn't mean that we should continue to apply for all those pre-approved credit card applications. Eating out five times a week may save us time, but it costs... a lot (especially when the bill goes on the Visa). And the shop-a-holic lifestyle can be seen for what it truly is, a symptom of much deeper personal and social pathos.   

3) An economic depression offers the opportunity to consume less. Consumerism is not only the motor for the global economy, it also has been the driving force behind environmental destruction. Globally speaking, the air, water, topsoil, oceans, forests, etc... are all in a state of degradation unparalleled in modern history. An example from my neck of the woods: due to the housing bubble there has been a constant drive to build more subdivisions--plowing under much of the local forestlands that made this portion of Southeast Virginia so appealing. But rustic aesthetics aside, this is a major migration route for all kinds of birds. The lack of trees here impacts food and shelter requirements for these flocks and results in fewer birds making their destinations. Perhaps with the economic meltdown we can convince our city planners that unchecked development has a downside: environmental degradation, a decrease in local appeal (which drives property values down even further when there are so many empty houses--when one has so many choices as to where to buy a new home, why chose to live in a city that has all the attraction of a strip mall?) and not to mention a huge surplus of empty houses on the market.

4) Finally, an economic downturn gives everyone an opportunity to be more socially expansive--to rediscover the value in human relationships in our families and our communities. If your hours get cut, you have more time to take the kids out to a high school football game, your spouse to a dance or invite friends over for an evening of cheap wine and good conversation. If you lose your job altogether, you'll need a strong social network to get you through the financial and emotional stress. SO, get expansive during the contraction and reconnect with the social events and relationships that hold real value, a value  that does not diminish with a fall in the DOW.

When to "cut bait"

I always liked the expression "cut bait"--it suggests both determination and realism. After a long day of fishing, someone has to make the decision that the fish aren't biting and that it's time to call it quits and return home. In my last post, which has become more pertinent judging by the new crop of upcoming layoffs reported this morning, I suggested that people need to identify a top three or four major expenditures that they could cut if a job loss is in the offing. 

For example, first I would, depending on public transportation in your area, loose all extraneous vehicles (motorcycles, 2nd and 3rd cars, boats, etc.) that cost you in upkeep, insurance and/or monthly payments. Second, lose the expensive cable setup--go basic cable and dial up internet if you can't live without these things--you'll save a bundle annually. Third, any major purchases you are paying off, either through store credit or on credit cards--big screen TVs, unnecessary furniture, that $1000 espresso machine...you get the idea, take it back. Fourth, push back any leisure travel, family vacations or other boondoggles you have planned to 2011 or 2012.

We are creatures of habit, and when faced with the craziness that would accompany a job loss, we may be hard pressed to make the necessary adjustments. The compulsion to cling to the things that give us comfort in hard times have the potential to drag us down if they continue to drain our resources. All the more important to have a plan in place should you ever need to make the call and "cut bait."   

Unemployment -- it's worse than you think

The financial meltdown became widely recognized just a few short months ago. The debate over whether or not the US was in recession quickly changed to whether or not we are heading toward a depression. The cheerleaders of the US economy, those who spent last summer blustering on about the economic strength and fundamental soundness of our economy, are much more somber, if not altogether silent, these days (there are a few exceptions, but they are beginning to look a bit ridiculous). Now the debate, subdued as it is, concerns the possibility of a depression in US. In fact, in the comparative assessments of many of the pundits, we have slid from undergoing a recession similar to the post 9-11 era, to the early 1990s and now it is suggested that we will be experiencing a recession that would compare to the length and severity of the early 1980s. The next stop is the 1930s, at which point the debate over whether or not the US is sliding into a depression will have been resolved. 

One point that is being used to mollify us is a comparison between today's unemployment figures with those from the 1930s. The high for that decade was around 25% in 1933. Currently the Bureau of Labor Statistics reports that, as of October 2008, we have an unemployment rate of 6.5% -- a far cry from the 1930s. This fact has been repeatedly brought up to dispel the specter of a new Great Depression. However, if you look at how the Bureau of Labor Statistics reports its figures, 6.5% measures only those who have actively sought a job in the last four weeks (category U-3). A better estimate is the U-6 category which measures 

1) people that are unemployed and includes those who are unemployed and have looked for work in the past year, but not within the last 4-weeks, and

2) the marginally employed--i.e. those who want full time employment but are unable to find it. 

This more inclusive number put the US unemployment rate at 11.8% in October (see http://www.bls.gov/news.release/empsit.t12.htm). 

However, the SGS Alternative Unemployment Rate, which includes people who desire employment but have not looked for work during the past year, is much higher. This figure was used until the Clinton administration, but is no longer included in Bureau of Labor Statistics reports as it tends to be politically inconvenient. The SGS Alternative Unemployment Rate is currently at 15%. 

Considering that recent mass layoffs in the financial sector and currently projected layoffs in retail and manufacturing, the unemployment rate could double during 2009.  Even Goldman Sachs projects official unemployment (U-3) rising to 9% in 2009. If the SGS rate correlates with this projected rise in the U-3 rate, then a conservative estimate of the SGS Alternative Rate will shoot to around 23%. At this point we are talking depression era unemployment levels by the end of 2009--and who knows what 2010 will bring. 

If you still have your job, I would begin the uncomfortable process of considering what you would do if you had no income for 6-12 months. Do you have enough savings to see you through? Most Americans don't.  But don't get bogged down with worry and stress-- now is the time to formulate your plans B, C and D. Could you live on unemployment? Would you be able to pick up a comparable job within a few months? Do you have family or friends that could put you up for a while? What possessions would you get rid of first? It is a good idea to immediately identify the top three or four items that you would not be able to afford if you were in reduced circumstances. Too often folks loose their job yet still try to get along as they have in the past, but this denial simply drags them down faster.  

Put on a sweater!

I used to hear it every time we spent Christmas at our grandparents' house. They kept the thermostat somewhere around 65 degrees and one touched it only on the pain of death. As kids, we didn't understand. If it is in the low 20s outside, why not crank up the heat? For our grandparents, who were children of the Great Depression, it was purely an economic calculation. 

Energy prices are even higher today, so by being a little more thermostat conscious we could all stand to save some real money each year. By most estimates, for each degree you lower your thermostat, you will save 1% off your energy bill. The US Energy Information Administration reports that the average annual household heating bill runs about $1000. So, if your heating bill runs around $1000 in winter, and you typically keep your thermostat at 75, by lowering it to 65 you can save  $100 per year...just off of your heating costs! Just think of all the sweaters that would buy! Turning the thermostat down further at night and when you are away will help you save even more.  It is easiest with a digital thermostat (fairly inexpensive to buy and easy to install) which will automatically set temperatures throughout the day, although you should keep the house no lower than 55 degrees to keep your water pipes from freezing. In addition to saving some real cash, you'll be reducing your portion of carbon emissions by thousands of pounds per year (see http://www.stopglobalwarming.org/carboncalculator.asp)! 

For a more detailed account of how to become a world class thermostat tinkerer, see Annie Bond's post at http://www.care2.com/greenliving/10-thermostat-tips-save-money.html

Community Gardens

I was listening to This American Life the other day and they were playing recorded interviews conducted by that ethnographer of the common man: Studs Turkle. These recordings were of people recalling Depression Era America and how they coped and what they experienced. I was struck by one lady who said something along the lines of "Well, we lived in the country, so food wasn't a problem for us..." Most of our impressions of the 1930s are of soup lines, children selling apples for a nickle and long lines of men queuing to interview for a few available jobs--all in an urban setting. Except for the Okies heading out of the dust bowl for California, we really have little idea of how rural folks experienced the depression. Provided that you could pay the mortgage, farmers probably avoided many of the deprivations that were rampant in the cities. Unfortunately for us today, the US population (largely rural in the 1930s) has ballooned in urban areas, making basic food security an issue should the economic crisis wreak havoc on our food systems (a situation that is altogether likely in the case of either inflation or deflation--and it is clear that we're going to get one or the other).

To hedge against the worst possible outcomes of this crisis (i.e. food scarcity), we should look to the "victory garden" movement in the 1940s. People from all over America rallied during World War Two and planted millions of vegetable gardens to ensure food security for the US and its troops overseas. As budgets get tight, job losses mount and unemployment grows, we will need surplus food in every locale. The government may or may put out the call for all red-blooded citizens to take up the hoe and begin sowing the seeds of our future recovery. Regardless, we should be look ahead toward a dark couple of years and act in our own collective interests.

We would be wise to begin a similar movement today to have arrangements ready for planting in spring 2009. Backyard gardens are a good idea for those who have a backyard. For the millions of apartment dwellers in the US, and those of us who have really tiny backyards, community gardens could serve to bolster household food production and slash grocery bills while creating an opportunity to connect with other people in the area. So, start a community garden today and look forward to a bountiful 2009. The American Community Garden Association is a very good organization that promotes the creation of community gardens at http://www.communitygarden.org/. Their website has tutorials on all the steps involved in organizing a community garden. Also check out http://www.revivevictorygarden.org/ for good tips on how to optimize your yard or patio space for household gardens.

Unload that white elephant!

The "white elephant" aphorism comes from Southeast Asia and it means to be burdened with something both unsellable and of great value. Monarchs of certain regions in Southeast Asia would possess a number of these sacred animals and occasionally gift them to worthy recipients. The giftee, not possessing the power or wealth of a monarch, could not refuse or sell the elephant and would then have to pay for its room and board. The cost of care could not be offset by pressing the sacred animal into some kind of labor; thus, as long as the animal lived it would constitute a drain the finances of its new owner (and elephants live a long, long time).

To continue the line of thinking from the last post (Cash is king!), might I make a humble suggestion: if you own an SUV or a minivan or anything that gets less than 35mpg you would be well advised to sell it now.

Let me explain. Last summer, in an empty lot near my house, there began to appear SUVs of all kinds going for incredibly cheap prices. Gas was around $4/gal here and those monstrosities were starting to cost more than their owners ever thought they would. Now, as gas plunges below $2/gal, the lot is again empty. The value of these big damn cars and trucks has probably gone up as a consequence of low gas prices. But, as we all know, that ain't gonna last.

As credit is tight right now, and gas is cheap, I suggest getting out from under your gas guzzler by trying to get some cash for it. Gas prices will shoot back up in the next few months (says everyone from the Sierra Club to T Boone Pickens to the Bush administration) and that 20mpg vehicle will once again be both a serious drain on your family's finances and nearly worthless. But now, for those who can't see beyond the current dip in gas prices, your ride might again be valued at a reasonable price. So, now's the time to sell off that white elephant and get yourself into something more economical. In addition to easing the pull on your wallet, you might enjoy getting around in something with a considerably smaller carbon footprint.

Cash is king!

NOTE: I am not an economist. I am, in fact, the last person on earth from whom you should take financial advice. That said, here is some financial advice.

Survivalists have been harping about putting your money into gold or silver as a way to preserve or increase its worth. That may have been a good idea in 2006, and if you cashed in last summer, you may have made a bit of money. However, these precious metals have been crashing since July 2008. Unlike the survivalists I have no idea where to put your money, but a sure thing is that bulking up your savings (in FDIC insured accounts) is probably a good idea about now. There is no telling when it will be advantageous to pull money out of the stock market again. A mere TWO MONTHS ago the DOW bounced to about 11,500--so, if you were thinking about cashing in your 401K, with minimal losses, that boat has sailed. It is more likely to benefit you to leave your stock portfolio alone for now and await better days when you can recoup your losses. The question is, should we continue to shovel 8%-10% of our income into the stock market? There are a few things that we should seriously consider, given the present state of the economy.

IF you have the requisite 6-12 months of savings that would see you through a sudden job loss, then remaining invested in the stock market is probably a good idea--stocks are cheap and continuing to buy at these prices will most likely pay off in the long run, providing the stock market exists in the future. But, let's face it, Americans are notoriously bad savers. I would bet that many of us hold more debt than savings.

IF you have little in terms of liquid assets (i.e. cash in the bank), then you could find yourself in very desperate circumstances if you get the ax within next few years, especially as unemployment rises and jobs become more scarce. You need a rainy day fund because there is nothing but rain in forecast.

Ideas on how to generate cash, quickly!
1) Adjust your 401k, if you have one, from, say, 8% to 2% or 3%, or opt out altogether for a while (providing that opting back in is not a problem) and take the extra money you find in your paycheck and put it in a savings account.

2) Stop eating out. This can be difficult, but putting together an inexpensive, yet healthful, menu week by week can save you hundreds of dollars a month (depending on how much you eat out). Estimate how much you spend per month on food and restaurants, then estimate your grocery bill based on your menu. Take the difference, divide it into the number of paychecks you receive per month, and put that much into the bank every paycheck.

3) Get your Scrooge on! Don't spend a lot on the holidays this year. Send cards, cookies, artwork, pictures of your family, homemade CD compilations--get imaginative. I suggest spending $10 on a box of holiday cards and a couple bucks on stamps and then stash the remaining $500-$1000 you would normally spend in the bank. Trust me, your friends and relatives, supportive as they are, would rather see you keep your home than have to move in with them in the event that you lose your job next year.

4) Take a temp job. If you can sacrifice your weekends or a few hours in the evenings, then pick up a short term job...wherever. A call center, delivering pizzas, waiting tables, all good cash generators. Put your side job paychecks in the bank. Remember, you only need to do this until you have secured your rainy day fund.

5) Sell stuff. It has never been easier. Root through all your stuff and put the things you don't use or particularly need into consignment, on ebay or take it to a pawn shop. Hold a garage sale. Put the proceeds in the bank.

6) For the truly adventurous, you can take on a roommate or a boarder. Or consider moving in with a family member and splitting their rent/mortgage. Doing this can ultimately save you the most money per month. Put the difference in the bank.

There are other ways to generate cash, but the above suggestions are fairly easy and can be accomplished today. It is crucial that we start stashing money now and develop a buffer, the larger the better, that can see us through the difficult times ahead.

Keep it local

Now more than ever we should be investing in our own communities. When jobs were plentiful and wages were stable it was easier to ignore the fact that local business were closing shop. They could not beat the prices at the local big box retailer, so in the Darwinian marketplace they went under. Your local coffee shop, bookstore, hardware store or pharmacy were likely plowed under in recent years. This did not affect us much. It was a loss in a purely nostalgic sense--the same goods could be purchased for cheaper elsewhere and who needs local "flavor" when you can save more at the Walmart?

Well, times have changed indeed. The chain stores that siphon off local dollars to far flung places (including insanely high CEO salaries) will be "restructuring" in the months and years to come. That means either lower salaries for workers or layoffs. I suggest taking a second look at local businesses. In many cases the owners of these businesses have a stake in the community in which they operate. Their kids go to the local schools, they have friendships and other kinds of connections that are place specific, and often they will sacrifice a bit to avoid having to layoff their workers. When a critical mass of people begin to invest in community businesses, we all reap the benefits of their success: more jobs, higher wages and ultimately lower prices.

It is time for relocalizing our financial activity. We have seen what happens when we buy from overseas exporters--the precipitous loss of high wage manufacturing jobs. We have seen what happens when we put our savings in the hands of Wall Street finance wizards. And we are just now seeing what happens to our low wage service sector jobs when big companies have to recoup their losses--job losses total 1.2 million this year alone (half that since August!). To create the durable communities that we will absolutely need in the years to come, we must begin investing in locally owned and operated businesses now. Seek out a local bank, bakery, grocery store or food coop, a community agricultural organization, bookstore, restaurants, etc... Support local arts by going to a community theater production instead of a Hollywood movie, or go see a band at a local pub. Begin to relocalize your spending now and when your company managers in Los Angeles decide to close your office, you may well have viable options just down the street.

Numbers...

I was just reading Warren Brussee's blog at http://wbrussee.wordpress.com/ He points to some troubling economic indicators that suggest the recession will deepen significantly next year. Here are just a few highlights.

HOUSING Our economy is not going to settle down until the housing bubble is completely deflated. The Standard & Poor’s/Case-Shiller housing index showed a 17% drop in home prices in the last year. However, to get down to its historical inflation-adjusted level, homes must drop an additional 22%.

Foreclosure filings are up 71% from a year ago, and we are just beginning to see the effect of option mortgage resets, which will go on for another three years. On option mortgages, buyers can pay less than the interest on the mortgage, so that the amount of the mortgage actually is increasing as the value of the home is going down. Since much of what we have seen in foreclosures was only related to sub prime mortgages, we are only half way through the foreclosure explosion due to adjustable rate mortgages. And with 30-year mortgages at 6.5%, few people can afford to switch to fixed rate mortgages.

SPENDING Consumer spending dropped in July, August, and September at the highest rate in 28 years. Since the consumer is responsible for 70% of the GDP, this bodes poorly for the future economy. Consumers are out of additional debt sources and are having to adjust to living within their incomes. Consumer confidence posted its steepest monthly drop on record in October

CREDIT CARD DEFAULTS Lenders wrote off $21 billion in bad credit card loans for the first half of this year, which is 5.5% of outstanding credit card debt. In response, credit card companies are tightening credit, further exacerbating the slowing of the economy

UNEMPLOYMENT RATE The unemployment rate is 6.1%. But in the last week, here are a few company announcements of coming layoffs! Whirlpool 5,000 jobs. Qwest 1,200. American Express 7,000. Goldman Sachs 3,260. Chrysler 1,825. Xerox 3,000. Yahoo 1,500. Merck 7,200. National City 4,000. ArvinMeritor 1,250. And those are just the ones I happened to notice! So the unemployment number is destined to jump sharply in the coming months.

He concludes that this whole mess will take years to sort out and that we are far from climbing out of it (in fact we are just beginning the downward spiral). The stock market will have its ups and downs, but the effect of the financial crisis on our jobs, our mortgages, our economic future will be largely negative for the next few years. Brussee predicts that we will emerge from the crisis sometime in 2012 or 2013.

Stone soup

This story has it all: community, frugality and good soup!

Once upon a time there was a poor village in a land at war. There came into the small hamlet a company of weary soldiers. Tired and hungry, they encamped in the town near the town square. The villagers trembled, for they had no food to share with these men, and were afraid the men might cause trouble. Soon the small band of men uncovered a gigantic pot and began to lay a fire for it. Trudging back and forth to the town well, they filled the pot with water and set it carefully on the crackling fire. An old woman, peering from behind a shutter, noticed that they had dropped a round stone into the pot. Unable to contain her curiosity, she ventured into the open, approached the cluster of men around the pot, and after looking in the kettle, "What pray tell, are you cooking there?"

The soldiers looked up and replied, "Stone soup, my good woman, a wondrous dish and so, so much better if we were to have a single onion or two to drop herein!" "I am but a poor peasant and have hardly enough to eat for myself," she answered, "but perhaps there is a sad onion or two on my kitchen shelf". I will bring them here for your soup if you will share a bowl of your fine repast with me." They consented, and she quickly disappeared, hungry with anticipation at the meal.

As she returned and added the onions, a querulous old man approached and after looking into the kettle, called out, "What pray tell, are you cooking here?" "Stone soup, my good man, and a right good banquet it is," they answered, "but how much better it would be if only we had some simple carrot to add." The poor man shook his head and replied, "I am but a starving peasant, but perhaps my good wife has some carrots hidden away for our last bite of food. I would share them with you if you would share a bowl of your fine soup with me and that good woman." They nodded appreciatively and awaited the return of the old man, his old wife and the carrots. After a while, return they did, and added their meager bounty to the pot.

They all sat down and waited. A young girl with a small basket full of herbs from the meadow entered the square and joined the group around the large and bubbling pot. She too was persuaded to add her share and she too waited. One by one, the hungry peasants of the village came out to see what the excitement was about. And one by one, they added a few potatoes, a handful of beans, a small green cabbage and a bone.

There soon appeared in their midst the town butcher, who had long since closed his door. Huffing and puffing, and mopping his brow with with a large red handkerchief, he called out, "What is all this commotion? What pray tell, smells so wonderfully good here in this poor village, which has nothing to eat?" "Stone soup, Sir," said the soldiers, "a creation fit for a king. All that is lacking to gibe it truly proportions is a chicken."

Oohs and aahs were heard throughout the crowd of hungry peasants. It is said that one old woman fainted from the heavenly nature of the thought. The butcher quietly disappeared. Within a matter of minutes he returned, clutching a scrawny chicken, his very last, and dropped it, with applause from the crowd, into the pot. There was a great merriment in the town that night. It had been a long time since they had laughed and sung and danced - and a very long time since they had eaten so well. In the morning when the town awoke, the soldiers had packed up their pot and left the village, leaving behind only the stone.

They marched all day and in the evening entered another small town. They uncovered their gigantic pot and set about laying a for for it. A nervous old man approached them and asked, "What pray tell, are you cooking there?" The soldiers looked up and replied, "Stone soup, my good man, a wondrous dish and so, so much better if we were to have a single onion or two to drop herein!"

--The Brothers Grimm

Here's the recipe:

You will need:
3-4 cans vegetable broth (or make your own)
6 red potatoes (cut in slices about 1/4-1/2 thick)
3 carrots (peeled and sliced)
1 zucchini (sliced)
1 summer squash (sliced)
1 onion (diced)
3 cloves garlic (mashed through a press)
1 stalk celery (sliced)
1/2 bell pepper (sliced/diced)
1 cup green beans (fresh is best but canned/frozen works)
1 large tomato (chopped up)
1/2 cup peas (again fresh is best but canned/frozen works)
1/2-1 cup corn (frozen works better than canned for some reason)
salt & pepper
small amount of butter or oil for sauteing the veggies
1 small CLEAN and STERILE stone
shredded parmesan cheese

place a stone in a soup pot

saute the garlic, onion, green pepper, celery and carrots until the onion is tender

add broth, add potatoes and squashes bring to a boil and add the remaining ingredients (if you are using fresh veggies you can add them all at the same time.....canned/frozen will turn mushy if added too soon though)cook over medium-low heat until veggies are tender.

scoop out the stone.......serve with parmesan cheese on top

For a huge list of money saving soup recipes go to http://www.thatsmyhome.com/soupkitchen/

Credit: sink or swim?

If there is any kind of sound financial advice available these days it is this: renegotiate your credit terms and then pay off your open accounts. Once this is done, then you can start to worry where to put all that extra money you are not paying in interest rates every month. The average number of credit cards held by Joe six pack is four; but one in ten Americans hold ten or more credit cards. Thus, according to the law of averages, there will be many folks who hold fewer than four cards and a few who hold many more.

Whatever your circumstance, it is important to renegotiate your credit terms. You can do this by calling the credit card company and haggling your interest rate from (the average) 18% to a more reasonable 10-12%. If you have a sterling credit score and a good history with the company, you may very well be able to do this. But, if you have missed payments and are having trouble staying on top of your bills, you may want to consider a credit counseling service. These places will do two things for you: 1) renegotiate you interest rates and 2) effectively take your cards away from you. If the second point sent chills down your spine, consider the wider economy for a moment.

Even the most optimistic of the Wall Street crowd are projecting a dismal next few years characterized by rising unemployment, more competition for jobs, lower wages and an historic dip in demand. In a word: recession. More levelheaded commentators are emitting far darker prognostications for the next decade or so. And the paranoiacs are certain that this is the end of the world as we know it. Whatever the case, things will be getting progressively more difficult for the average person, and the last thing we need is the vampiric siphoning off of what resources we have to pay off the interest of our credit cards (indeed the minimum monthly payment goes primarily to pay interest, which means that, even if you never use the card again, you will be carrying the balance for many, many years to come).

I recommend credit counseling. My wife and I used credit cards to make up for the shortfalls in income during our grad school years. We racked up a truly impressive mountain of debt and, about five years ago, we went on a credit diet. We surrendered our umpteen credit accounts to a trusted and reputable credit counseling service and, for a small monthly fee, they renegotiated our interest rates and set a monthly payment rate for us. So, for the last five years we have sent them between $500-$700 a month (the payment amount goes down as you pay off accounts) and they redistribute the amount to all of our creditors. As we pay off accounts, we can often keep the credit lines open--but not to use! Instead we do this to boost our credit score (yes, it's crazy, but you have to have open credit lines to get a good credit score--it seems more sensible that if you have a certain income and less credit extended to you, there would be less risk of getting into trouble over-extending yourself, but there it is...). Now we have paid off 2/3 of our original debt. It is very satisfying to watch account after account drop off the list. In addition, we are very careful now when making any credit purchase (an extremely rare occurrence).

So, my suggestion is that if you find yourself slowly sinking under the weight of your credit card bills, renegotiate or have a service do it for you, and then get out the scissors! Take a deep breath, tighten your belt and start living within your means--it won't be nearly as bad as you imagine and you will begin to develop a little of that quality we will all need in the coming years: restraint.

Check out The Motley Fool website for helpful tips for getting out of debt: http://www.fool.com/personal-finance/credit/index.aspx

Tinfoil hatters part 2: on civilization's thin veneer

This is just a follow-up to yesterday's argument against the common survivalist mentality. One of the linchpins of the eat-thy-neighbor survivalist ethos is the idea that societal collapse is inevitable because our society is deceptively civil. The phrase you often hear is that it would not take much of a disruption (peak oil, war, pandemic, etc...) for the thin veneer of civilization (which under normal circumstances holds things together) to give way to howling mobs and general barbarity.

It is true that, in the immortal words of Bob Marley, "a hungry man is an angry man," and desperate people will often commit unthinkable acts during times of crisis. But these acts occur not because the elements of civilization are not present, they occur because people with the means and disposition to commit violence are themselves not civil. Civilization has nothing to do with infrastructure, architecture or political power, rather it arises through the regularity of civil (as opposed to barbaric or malevolent) transactions between people, often within a certain locality. It is carried in our hearts and minds and manifests through mutual attitudes of trust and benevolence. But, for survivalists, civilization merely is an impediment to their fantasies of heroism (or merely consequence). The intense individualism of some of these folks is not now, and certainly not in times of crisis, conducive to civil social intercourse. If we are lucky these people will crawl into their bunkers and leave the rest of us in peace to get by together, to repair our communities and to safeguard our collective livelihoods.

If the global financial crisis manifests itself in the most dire possible terms, we will need heroes, that is, people willing to work together for the betterment of all. As we have seen in Iraq, social disintegration can indeed lead to the rise of tribalisms and the rule of the most savage and well armed elements of society.

It doesn't have to be that way. For example, post-war Japan could have easily become the third world country we tried to bomb it into, but the people worked together to recreate communities, companies and neighborhood associations, and in 30 years they became the world's second largest economy. I don't know if, in 30 years, we will be able to say the same about Iraq. It really is up to us, to how we respond during these critical times.

So, adopt a survivalist today. Get him out of his bunker, take him for a walk around town and cancel his subscription to "guns and ammo" or "soldier of fortune." Introduce him to people and teach him that, even in troubled times, together we can create sustainable communities and a durable future.

This has been a Public Service Announcement brought to you by SGDT.

Not just for the tinfoil hat crowd anymore

I admit that I hold a prejudice against the separatists, the guns-beans-band aid hoarders, the end-of-days fanatics, anyone the owns or wants to build a "bunker," and any group that looks with that weird titillating anxiety toward a future apocalypse. These people have always been around and with every crisis they come out of the woodwork to pronounce with satisfaction--"the end is finally here!" We saw this with the Y2K-ers, the Revelationiacs, the nuclear holocaust survivalists, and now with the financial meltdown we hear again the warnings from paranoiacs of every stripe (stay tuned for the 2012 crowd). Many of these folks already live on the margins of society and project their personal failures and sense of alienation into a reactionary stance in relation the rest of the world. They, many of whom tend to be conservative men, deal with their loss of control over their lives, their families and their future with a narrative in which they become heroic leaders in a post-apocalyptic world. Most of these people are harmless and truly hope to contribute in the case of societal breakdown. But some are dangerous and, with their stockpiles of weapons and ammo, look forward to a day when they can enact their own predatory impulses.

This being said, I have to admit to some discomfort writing a blog that takes as its premise the same kind of future social disintegration as many of these wing nuts. I recently looked back over my past few posts and found that I begin each with a short discourse trying to justify my own alarmist tone with facts and figures from the real world. Ultimately, the fact that no one seems to know what the full effects of the global financial crisis will be, indeed we are in a period of history without precedent, urges me to err on the side of caution. So, the idea behind this blog is that things may well fall apart in near future and everyone should be 1) capable of weathering the storm for as long as it takes for boring, beautiful normalcy to return, and 2) prepared to reach out and participate, even as things get serious, in creating durable social networks to ensure that we all make it through in one piece. In the first instance I agree with the survivalists: we must be able to keep ourselves and our families clothed, fed and safe during the crisis. But in the second instance, I insist that we do not barricade our doors, sit on our horded goods and view everyone as a potential threat. If things get as bad as they could, we all need to work to build up our local economies (for example, through a local business alliance http://www.billmckibben.com/pdfs/introduce-residents.pdf); work to keep the most vulnerable in our communities clothed, sheltered and fed; form neighborhood cooperatives in which resource donations are pooled, properties joined to build large gardens, and "neighborhood watch" programs stepped up to combat the probable rise in crime; and work through larger organizations such as faith communities to export donations to other parts of the country and the world.

By reaching out and establishing viable local communities we can mitigate the presence of the gun-toting "mad-max" element which, despite their best intentions, desire the chaos that will be unleashed by the coming global depression. So, get out there and start meeting your neighbors, join a faith community, volunteer at a soup kitchen and/or join a local coop. Get out, multiply your social connections each day and fight the urge to turn inward--it's spooky in there!

Canary in the coalmine

It is terrible turn of phrase, and I don't mean to belittle anyone caught up in the following scenario, but according to the Oct.26 Washington Post Online, food prices in developing countries are starting to be affected by the global financial crisis. The ripple is beginning to affect those least able to absorb the shock. There are two points in the article that should give us pause.

The first point: "As shock waves from the credit crisis began to spread around the world last month, China scrambled to protect itself. Among the most extreme measures it took was to impose new export taxes to keep critical supplies such as grains and fertilizer from leaving the country."

Here we see a state that has been in thrall of the open market for years, reasserting itself to feed its own people. There's nothing wrong with that, indeed protecting its populace from famine could be considered one of the most important functions of a state. But it does mean that all that good cheap food that flies around the world to stock our shelves may become scarce in the near future, driving prices up more than the cost of fuel threatened to do earlier this year.

The second point that should concern us is that, "[c]ommodity prices have plummeted in recent weeks as investors have shown increasing concern about a global recession and a drop in the demand for goods. Wheat futures for December delivery closed at $5.1625 on Friday -- down 62 percent from a record set in February. Corn futures are down 53 percent from their all-time high, and soybean futures are 47 percent lower...Such declines, while initially welcomed by consumers, could eventually increase deflationary pressures -- lower prices could mean less incentive for farmers to cultivate crops. That, in turn, could exacerbate the global food shortage."

The Wall Street Journal published something similar last week. As commodity prices fall, and production costs rise (seed, fertilizer, pesticides, etc...), there is less incentive for farmers to plant. These two points alone should convince anyone concerned by the eventual effects of the meltdown to begin to stock up on food items and sundries to take the edge off the jump in prices we'll likely see beginning next year and to avoid any kind of nightmare scenario where food scarcity really threatens our families and communities.

Here is a short list of things I would invest in now...

Starches: rice, pasta, flour, corn meal (degerminated), dehydrated potato products

Protein sources: texturized vegetable protein (TVP), beans, lentils, wheat gluten (for seitan), nuts, soy beans

Vegetables: canned tomatoes (though technically fruit I guess), really any veggies canned, pickled or dehydrated (dehydrated carrots, celery, onion and potatoes make for an easy soup base)

Fruits: anything canned, dried or dehydrated (if you have a dehydrator, now is a good time to dehydrate apples)

Dairy: dried milk, dry cheeses like Parmesan can have a long shelf life, dehydrated eggs


Misc: vegetable oil, shortening, chlorine bleach (for emergency water purification--look online for procedure), salt, sugar, spices, soy sauce, vinegar and dried herbs

Medicine: any over the counter meds like tylenol/ibuprofin, antihistimine for allergies, antibacterial cream, cough syrup, Pepto, an assortment of bandages, gauze, tape, etc...

This is just a start. But the point here is that the window for buying cheap food, in bulk--the kind that will see you and those with whom you share (hopefully you will purchase enough to contribute if need be)--is closing. Bulk items might not be within your reach by next summer, so start stuffing that pantry now.

Surviving the global depression...with cabbages!

It is tough enough figuring out what is happening in our economy day-to-day, let alone trying to understand the full implications of its current collapse. The future is uncertain and commentators contradict each other daily in their forecasts. It is certain that the triumph of free market capitalism has faltered and will not recover as soon as its advocates wish (these people have been strangely silent these days). With the fall of Wall Street and credit markets, and with the government going out on shaky limb, it doesn't take too much of a stretch to foresee widespread (read: global) unemployment, inflation, foreclosures and businesses closing shop. Furthermore, food costs will likely begin eating up a larger portion of the family budget. To offset costs, and to take a step toward self-sufficiency, I suggest starting a garden or buying a share in a community sponsored agriculture program http://www.localharvest.org/csa/

I have decided to start a (very) late summer garden plot for cabbages, kale and collards. I have a small plot that I dug up this spring and plated with tomatoes, squash, cucumbers and peppers, only to be routed by a voracious muskrat. He, however, has not made an appearance since July--I hope he has found greener pastures than the barren weed patch he left in his wake. Cabbages take between 70-120 days to mature and do well in cooler weather. I am in Virginia and the winters here are very mild--so, I hope to have a cabbage harvest sometime between January and February. I think that individuals and families have to begin to strengthen not only their social networks, but also their self-sufficiency to better weather whatever may come. There is a good site for planting in the autumn and winter http://www.harvestwizard.com/2008/08/planting.html

Continue to stock up the pantry, and in the meantime start a winter garden. If for no other reason than to get outside and take your mind off of your dwindling retirement portfolio. There are a number of veggies that do quite well in the winter, depending on light exposure and minimum temperatures. If you are in an area that freezes, consider an investment in sun boxes (cold frames). And if you have very little land, like me, you'll want to check out "Square Foot Gardening" by Mel Bartholomew.

Strengthening social networks

As I mention in the previous posts, the future is uncertain, and planning for uncertainty, as difficult as that appears, is necessary for getting through the oncoming crisis. Indeed, the financial system's decline has been something of a spectator sport for many of us in the past few weeks (or months, if you've been paying attention). Any of us with money in the stock market feel the pain acutely, but if our economist kings manage to turn this all around, then worry not--we may be back up to 14,000 in a year's time, but maybe not. Those of us without much invested in the market have just been watching the carnage from afar--but not for long I think. The link between companies and the financial markets is direct, and when credit does not flow, and investments have been eviscerated, many companies will not weather the storm in the months to come. Many will go out of business and there will be mass layoffs; unemployment will rise quickly, and it is questionable whether the government will be able to handle a sudden increase in entitlements. In my city, there has been a hiring freeze in effect for about a year now, and with state budgets drying up, there is no end in sight. Unfortunately, the scarcity in government jobs (i.e. jobs that pay fairly well and tend to have good benefit packages) means that there are many of us who must do the best we can in the service sector (poor pay and no benefits). As companies trim down on operations in response to a sudden drop in demand (let's face it, folks are scared and cutting back even now), the masses of unemployed will rise along with all of the social ills that come along with unemployment: crime, mental illness, poverty, etc...

If this is the case, and we have a deterioration in social conditions in the coming years, it is more important than ever to bolster your existing social networks--we will all need to depend on one another as circumstances change. From the go-go 1990s until recently, hyper-individualism has been possible and perhaps, given the circumstances, even desirable; however, it is no longer a good idea to put so much of our time and attention on pleasing ourselves. This practice of self-indulgence has been part of the problem--many of us have over-extended ourselves on credit over the past decade or so (it was so easy to get credit cards), largely in the service of short-term self-gratification (flat screen TVs, big cars, lots of home decor, electronic devices of all sorts). It is time to start placing our shrinking resource into building the kinds of social ties and community institutions that will bolster our chances of making it through the global depression. This means re-prioritizing where we sink our money, time and energies.

I suggest a good place to start is (for those of us not already involved) joining a church. I am not a religious person: if you had asked me a year ago if I would ever consider becoming a member of an organized religion, I would have certainly said, "hell no." But times change. Churches foster strong communities through volunteer work and sustain an awareness of the needs of their neighbors. These venerable institutions can be a positive influence in the community and will help you directly if you find yourself in a difficult situation. Find a church that tends to be more inclusive and tolerant. If you have no preference, ask a church-going friend about theirs and invite yourself to the next gathering. Once you are part of a congregation, get to know folks and volunteer for church-sponsored outings or charities (soup kitchen, food bank, toys for tots). The point here is to multiply your social connections and, who knows, broaden your spiritual horizons. Churches foster dense social networks and often friendships that are connected to a larger institution and mission tend to be more durable than the connections forged at work or in chat rooms.

It is easy to find a church...just look in the yellow pages or ask around. Have an idea of what kind of church-going experience you want to have: for the fans of doctrine, saints and incense there is the Catholic Church; for those who prefer rousing sermons and lively music, look into a Baptist congregation; for lovers of diversity, try a Universalist or liberal Methodist church. Again, initially anyway, this is a means to multiply and deepen you social connections--it will allow you to depend on others in times of trouble and place you in the position to help others as they require help. If you join a congregation that preaches intolerance and hatred toward outsiders, you will be contributing to the many challenges that will beset our communities and families in the months and years to come. We will come through the global depression with stronger communities and intact institutions from which we will all benefit; perhaps we will also gather deeper, more meaningful social relationships in the process--enriching our lives more than the consumer goodies that we bought to fill the social vacuum that characterized, for many of us, the last last few decades.

Remember, civilizations fall when societies dissolve into factions--and when civilizations fall, people suffer all the abuses of power that tend to arise in the absence of civility. This does not mean that you you should not prepare yourself (see the previous post on stocking up on dry goods etc...); but withdrawing into your bunker and adopting a "survivalist" mentality is not helpful to anyone, not even yourself (who wants to live like a paranoid hermit?). With a strong social network, a sense of empathy and a desire to alleviate the suffering of those around us--these things will see us all through this mess together--and perhaps we'll be better of for it.

A little darker now....

The Dow falls 678 points today. People are looking for the bottom and hoping for a quick recovery--I hope they find it and we do turn it around sooner rather than later. But things being what they are, the collapse may continue to surpass our expectations. There is some consensus that this economic event is not the same as the 1929 crash--this assertion is being used to mollify panicked investors; but, what is not being discussed is that today, unlike during the great depression, we are globally connected with many other ailing national economies. This may be a global race to the bottom as the world's major economies pull one another down. The friction between failing national economies may begin to play out on a larger scale than the current situation between England and Iceland. England wants to sue Icelandic banks that folded and took millions of pounds of British savings with them. Now that they have to keep themselves afloat, what happens when China starts cashing in all of the treasury bonds that they have been buying to keep the US in cash during our overdrawn Bush years? It's all a big question mark at this point, but it could get ugly. What is plain is that currently we are not experiencing the brunt of the crisis in terms of a dropping dollar and rising prices. I always thought my grandparents were a little odd for doing things like stashing canned goods under their beds, or patching worn out sweaters, or making so many things from scratch. Their frugality was born of some rough times during the Great Depression.

There is no way to tell if we will be compelled to make the same kinds of sacrifices as my grandparents, but now would be a good time to start thinking about that space beneath your own bed. Should food shortages occur, you would want to have a full pantry to offset periods of scarcity. It's a little extreme, but the Mormons supposedly store a year's worth of food for just such emergencies. There is a calculator that counts up the pounds of food you need for a year's supply-- http://lds.about.com/library/bl/faq/blcalculator.htm --this is something to start thinking about now, when stores are posting great sales to thin their stock in anticipation for lower sales next year. Dried goods and canned goods are ideal for long storage. Here's a link about the shelf life of different foods: http://standeyo.com/News_Files/Food/Extend_Shelf_Life.html

What this all means...

The problem is this: nobody knows exactly what is happening right now except that it is unprecedented in terms of its scope and intensity. The global economy is wobbling toward a deep recession, if not depression (the definitions for these things are inexact, but the rule of thumb seems to be that a depression is where GDP declines 10% or more), as our leaders scramble to gain some kind of control over the plunging stock market and frozen credit markets. I started this blog because people who jump to the "Armageddon" scenario tend to be borderline paranoiacs who are all too ready to stockpile ammunition and Slim-Jims for the "end times." On the other hand, the more level-headed experts have been consistently wrong about the intensity and scope of the current crisis; it has simply gone from bad to worse. I haven't heard anyone address questions concerning our national 10 trillion dollar debt, especially at a time where GDP will be decreasing; nor have I heard what the impact of the Fed's money printing spree will have on inflation. Taking into account the current frigidity of the credit markets, rising unemployment, inflation worries and, now, the global nature of this crisis--it appears that we may be in for a long downward spiral in terms of the average person's standard of living. This blog is intended as a forum for the exchange of ideas that explore what a long-term economic recession or depression will feel like and what to do to avoid its more dire effects (starving in the streets, etc).

In the coming weeks I will be writing on a variety of topics related to the event that we are now witnessing in the news, and particularly how to make it through with our collective sanity and personal budgets intact. These posts will fall broadly into five categories:

1. Understanding Historical Perspectives: Your (great-) grandma, who lived through a global depression in 1930s, has just usurped your financial advisor (who told you in July to just "ride it out" in the stock market) for prime insights into getting by in the coming years.

2. Strengthen Social Networks: If you can count on one hand the number of significant relationships in your life, now would the time to join a church (the life-affriming kind, not the Revelations kind), book club, food co-op, knitting circle, hiking club, etc...

3. Personal Finance: Lose the credit cards, start saving--we're not going to shop our way out of this one.

4. Household Management: Tips on getting by on the cheap!

5. Skill Sets: Your mastery of mediated realities (i.e. video games, web surfing, weekly TV shows) will avail you not in the days ahead.

Whatever this crisis means, we'll get through it together if we take some time to change behaviors that may have made sense six-months ago, but may indeed be destructive in the months and years to come.

Be safe, be sane, let's get to work!