Surviving the Global Depression... Together

Stay Human

2011-08-08T14:29:00.004-04:00

I make few important life decisions without reflecting on some pithy quote from Master Yoda. Today I have been mulling over this little gem:

“Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering.”

It seems like almost overnight sober, even-keeled folks are reduced to panicky, wild-eyed ... well, animals. Fear is primal. It is a base emotion, like anger, that strips the mind of all capacity to work in a rational manner. Without rational thought we are incapable of sussing out effective action. We become confused and simply react to stimuli. While we all experience fear now and again - it is inhuman to live in fear. And as one moves from fear to anger and then hate, one become less and less human.

When under the spell of fear, I find it useful to recite the Bene Gesserit litany against fear from Frank Herbert's Dune. I really only remember the first four lines, but the litany in its entirety is a zippy little recipe to work through the fear and come out the other side in tact: human.

I must not fear.
Fear is the mind-killer.
Fear is the little-death that brings total obliteration.
I will face my fear.
I will permit it to pass over me and through me.
And when it has gone past I will turn the inner eye to see its path.
Where the fear has gone there will be nothing.
Only I will remain.

Stay human people!

A more flexible society?

2010-11-21T19:26:00.003-05:00

Regardless of how you view the mid-term elections, one thing is clear: at the very moment we need a thoughtful and responsive government, we are going to get at least another two years of gridlock. Only this time around it will likely be far more intractable than the merely contentious previous two years. Just as the House failed to extend unemployment benefits last Thursday, the Federal Reserve downgrades their earlier, more optimistic view of the economic recovery in 2011. So, it looks like we're in for long sputtering haul with high unemployment and a government that probably will not be able to make the bold moves necessary to alleviate socioeconomic conditions for the poor (1 in 7 Americans).

With the government incapacitated, it is up to Americans to do what needs to be done. And we can do it. Many already are doing it. So here is my suggestion, polyanna-ish though it is:

Folks on the right, as mistrustful of government competency as you are, now is the time to get involved in the kinds of community efforts that will help lift people out of poverty. Your best public philosopher, Francis Fukuyama, wrote an entire book on the subject!

Folks on the left, bent as you are on social equality, this is an opportunity to put your lefty activist cred where your mouth is. Get out there and start an NGO to connect people with jobs, training, or food!

Seriously, the time for rallies and placards and partisanship is over. We are far from out of the woods and we need to work together to pull through this rough patch--or else it may turn out far nastier than any of us can envision.

Things you can do...

1) Volunteer at a food pantry

2) Volunteer at a soup kitchen

3) Donate to charitable causes that help alleviate poverty... anywhere

4) If you are a business owner, create a new job

5) Start or join a community garden

6) Volunteer to teach job skills (computer applications, welding, car repair, horticulture... anything)

7) Start an NGO to... secure low cost or no cost housing; find/create jobs for the jobless; teach skills; increase community involvement...

8) Buy stuff! Not on credit, not irresponsibly, not at the expense of your own savings, but stimulate demand for goods and services in your community - preferably from locally owned merchants (more of the money you spend will likely recirculate back into your own area, rather than getting siphoned off to Arkansas - apologies to Arkansan readers)

9) If you have a friend, acquaintance, ex-coworker, who is unemployed (and who doesn't these days?), then be a job-hunting buddy. Help them meet their own goals for application placement, acquiring new marketable skills, etc. And then take them out for a beer/cosmo at the end of a long week of job-hunting.

10) If you can't do anything - too busy, can't easily get around, etc., then go online and donate cash, clothes (often they'll pick up), or optimism.

11) If you don't do anything, then, at the very least, ease off the vitriol you hurl toward your imagined political rivals. It's not about politics anymore.

People on the left and the right have deep traditions of helping others. Whether through your church or your commune, get involved, and not just through the holiday season. We're not nearly through with the fallout from fall 2008 - the outcome depends on us.

"Helping Hands" illustration by Chris Kasch

Economic refugees find shelter in tent cities

2010-07-07T08:20:00.005-04:00

My grandparents knew them as hobo camps - groups of unemployed men doing what they could to get by during the hard times of the Great Depression. Today we witness a more troubling phenomenon. Tent cities have been springing up all over the nation in the last few years. Composed of a conglomeration of unemployed, underemployed, the working poor, and discouraged workers, this new phenomenon suggests that the current economic downturn is producing some disturbing features. The National Coalition for the Homeless has launched a new study in an attempt to better understand this growing social concern. What they have found is that municipalities have differed greatly in their response to the sudden, urgent need for housing among folks affected by the recession. Some cities (Seattle, WA and Portland, OR, for example) have set aside land, provided services, and attempted to alleviate the human suffering experienced by those displaced by the shifting economy; other cities (Colorado Springs, CO) at first worked with the homeless, and then, panicked by their increase in size and apparent permanence, broke up the tent cities and sent people packing.

With the disappointing unemployment numbers just out, the inability of our politicians to extend unemployment benefits, and a structurally weakened economic system, we must prepare to accommodate a growing number homeless with creative solutions. The "new study" link above compares different approaches along the west coast of the US and worth a look.

Love letters straight from the Heart

2010-05-24T10:19:00.002-04:00

Apparently this email made the rounds recently -- it's the swan song of the utopian capitalist, the death rattle of the "survival-of-the-fittest" individualist, the last gasp of the crass materialist. It is weird how detached Wall Street bankers are from the so-called "Main Street" lives they assume they will be leading. $85K per year? Four months vacation? The median household income in America is around $50K and three weeks vacation is the average for someone with 25 years in at their job. To which Main Street does Joe Wall Street think s/he'll be moving I wonder?

"We are Wall Street. It's our job to make money. Whether it's a commodity, stock, bond, or some hypothetical piece of fake paper, it doesn't matter. We would trade baseball cards if it were profitable. I didn't hear America complaining when the market was roaring to 14,000 and everyone's 401K doubled every 3 years. Just like gambling, its not a problem until you lose. I've never heard of anyone going to Gamblers Anonymous because they won too much in Vegas.

Well now the market crapped out, & even though it has come back somewhat, the government and the average Joes are still looking for a scapegoat. God knows there has to be one for everything. Well, here we are.

Go ahead and continue to take us down, but you're only going to hurt yourselves. What's going to happen when we can't find jobs on the Street anymore? Guess what: We're going to take yours. We get up at 5am & work till 10pm or later. We're used to not getting up to pee when we have a position. We don't take an hour or more for a lunch break. We don't demand a union. We don't retire at 50 with a pension. We eat what we kill, and when the only thing left to eat is on your dinner plates, we'll eat that.

For years teachers and other unionized labor have had us fooled. We were too busy working to notice. Do you really think that we are incapable of teaching 3rd graders and doing landscaping? We're going to take your cushy jobs with tenure and 4 months off a year and whine just like you that we are so-o-o-o underpaid for building the youth of America. Say goodbye to your overtime and double time and a half. I'll be hitting grounders to the high school baseball team for $5k extra a summer, thank you very much.

So now that we're going to be making $85k a year without upside, Joe Mainstreet is going to have his revenge, right? Wrong! Guess what: we're going to stop buying the new 80k car, we aren't going to leave the 35 percent tip at our business dinners anymore. No more free rides on our backs. We're going to landscape our own back yards, wash our cars with a garden hose in our driveways. Our money was your money. You spent it. When our money dries up, so does yours.

The difference is, you lived off of it, we rejoiced in it. The Obama administration and the Democratic National Committee might get their way and knock us off the top of the pyramid, but it's really going to hurt like hell for them when our fat a**es land directly on the middle class of America and knock them to the bottom.

We aren't dinosaurs. We are smarter and more vicious than that, and we are going to survive. The question is, now that Obama & his administration are making Joe Mainstreet our food supply…will he? and will they?"

A Year's Hiatus

2010-05-20T12:43:00.003-04:00

At the end of April, 2009, I decided to stop blogging about what seemed, then, as a looming global economic collapse and started to practice what I was preaching. I finished my postgraduate degree, started "leveraging" my skill-set to make a little money, and I have been working at being less spendy and more attune to the value of free stuff - you know, the good stuff, the stuff with substance and meaning: family, friends, art, music, literature, living well, and living less encumbered. Still working on the last one. It's been quite a year. Here are a few things I've learned.

1. Your skills and talents are valuable and there are people who are happy to pay you for your knowledge.

2. Getting out from behind the computer is the best, maybe only, way to live.

3. Despite the neoluddite sentiment of point #2, meetup.com is a great site to find groups of others with similar interests...

4. and craigslist.org is a good way to get the word out about what you have to offer the world.

5. Jogging keeps one sane and fit (two things we should all strive for).

6. Making a good soup is the most important skill one could possess.

So, why am I blogging here again? I guess things are getting pretty bad politically, environmentally, and economically and 1) attention needs to be paid to, let's say, alternative reactions to calamity, 2) blogging is one way to build community and, truth to tell, it's something that I have missed, 3) I find that blogging helps me place events in perspective and makes me spend some time carefully considering how to articulate with the future.

What's new after a year? Not much economically. The unemployment rate is higher and likely to climb; there is an oil slick covering the Gulf and threatening to catch ocean currents, spreading it even farther; Europe is in crisis; the stock market is slumping...again...

How about the positives? CO2 emissions drop in 2009 due to the recession; consensus on important issues is starting to emerge - e.g. the US National Academy of Scientists have agreed that global warming is real and due to human activities; a new deal protects millions of acres of forest lands in Canada; the recession has prompted a record number of startups in the US; contraction is the new growth (which is not necessarily a bad thing).

Futures: Charles Schwab, Barak Obama and me

2009-04-29T09:16:00.007-04:00

I understand completely the importance of optimism about the future when it comes to social, political or economic change. One has to believe in positive future outcomes if one is to invest time, money, effort and hope in projects that will not come to fruition for months or years. I get it and, more importantly, I buy into the proposition that tomorrow grants us an opportunity to better ourselves and the world. So why do I find it irksome when companies hype the future, or when commentators pounce on some obscure economic indicator and turn it into the harbinger of prosperity? The new Charles Schwab ad says "Dwelling on the past won't help my future. Do something about it." Very paternal, Chuck.

I think most people's problems from the economic downturn are not grounded in the past; rather, it's the present and very immanent future that most of us are contending with: drained retirement accounts, loss of jobs, cut hours, lack of available credit... While there is no doubting that years from now we'll look back at the 2008-2??? depression and laugh or grimace, but now is the time to think clearly about what we should be doing with dwindling, threatened or otherwise reduced resources. Pretending, as suggested by the Charles Schwab ad, that we're out of the woods and that our reluctance to go whole hog back into the stock market, or supermarket for that matter, is based on an irrational reaction to past events is foolish to say the least.

Prudence is called for. While it might be tempting to bet on the stock market or take out more credit to get out of our current financial doldrums, we should be looking instead for sustainable solutions. Americans should not re-adopt their role as the world's economic engine. As we are finding out, the growth in the world's economy from 1995-2007 was largely based on consumers and companies overextending themselves on credit, on insane financial commodities and an irrational belief that real estate can leap in value year after year...forever. What a difference a year makes, no? How about more sustainable investments: a car that uses less fuel, appliances that use less energy, solar tiles for your home, community investments that bring quality of life returns, or an investment in education? These things won't make you rich, but some will allow you to save money and others will contribute to a genuine sense of well-being, which is what all the over-leveraging lo these many years was supposed to do, right? Here's to hope!

An interesting take on first quarter numbers

2009-04-01T15:57:00.003-04:00

This is an excerpt from Warren Brussee's blog. He's a smart guy, one of the few who saw that the world's financial system was in hot water long before other economists and bloggers like me, but he does have a book to sell, so take his prognostications with that in mind.

THE MASSES ARE MOBILIZING

In my book, I predicted that by 2012 people would begin to actively and sometimes violently protest against what they perceived as inequalities. We are already seeing inklings of these protest movements.

In 1933, in “The Nation,” James Steele wrote about how 10,000 people protested against the eviction of Cleveland resident John Sparanga. Once again, groups in Cleveland have rallied outside the Cuyahoga County courthouse, calling for a foreclosure freeze. In Boston, the Neighborhood Assistance Corporation of America protested in front of Countrywide Financial offices. The Mabuhay Alliance, joined by the Mexican-American Political Alliance, staged a protest in front of Countrywide’s San Diego office. In Los Angeles and Oakland, groups like ACORN have organized low-income homeowners. Contra Costa Interfaith Supporting Community Organization (CCISCO) protested in front of several Antioch bank branches, forcing the banks to renegotiate their members’ loans.

Such protests have not just been limited to foreclosures. Groups have marched on the homes of those receiving the bonuses from AIG. In typical mass protest confusion, the protests centered on homes where the AIG employees had already agreed to give up their bonuses!

And that is the problem! Mass protests include many people who will not be rational. It is only a matter of time until someone in these protest groups steps over the line, or they are confronted by a police team that loses their cool and becomes physical in their response. A Vietnam-era Kent State confrontation scenario seems inevitable. Once that happens, we could see total chaos as police and communities refuse to take on protest groups and pressure builds to stop foreclosing on people. Our financial institutions will not know what to do with such a situation. And corporate leaders who are receiving huge bonuses or salaries will find themselves under ever-increasing pressures from stock holders and others who feel that these corporate leaders are prospering while others are hurting.

The Obama team will really start earning their incomes if such protests become commonplace and violent.

HOUSING The January 2009 Standard & Poor’s/Case-Shiller 20-city housing index dropped a record 19% versus a year ago. This index has dropped 29% from its peak in 2006; but housing prices must drop another 15% to 20% to get down to their historical inflation-adjusted level.

The New York Times and others have reported that banks are sometimes going through the foreclosure process but stopping at the last minute, insisting that the property owners still own the homes and must pay taxes and do required repairs. Banks are doing this on homes that have been vandalized and are largely not saleable. Although the exact number of homes involved are not known, they are included in the 700,000 estimate I included in my mid-March update.

THE ECONOMIC NUMBERS Recently, some economic numbers have given substance to those who believe that the downturn has bottomed out and “happy days” will be starting soon. But it behooves an investor to do some examination of these numbers.

For example, in February, new home sales rose 4.7% versus January sales. However, putting this in historical context, February’s new home sales were the second-worst on record and well below last year’s numbers. It’s just that January numbers were so bad that February numbers look better in comparison.

Consumer spending in February was up for the second month in a row. However, looking at the numbers for the past year, for the first six months of that year, the monthly change in consumer spending averaged +0.42% per month. For the most recent six months the average change was -0.35%.

Perhaps a better view of the whole economy is reflected in the job benefits numbers. The Labor Department reported that initial jobless benefit claims rose last week, and those continuing to receive benefits set a record for the ninth straight week. This means that laid off workers are having a harder time finding jobs. The proportion of the workforce that is unemployed is the highest since 1983 and almost double what it was a year ago. And these data do not include the almost 1.5 million receiving extended unemployment compensation..

THE STOCKMARKET With the recent jump in the market, the S&P 500 price/dividend ratio is now at 37. This is well above its historical median of 26 and my entry price goal of 17.2. However, even with the recent rise in the markets, the S&P 500 is down 11% for the year.

Return of the artisan

2009-03-06T12:06:00.004-05:00

Considering the dismal unemployment data out today, and the even more dismal predictions, we find ourselves at a juncture where there will be a nearly unprecedented number of people out of work. Depending the unemployment figure you are looking at, we are approaching the same number of people that were out of work at the height of the depression in the 1930s (12.5 million today vs. 14 million in 1933--the worst year for unemployment during the depression).

With so many people out of work, and so few available jobs, we may see the rise of a kind of neo-artisan. During the months that it can take to find work, there are many of us relying on our secondary skills (gardening, cooking, music, art, writing, foreign language ability, etc.) to get by. I would predict that many of the closet artists, writers and musicians would tap into the skill set that was deemed "unprofitable" during the go-go economy of recent years and find ways to make it work for them. In developing these skills, making contacts, gaining confidence and buyers along the way, bankers may find value in throwing pots, insurance adjusters might instead make their dough by baking and former Wall Street Execs could make a respectable living playing the blues.

Who knows? But I would bet that we will see a flourishing of artisanal entrepreneurs and a proliferation of talent in the months and years to come. So, if you are looking for work, or fulfillment, begin nurturing that hidden talent, and, when you have something that someone else might buy, hang a real and/or virtual sign out and see what happens--you might surprise yourself.

The photo is of "Joe the potter" at Horseshoe Mountain Pottery ; see also John Sanchez at Sanchez Art Werk and guitarist Brendan Burns for examples of folks who have been putting their talents to work for them for a number of years now and using the internet to their advantage.

Drought in the golden state

2009-03-03T09:08:00.007-05:00

Here is another argument for establishing community gardens.

"The almond orchards are beginning to bloom in California’s Central Valley, the vast swath of fertile, flat land that runs up and down the middle of the state. Bees are pollinating the rows of flowering trees, and the harvest will shape up over the coming months. But for many farmers, one crucial thing is missing from this picture – water.

The US Bureau of Reclamation, which manages water allocation in arid regions, announced last week it will not provide vital irrigation to Central Valley farmers this year because of drought, and the California State Water Project expects to meet only 15 percent of water requests.

“That’s unheard-of,” says Jim Jasper, an almond farmer in Newman, Calif. “We’ve never seen a zero allocation for water.” Many growers here are destroying older and less productive trees to conserve water for other crops.

The University of California estimates that the drought may cause 847,000 acres to go unplanted this year, with income reductions of more than $2 billion and the loss of 70,000 jobs" (Christian Science Monitor 2/26/09).

With climate change, the precipitous fall in all commodity prices, the flight of cheap immigrant labor and the difficulty in securing credit, relying on the agricultural pipeline to continue supplying our supermarket shelves with fresh produce, dairy and grain may be a mistake. It makes sense to begin appropriating community plots now and planning for spring planting. This can do three things immediately: 1) provide local food security, 2) improve local nutrition, and 3) provided your locality successfully bids for federal relief funds, community gardens can create paying jobs. For more information on community gardens see http://www.mrsc.org/Subjects/Parks/comgarden.asp

The end is near...er

2009-03-02T15:19:00.005-05:00

The economic crisis ranges in titles from the hilarious "economic shitstorm" to the more somber "global economic readjustment." I like the former because it is descriptive of the havoc the crisis wrecks in individual lives. It captures the anxiety, worry and, ultimately, the sense that what we're experiencing is so profound, nothing will ever be the same again. The latter sounds like an economist's euphemism that obscures more than it describes. And it undoubtedly does just that. "Readjustment" is similar to the more familiar and hated "restructuring." When the unemployed are feeling glib they say "I was restructured" to that they were laid off. That said, I like "readjustment" because, while it is not as colorful, it gets to something deeper: something went wrong with the fundamentals of our (really, the world's) market economy.

Whether you are talking about the stocks that make up you 401k, the value of your home or the grievous errors in judgment that your banker made in the past several years, the issue at stake is the fact that, at some point, the wheels left the pavement. That is, the value of the stock, home or bundled securities simply did not reflect its real market value. Profitless companies were able to sell shares of stock for more value than they really held. Houses were sold at inflated prices to customers who could not afford them; this was based on the crazy logic that they would forever increase in value. And the bundled securities, or derivative, market was a ponzi scheme based on misinformation (perhaps willful ignorance) and speculation.

In fact, that is what the "readjustment" is all about: it is a period where values finally begin to reflect reality. Until we can eliminate the very human tendency to speculate and act according to expectations (which can be based on everything from very solid information to wishful thinking to calculated lies), markets will never be just markets. They, like the commodities they trade, will always hold a fetishistic attraction for us: "it's more than just a home/stock/derivative, it's an investment."

As things get worse (a mantra we've heard a million times now, followed by "before they get better"), they are also getting more real: things are readjusting. Your home is finding a market value for which a loan can be had--the same goes for the stocks in your retirement fund and the bundled securities held by your bank. Of course, this is little consolation if you've lost your job/home/savings. And it is high price to pay for the trillions of little lies and bubble-headed fantasies that have landed us in this mess. Unfortunately, most of us are complicit to some degree in the collective delusion that washed over the industrialized world for the last decade and a half.

Just as speculation and loose financial practices can inflate value, it goes the other way as well. Expectation of future losses can drive values below the point at which they would normally reside. Time is the only remedy...we've got to wait it out. The best we can hope for is an economic system that, post-readjustment, is characterized by more honesty, transparency and rationality. So, as we press on through this shitstorm together, just remember that, without a doubt, the end is nearer.

The end of the world as we know it, or cultural renaissance? You decide.

2009-02-24T08:51:00.004-05:00

The paradox between the economic disaster of the 1930s-40s and the flowering of cultural achievement in that era has been often commented upon. We get writers like Henry Miller, Ernest Hemingway, Zora Neale Hurston, TS Elliot, ee cummings, Langston Hughes, etc... And artistic movements from documentary realism to expressionism and surrealism. Not to mention the music, this was the golden age of Jazz/swing and the first time marginal genres like folk and country received much wider appreciation. And the same goes for Hollywood and theater in general. How did so much artistic creation rise out of the wide-spread poverty and despair of the first great depression?

There are many answers to that question. For example, there were WPA programs like the Federal Theater Project that funded local theater groups. There was no TV, so people were more likely to get out of their houses in search for entertainment. And 1933 saw the end of prohibition, making night clubs and dance halls possible.

Beyond the misery produced by such economic downturns, there are other less negative effects as well. When business is slow, or non-existent, people may have more time on their hands. More time to think and create and/or more time to appreciate music, art, theater and writing--the former may also be encouraged by economic imperative, the latter motivated by a desire to escape the confines of their situation.

Today, our cable TV and the internet are a mixed blessing. These are relatively inexpensive sources of endless entertainment, which can be a good thing when you are too broke to go out. But they are also easy, habit-forming options for unimaginative, and this could wind up being a detriment to the growth of our cultural resources, and a drag on the recovery of the economy as a whole. But, who knows, perhaps folks will take their economic stimulus (in the form of paycheck tax reductions) and go buy a book, see a theater production or a band--supporting the artistic rebirth of the early millennium, an historical event that our great grandchildren will point to as evidence of our collective cultural sophistication and elan.

Economic terrorism?

2009-02-23T09:16:00.003-05:00

I was half-listening to the news the other day when a concerned security analyst mentioned that not only has the economic crisis risen higher on the priority list of security-minded government agencies and think tanks, it has surpassed terrorism as a threat to our nation. This made sense to me. Poor countries tend to be more unstable and the ensuing social unrest due to the inability of governments to promote prosperity has toppled many a regime in the past. But then the analyst began talking about economic terrorism in relation to countries like China. The idea is that China could do sneaky things like stop buying our government bonds or, worse, start cashing them in. This would in turn destabilize our already stressed economic system and lead to some unspoken cataclysm.

There are several obfuscations going on in this line of discussion. First, through a kind of willful ignorance that borders on the criminal, regulatory agencies in the United States government let the dogs run wild on Wall Street and in the banks for years. If there is a culprit in the current crisis, an underwriter of the current global social and economic chaos, if you will, it is the US. It seems kind of, well, predictable, that in the middle of a mess of our own creation, government officials would start fishing for a new, immediate, less tired, distraction for people to get worked up over. Second, the exact definition of economic terrorism is left open. Some say that an economic terrorist must be a non-state actor bent on wrecking havoc on our economy. Others use the term to indicate states that might use economic means to weaken our position in the world. In using the first definition, I give you Lehman, Abermoff, Stanford. In using the second, may I present the Clinton and Bush administrations. Finally, as this meltdown is really a problem with an economic philosophy that has prevailed in many countries, especially over the last twenty years, it would be more than a little ironic to begin fingering so-called communist nations like China. If there is such an animal as economic terrorism, the US would do well to adopt a more humble posture.

When to invest?

2009-02-19T11:27:00.002-05:00

Conventional wisdom says, "Buy low, sell high," and I have been content to do just that. As the stock market has slid repeatedly since fall of 2008, I have thought that, despite everything, I have time and the market will turn around before I am ready to cash out. So, a few weeks ago as the DOW hovered around 8500, I upped my 401K contribution. Buy cheap! But lately I have started to look my ignorance in the face. Sure, it's nice to buy low, but what happens to stocks that I own when businesses go bust? What happens to stocks that I own when they change status from blue chip to penny stocks? Or, more darkly, what happens to my nest egg if the whole thing implodes? Considering my misgivings about our collective return to the roaring 90s or the go-go 2000s, is there any wisdom in investing at all?

Don't get me wrong, I am not one of the buy-gold-now! types, and generally speaking I am confident that after we have bled the system of its poison (bad debt, toxic mortgages, etc.) things will turn around. My hope is that the turmoil of the next few years will be, if not a positive experience (especially taken individually), for our collective betterment. We need to slow down and find value in the myriad things that cannot be purchased--I believe that our survival depends on this. That said, I am a frugal fellow and the idea of tossing my hard-earned shekels down a rat-hole makes me queasy. So, any ideas? Continue to invest? Stop investing in stocks and buy wines (actually a bad investment for me, I like wine too much) or spend my investment dollars on all manner of immediate gratification?

Great Depression 2.0: time to get organized!

2009-01-15T10:45:00.003-05:00

Freemarketeers are as obsolete as my old Commodore 64 (RIP). The "free" market, based as it is on speculation, exploitation and private ownership, cannot operate when the future is bleak, jobs are being lost by the millions, homes are falling into foreclosure and cars are being repossessed at historic rates (1.5 million cars and trucks in 2008, up 12% from 2007). From an social and economic standpoint, 2008 was a train wreck. To top off the dismal performance of the stock market, skyrocketing foreclosure rates and unemployment figures, it turns out that retail sales were down in December--double their projected fall to 2.7%. Retailers call the day after Thanksgiving "Black Friday" because this is the symbolic start of the holiday shopping season and the time of year when retailer first start to see profits (out of the red and into the black). With sales down 2.7% in December, it can be expected that many retailers would not have seen a profit in 2008--and with the credit markets still frozen, we should expect to see more stores closing up in the ensuing months. This leads to even more job cuts and the spiral downward continues. What is to be done?

1) Volunteerism: the more goods and services people are willing to donate to community projects, the better we'll be able to stave off the deleterious social and economic effects of the current crisis. People are already needed to staff food drives, soup kitchens and community shelters--the demand for dedicated individuals will only grow as the economy sinks.

2) Cooperative ownership of businesses: A business venture may be more feasible during economic turmoil if the rewards and risks more evenly spread across the business. This provides incentives for higher productivity in times of plenty and can entail greater job security in times of scarcity.

3) Community organizing: Government won't be able to assess or address the varied existential needs that will arise in the months to come in a timely enough manner. Communities need to organize and implement solutions to their problems. During times of economic uncertainty these issues will invariably include: unemployment, shortfalls in health care, poverty, homelessness, mental health issues, municipal transit, availability of nutritious food, crime and corruption in government... Community groups can form a bridge between a slow and possibly inadequate governmental response and eventual economic recovery.

4) Local initiatives to vie for government largess. If local government fails to address local needs, then community organizations can float initiatives for funding through other channels (state, federal, private, or through religious organizations).

Needs are only going to increase, as will the pressures of social disintegration--communities can and should take charge of these issues now. Check out http://www.volunteermatch.org/ to find organizations in your area to join. If you don't have any that meet your concern, organize one!

For the love of pizza...

2009-01-13T15:36:00.003-05:00

We've been trying to cut back on dining out since the economy started circling the drain. With a teenage boy in the house, pizza night has become a fixture over the years. We have sought out and found many excellent pizza joints up and down the east and west coasts, but with an average of $40 a pop (not including wine), we decided to come up with a basic pizza recipe that approximates what we love about this dish: thin crust, tasty sauce and just the right amount of cheese. It is a basic cheese pizza (we're purists), but you can top it with anything you want. The dough takes a little preparation, but it's worth it. The dough recipe is actually double what you need--I freeze half for another day--so if you want just enough for the two pizzas, cut the quantities for the dough portion in half.

Dough (this will make enough for four pizzas)
1 1/2 tablespoons yeast
2 cups warm water
1 teaspoon brown sugar

Put this in a mixing bowl and give the yeast 5 minutes or so to wake up (by the time you finish mixing the flours it should be ready to go).

5 cups unbleached white flour
1 cup whole wheat flour
1 teaspoon salt
2 tablespoons oil (pref. olive oil, but vegetable oil will do)

Mix the dry stuff together and add to the wet. Incorporate the flours a cup at a time in to the yeast mixture if mixing manually. If you have a mixer with a dough hook, use that and mix all at once. Toward the end of mixing, add a little more water if the dough seems too dry and inelastic; if too wet, add more flour. Take dough out of mixing bowl and knead on a floured counter top until it becomes smooth and pliable. Scrape out the mixing bowl and lightly oil. Then place the dough in the bowl, cover with a cloth and let rise in the warmer part of the kitchen until about doubled in bulk (between 1 and 2 hours).

Sauce (make sauce and cool while the dough rises--enough for two pizzas)
1 - 28oz. can of diced tomatoes (pref. organic)
2 teaspoons brown sugar
1/2 teaspoon salt
1/2 teaspoon oregano
2 tablespoons red wine (optional)
1 chopped clove of garlic (optional)

Place all sauce ingredients into a blender and blend. Pour contents into a sauce pan and simmer on med. low for 20-30 minutes (stirring often). Take off heat and let cool.

(Once the dough is risen) At this point I divide the dough in half and knead into two rounds--one I put into a plastic bag and stick in the freezer for the next pizza night, the other I divide and knead into two rounds. Let these rounds rise on the counter for about 30 minutes.

While the rounds rise on the counter, set two racks in the middle of the oven and preheat to 500 degrees (see caution below). Take two sheet pans, flip them upside down and oil their backsides (this is the surface on which you will cook the pizzas). Take the rounds and begin to gently stretch them into rectangles. Place the rectangles onto the sheet pans and carefully stretch them out to the edges--you want the dough to be stretched very thin (it will rise in the oven). Then spoon the cooled sauce on the dough.

Cheese (enough for two pizzas)
1 pound mozzarella (shred)
4 tablespoons parmesan

Sprinkle cheeses on the pizzas. Carefully place pizzas in the oven and cook for a total 12-14 minutes, swapping positions halfway through for more even cooking (if you don't, the pizza crust on the bottom rack may over-cook). Caution: 500 degrees is really, really hot, so keep your face away from the oven when you open it and use thick, dry kitchen towels when handling the racks or pizza pans. Also, if your oven is not clean it will smoke.

When the pizzas are out, use a knife to separate pizza from pan and place liberated pizzas on cooling racks (this keeps the crust somewhat crisp). While the process may look daunting, it really doesn't take that much effort and, once preformed a few times, goes quite quick. Two pizzas easily feed our family of three with a few slices left over for the next day. Depending on grocery prices in your area, the total cost per pizza is about $3.

Laid off?

2009-01-09T10:04:00.005-05:00

According to recent data, 2008 marks the highest annual job loss since 1945 with a total loss of 2.6 million jobs--and forecasts for 2009 are not encouraging. If you recently lost your job or lose your job this year, there are a few things you can do to make the best of an otherwise bad situation.

1) Swallow your pride. This can be the most difficult obstacle because in the US we have this undercurrent of individualism that degrades those who ask for help. If it helps, the champions of this ideology are currently in Washington DC begging for handouts to keep themselves employed. The rules have changed, it's OK to rely on others for a while; in fact, embracing the idea of mutual support over cut-throat individualism may be our only way out of this debacle.

2) File for unemployment benefits, in some instances you can do this online. Benefits vary by state so check online to find out what kind of documentation you need to file.

3) Get food stamps now. Next to housing, the monthly grocery bill will drain your resources faster than anything else. The food stamp program is now called the Supplemental Nutrition Assistance Program (SNAP), find out if you're eligible online and visit your local SNAP office.

4) Along with foodstamps, consider supplementing with food from your local food bank (this link has a great foodbank locator).

5) If you have small children (up to age 5), don't hesitate to get on the WIC program. This will ensure a monthly inflow of healthy food for the kids.

6) Finally, if you have a little land, now would be a good time to consider planting a garden. It will help you feel more self-sufficient and pulling weeds can be quite relaxing.

7) File for medicaid , SCHIP or medicare to keep you and your family healthy.

8) Consider alternate housing options. If you're mortgage is too high, try to renegotiate a lower rate with your bank (tell them that you are looking at foreclosure otherwise and that time is of the essence). If you rent or are getting out of your mortgage (selling, renting, foreclosure, etc...), start looking for either a public housing arrangement, which, depending on your location, may entail getting on a waiting list, or find an apartment with lower rent.

9) Get back on the horse. Even while arranging for low income assistance, keep up the job search. Give yourself a goal of submitting X applications per day. Hit a range of employment possibilities: now is not the time to wait for that perfect job, get out and sling hash if you have to.

10) Keep morale up at home. Nearly everyone goes through tight times during their lives. Remember that this is only temporary. In the meantime, be careful to not take frustrations out on your kids or spouse; instead, circle the wagons and be supportive of each other--more so than usual.

11) Keep a tight rein on discretionary expenditures. Eat at home or sponsor a good old fashioned potluck for a change. Use your local library for internet, DVDs (consider comedies over drama or horror, see previous point), CDs and books. Take advantage of free local festivals, concerts, plays and lectures.

12) If you find that in the midst of job-hunting and applying for government assistance you still have time on your hands, start volunteering--this will feel empowering, get you out of the house and meeting people and contribute to a society-wide effort to confront the effects of the economic downturn.

Best of luck.

The "new frugality" responsible for economic crisis?

2009-01-07T09:12:00.005-05:00

The Wall Street Journal posted an article tagged "The New Frugality Worsens Downturn." The basic premise is that because of 2008's October surprise (i.e. the collapse of the financial sector, plunging stock market and the widespread destruction of wealth), American families, once the dynamo behind global economic growth, are beginning to save more, use credit less and live more within their means--leading to a sustained economic slump.

The author writes, "Americans, fresh off a decades-long buying spree, are finally saving more and spending less -- just as the economy needs their dollars the most." The assertions made by these kinds of statements is that the economy is sick and we need consumers to step up and do what they do best: go shopping. But this Bush-era argument is wearing thin in the days of post-Wall Street scandal. The fact is, Americans have been living far beyond their means for decades. Perhaps, just perhaps, after the illusions of wealth have all been dispelled and employment rates, car sales and stock quotes begin to reflect the reality that growth-at-all-costs is simply not sustainable, our expectations of what life is all about may also become more...reasonable. The GDP does not need to grow every quarter ad infinitum, the stock market does not owe you a 10% return on your investment each year, investment bankers do not need a 6-figure paycheck and nearly all Americans could and probably should make do with far less.

The "new frugality" is a harbinger of a society-wide adjustment of expectations. It is not a social malady, rather it is an opportunity for all of us to make conscious decisions about what kind of world we want to build on the ashes of outdated economic, ecological and social models--you know, the models that promoted the 60-hour work week, the 2-hour commute, over-scheduled kids, spouseless marriages, global warming, suburban sprawl, the collapse of innumerable species the growing gap between rich and poor, etc... No, the new propensity for families to save more and think more about what and how much they buy is an opening to a greener, more sane and sustainable future.

Trickle up economy

2008-12-26T16:46:00.003-05:00

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?

2008-12-26T13:05:00.001-05:00

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

2008-12-23T11:22:00.001-05:00

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

2008-12-19T09:02:00.002-05:00

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

2008-12-18T08:54:00.006-05:00

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

2008-12-17T07:58:00.007-05:00

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

2008-12-12T09:15:00.002-05:00

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

2008-12-07T09:31:00.004-05:00

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"

2008-12-04T10:37:00.002-05:00

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

2008-12-03T11:10:00.005-05:00

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!

2008-11-25T09:17:00.005-05:00

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

2008-11-17T11:43:00.004-05:00

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!

2008-11-16T12:50:00.004-05:00

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!

2008-11-12T10:26:00.003-05:00

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

2008-11-07T10:48:00.004-05:00

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...

2008-11-06T21:30:00.003-05:00

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

2008-11-06T16:24:00.003-05:00

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?

2008-10-29T08:23:00.003-04:00

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

2008-10-28T10:32:00.002-04:00

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

2008-10-27T10:54:00.004-04:00

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

2008-10-26T13:00:00.005-04:00

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!

2008-10-15T14:43:00.002-04:00

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

2008-10-12T13:51:00.002-04:00

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....

2008-10-09T21:53:00.006-04:00

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...

2008-10-08T10:04:00.000-04:00

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!