Laid off?

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?

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

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.     

Social unrest

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

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

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

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

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

Global Depression

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

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

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

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

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

When to "cut bait"

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

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

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

Unemployment -- it's worse than you think

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

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

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

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

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

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

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

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

Numbers...

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

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

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

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

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

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

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

Not just for the tinfoil hat crowd anymore

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

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

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

Surviving the global depression...with cabbages!

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

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

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

What this all means...

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

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

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

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

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

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

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

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

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