Depression

298 Miles

That how far I drove this week between filling my car with gasoline Monday morning and dropping my son at school Wednesday morning. Why is that significant? For many reasons: cost, time, and luxury to name a few.

First, the cost. My car achieves approximately 16 miles per gallon and gasoline is currently selling at $1.99/gallon. For arguments sake we can agree I used about 20 gallons of gasoline or spent just $40 to go 298 miles. In that 298 miles I took kids to school in the morning, picked up kids in the afternoon and drove myself to Orlando two nights. Looking at a map, 298 miles would take me south to Key Largo or North to Macon Georgia. By comparison, Greyhound would charge $65 for the trip to Key Largo and the scheduled time is 11 hours 50 minutes. With passengers in my car there is no way another alternative competes with my personal vehicle regarding cost.

Right now we are enjoying cheap oil again, prices are less than $50/barrel and gasoline has fallen to its lowest price in since President Obama took office in 2009. However, there is no way this low oil price can continue. Most people do not understand Peak Oil, or laugh it off as a doom and gloom theory. However, the “Peak” in the U.S. occurred in 1972. Peak oil theory is not about there being no oil as there will always be oil Instead, Peak is about the marginal cost to extract each subsequent barrel of oil costing more than the prior barrel. Think of this like working out and having to do pull ups. The first one is easy and takes no effort, the second is harder, followed by the third, fourth, etc. Some people can do ten or twelve pull-ups but the amount of effort to do so is immense. Getting oil out of the ground is the same.

The movie, “There Will be Blood” illustrates this well. Over 130 years ago oil pooled upon the top soil in Pennsylvania. It was easy to retrieve, take a bucket and scoop it up. By the 1920s it was necessary to dig a well, more expensive (harder like the 2^nd and 3^rd pullups) than the first barrel. In the 1980s discoveries of oil on the North Sea helped the U.K. recover economically but at great expense. Whereas in the late 19^th century a farmer with no materials could fill a barrel of oil in a day with a shovel and a bucket by the end of the 20^th century it took nearly a billion dollars to successfully drill a hole in the ground under thousands of feet of water.

My 298 miles was traveled quickly, far faster than in other locales or in days gone by. I estimate I spent about nine hours traveling 298 miles this week. If I lived in Manhattan the same 298 miles could have taken nearly 30 hours. Sixty years ago to travel 298 miles would have taken twelve to fifteen hours. Of course, by car just 100 years ago such a journey as unheard of. Currently I am reading James Howard Kunstler, “A History of the Future,” an excellent prose depicting a post economic collapse in the future. Twentieth century Americans find themselves living again like frontiersmen without electricity or automobiles. Thus, all channels of trade have collapsed and the horse and mule have again become the key method of transportation. In some instances river boats are used to transport goods on the Great Lakes.

We are spoiled to know we can jump in a car and be 298 miles down range in just six hours. The same trip, Daytona Beach to Key Largo or Macon, Georgia in the late 19^th century would have taken two or three days, if not longer. I often contemplate a trip to my cabin, in North Georgia, via bicycle. I figure four to five days to travel the 500 miles, weather permitting of course. In my car, even the weather does not slow me down.

And of course, luxury comes into play. I drive a nice, air conditioned car with power windows, leather seats and connected to the world via an incredible stereo. Why would I choose to use public transportation and subject myself to uncomfortable influences from others? Of course, this personal luxury only works when fuel is inexpensive. But again, even as a child, our 1969 Ford Galaxy had vinyl seats, no air conditioning and a leaf-spring system unchanged from the days of the wagon that took men west in the 19^th century. One hundred years ago my car would have been more luxurious than any coach manufacturer built at the time, and yet it is mass made.

Next week I may drive farther. 298 miles was nothing unique other than an observation and a moment to gain perspective that our lives are amazing in 2015 I thought I would have a flying car by now, but there is nothing wrong with cost effectively quickly, and luxuriously traveling 298 miles.

Success is NOT Debt

How do you measure success? I believe Americans judge one’s success by the size of their mortgage or house. I want us to break the paradigms of societal norms and judge success by freedom. Imagine being debt free. If not debt free then without being a slave to debt by having a minimal amount that allows control over spending and the ability to go anywhere.

As little as 100 years ago, when my grandfathers were children it was not expected to own a house. Homes were required for farmers, but many people were transient laborers. For them a bed roll and a horse had more practicality than “bricks and sticks” planted in a single locale. Prior to World War II Americans were far more agrarian and lived on larger lots to homestead. Cities were dense in population and apartments ruled the day. My great grandmother ran a boarding house for coal miners. Boarding houses are now lost to another time.

Immediately following World War II came the invention of “suburbia”. Starting in Levittown, New York anyone could buy the new American dream – a house. I refer to these early, 1,000 square foot structures as apartment with thick walls: grass. Denser than rural areas, but more spacious, a new living arrangement was sold to the American people. Fueled by a rapid shift in post war production to automobiles the time required to travel distances were shortened significantly. Families could escape urban lifestyle and commuter to work.

It was in the 1950 we began training future generations to believe happiness was measured by their subdivision, brick facade, and picket fence. Along the way our parents stole freedom from us. We could only be judged successful when we had a job, married, and bought a house. Not buying a house, and quietly enslaving ourselves to 30 years of payments three times the amount of the original principal, meant we were failures. Once purchased a cycle of accumulation was required; consumerism built through the fifties and sixties by a never ending flow of cheap, meaningless merchandise from countries never heard of.

The 1990s brought us “McMansions” – homes of epic proportion. With 4 and 5 bedrooms, game rooms, media rooms and excessively large bathrooms accelerated by easy money financing anyone could look like a Vanderbilt. Again, judgment of failure fell upon those failing to keep up with the Jones’. Furthermore, Americans found need for storage units to keep all of their stuff: the trinkets bought at stores like Garden Ridge and Pier 1. My personal opinion, two stores that supply absolutely nothing anyone needs, but distribute trinkets made through near forced labor.

In 2008 financial mayhem fell across our country and housing sales stopped. To this day the National Association of Realtors reports we have bottomed out and housing is recovering. Fortunately, data exposes lies and their story has yet to come true. In February 2013, five years into the Great Recession, housing sales totaled 131,000 for the entire month when backing out investor and foreclosure sales. It is again now I ask again, “does debt or a mortgage determine one’s success?” Of course, success is personal. Judged by others though it continues as an expectation; we must own homes to meet society’s norms. My wife and I are pushing back.

We recently moved to Florida to be near my kids after being forced away in 2009. We had planned to buy a house until we started looking. It was appalling what our money would buy: shoddy construction for $300k, homes ten feet from the neighbor’s for $275k, and a piece of dirt for $70k, or an effective $280k per acre. Why, because the Fed’s $85billion per month quantitative easing feeds a desire for cheap money. Lastly, what if something changes? In other words job opportunities, job loss, society degradation, illness, or any other reason. Why would we want to be anchored to 5,000 square feet of Volusia County Florida?

So how do we gain freedom? Break the mortgage race: if debt is required don’t commit to dirt. I’ve seen too many people pass opportunities during the Great Recession because they were connected to a house, not a “home” with their family. A house is just the container, a home is the programming delivered inside. Thus, a compromise to take our home where we want to go can bring the best situation. For now LeeAnn and I are foregoing bricks and sticks containers for one with mobility. We will see in six months how it feels and whether we moved far. Regardless, knowing we can brings peace.

March 24, 2013 by admin Capitalism Depression Great Recession sheep

College Alternatives (10/27/2012)

One of my favorite bloggers is James Altucher. He constantly harps on the lack of value currently presented by higher education. Sadly, many people miss what I believe is his key point: education debt is stupid unless you can pay it back. In our current society there is a mentality that you must have a degree to succeed in life and there are no other alternatives. I do not think this is true. More important, if a degree is sought and debt is incurred there should be a return on investment.

An example of a bad decision is a liberal arts major taking on $100k in debt a private school when the same education could be had at a public institution, in-state, for a fraction of the cost. Similarly, anyone attending a for-profit corporate university should seriously question the process. These schools exist only because the federal government has insured the repayment of their tuition fees and they feed on chuckleheads willing to get a shoddy degree with no understanding of the repayment process. If the schools themselves had to collect debt they would readily go out of business. If the students understood how bad these institutions are they would go out of business.

Considering the above I recently shared a conversation with my friend Hal Rice about college alternatives. We both have a plethora of children who will seek education. I have no plans, and believe no parent should have plans, to fund the education of my children. I am a believer in self-sufficiency and struggle to drive desire and appreciation. In our conversation I said the career advice I would give to my children is as follows (counting down) for the top 10 best jobs.

Before reading there are a few key points worth mentioning:

– Unless you are a Kennedy, no one gives a shit where you went to college when getting a job. They just want to see a degree

– Unless you went to an Ivy League school, again, no one gives a shit where you went to college

– If you are a professional (lawyer, doctor, engineer, etc) and have a license to practice then no one gives a shit where you went to college

– You should never take on any more debt than the one-half average starting salary of one year’s wages. You are a dumbass if you do

– Liberal Arts degrees are useless unless you want to be a teacher. Thus, if you spend more than $15k to get a liberal arts degree you are a chucklehead

– There is nothing wrong with a trade profession: carpentry, auto repair, air conditioning, etc. The key is to learn a skill the COULD be translated to other industries

– Most important, live life and focus on happiness

(10) Military career. As an NCO it is possible to find a job function to ultimately translate to private industry. Electronics training, aircraft repair, or aircraft approach systems come to my mind. After 25 years retirement will supplement a civilian career with benefits for life.

(9) Lawyer. Pick a fourth tier law school and pass the bar. Focus on a district attorney job first to get some experience and then go to work in a small town in a small practice. Connect with local CPAs and financial planners to do Wills and Trusts. Get to know the real estate people and manage property transactions. With some divorce and drunk driving clients and charging a reasonable rate this is a well-respected and affordable career.

(8) Computer Programmer. Tough competition from abroad for this career but high incomes provide an excellent return. Still in demand though but the challenge is to keep up with changing technology. Expertise in a particular industry can provide a career for life.

(7) Aircraft Repair. Tough but doable and not a bad life. Setup shop at the right airport and keep your license current you can have a career. This can be in general aviation or take someone to the airlines. Remember, the airplane does not fly if maintenance is not completed.

(6) Air Conditioning Repair. In the south (Florida, Texas, Arizona) this one is hard to beat. If it’s 100F outside people want their A/C fixed and you have them. A skilled person with some business savvy and customer service attention can build a nice local business.

(5) Pastor. OK, here is a special job and one that won’t make you rich, unless you are a televangelist. Everyone loves you. Generally you have benefits and a decent salary. You won’t be rich and have to work weekends. But, if you can write and like people this is a great career.

(4) Local Insurance Agent. Specifically, State Farm or Farm Bureau. Everyone in town loves this guy and he knows everyone. Join Kiwanis, Rotary, church, and knock on doors. Insurance is the gift that keeps giving and giving. If you sell a life policy there are residuals. Sell property and you get a small piece annually. It is hard to beat this job. No degree needed….

(3) Optometrist. Again, does insurance matter with these guys – no. Have you spent $500 on eye glass frames? If your glasses break are you going to wait until you have money to replace them? No, you have to see. Follow the orthodontist education route below.

(2)Veterinarian. My vet doesn’t take insurance, does yours? I dropped $200 on my “free cat” last week because he is the family pet. Follow the same path to education success for an Orthodontist.

(1) Orthodontist. I am now paying for braces and these guys are brutal. $5000 per mouth, no matter what. There is no negotiation, they are immune from insurance, they setup in any town in America, and appear to be recession proof. A public school will provide the basis to get into dental school and then go off-shore. Get a cheap education, come back for residency and get your license.

October 27, 2012 by admin Depression Economic Development preparedness sheep

Out of Sync

Annually I experience the same odd weekend in late January or early February void of understanding the fascination of watching steroidal, beast-like millionaires engage in gladiator activities on a Sunday evening. I think my concern would wash away if the obsessed fans were willing to move from the couch and do more than head to Wal-Mart to purchase corn-syrup enriched foods to add to their excessively high caloric intake. For days beforehand morning and evening news programs beam critical messages to the masses about the must-watch game, the cannot wait to be seen commercials, and the over-hyped halftime show. Unable to afford it, but still willing, consumers will purchase new televisions to achieve bragging rights among their friends. Grocery stores peddle mountains of soda and chips at the gateways to their stores and decorate like another holiday has come. On game day over zealous fans will don tribal colors to cheer for their millionaires and some will paint their skin or even forever mark themselves with tattoos. Hilariously, the word “we” will be used more than ever to claim membership on a team although no fan would be allowed near the celebrity players.

With 45.8 million Americans on food stamps it is likely the SNAP card will purchase soda and chips to celebrate the day. For an afternoon the unemployed, those facing foreclosure, and many worried about job security will disregard the true American concerns instead asserting this ritual game as more important. Sadly, these same hurting neighbors will know more about the players, their names, hometowns, and meaningless statistics than they do members of congress, their state legislature, or local elected officials. Ironically, many support the “occupy” movements and fall victim to the populist arguments of today, but fail to realize their own celebration of the ultra-rich further distances the classes. While players unionize to find fairness in the absurd revenue generation, the owners are elevated from the lifestyle of their fans by wealth beyond most imaginations. I wonder how many fans realize a player earns more in one season than most fans will earn in a lifetime?

So, another meaningless game has come and gone and an afternoon of life was given to further reward those our president is suggesting we despise. Of course, many men will take their sons to football practice to teach them the gladiator like throws, and tackles to hopefully make superstars of them, or more importantly demonstrate their masculinity to their tribal friends. The reward of the annual ritual of millionaire game playing is the small boost to the economy and distraction from woe, but the tragedy is the blind following of the masses being entertained like the citizens of Rome as the empire faces collapse.

February 5, 2012 by admin Controversy Depression General Rant

Pragmatic

Pragmatic (01/04/2012)

Taking my son to school recently I was listening to an interview on NPR with a spokesperson from Merriam-Webster dictionary. I have always loved the dictionary and can remember scouring the unabridged version when I was in school, searching for words I needed to learn and finding words of which I had never heard. Today, I never pick up a printed dictionary and instead relay on a digital search. Companies like Merriam-Webster benefit because in the digital world the company captures data about users, like the most common search. For 2011 Merriam-Webster reported the most searched word is “pragmatic.” Coincidentally, in conversation the day before the NPR piece I was commenting “I’m a doom and gloomer” when it comes to the economy, currencies, resources, or general outlook. My friend Katie quickly corrected me and said, “I don’t think you’re a doom and gloomer; your pragmatic.”

Like many of us looking for the meaning of the word pragmatic I cannot say I gave much thought to it before our economic downturn several years ago. In September 2007, I lost my job and found myself selling unneeded items, downsizing through multiple garage sales, and finally having to leave my friends and children in New Smynra Beach, Florida. I started reading, learning, and understanding government, money, commodities, food chains, and even media interpretation of events. Ultimately, this led to my opportunity to write weekly newspaper columns in several papers and publishing my book, Clearly Ambiguous.

Encouraged by personal change I started identifying trends and taking an umpire-like view of the world, “calling it like it is.” Specifically I remember a meeting with a group of realtors in spring 2008, part of a leads group I had formed, and the realtors commenting the housing market would return by the end of the year. I challenged their thoughts, stating it would be five to ten years before real estate made any return to the prior levels. Challenged, I stood my ground sharing statistics, facts, and observations. Recent data by the National Association of Realtors has reiterated the markets have been worse than reported and instead consistent with my assertions.

Each week I work hard to share events whether identifying infringements on our liberties, disputing economic optimism, or calling out the idiocy of our leaders’ decision making. My friend has accused me of being negative, another of living on the mountain too long and become radical. I think Katie got it right, I am “pragmatic.” prag•mat•ic (adj \prag-ˈma-tik\) 1: archaic a (1): BUSY (2): OFFICIOUS b: OPINIONATED. 2: relating to matters of fact or practical affairs often to the exclusion of intellectual or artistic matters : practical as opposed to idealistic.

January 4, 2012 by admin Depression Great Recession preparedness

1984, Y2K, 2012…(12/28/2011)

It started last week when I saw my first article referencing a countdown to the winter solstice of 2012 when the Mayan calendar predicts the world will end. I think this is silliness and would be the same as a future archaeologist mining a 21st century landfill and finding a “Snap-On” tools calendar ending 12/31/2011. Speculative archaeologists make conclusions based on limited data and future generations could infer we worshipped scantily clad women and predicted our termination at the end of this year.

Cultures have always focused on end-of-time events. I believe a fascination with the opportunity to have a genesis of life provides hope by focusing on doomsday dates . Whether fueled by Nostradamus, lunatics like Harold Camping, a novel written by George Orwell, or the errors of 1960’s computer programmers, Hollywood, the media, and internet pundits focus on predictions to build their own following and create panic. Speculation from movies like The Road, Armageddon, or 2012 feed the appetite of people seeing hope through termination of today’s woes and a clean start in a new world.

Predictions of an Orwellian society did not come true in 1984. However, a slow incremental change has occurred and continues to take us closer to that vision nearly every day. Slowly liberties and freedoms are eroding to government sponsored surveillance and restricted speech, travel, and freedoms. Looking back to 1999 we know airplanes did not fall from the sky or satellites crash to earth, and traffic lights and computers continued to operate. However, more than any prophetic event facing our world the hype around Y2K contained a level of validity. Personally, as a software-company owner at the time, I benefitted from failures of my competitors to update products for the year 2000 and conclude a level of failure was avoided through preparation.

In 2012 disasters are looming on the horizon which may create the feel of a societal collapse and end life as we know it. At the end of 2011 when we feel the worst of the financial crisis is behind us the world governments have used their ammunition to save the economies but the battle must continue. With no way left to fight Europe will face its biggest financial challenge and could ultimately collapse upon itself. Although China has expanded rapidly growth will halt and credit will freeze due to an American and European consumer hunkered down awaiting the end of the world where iPhones and shopping malls will no longer be important. Western nations will fight to recover outsourced industries, realizing globalism created a Roman Empire like gluttonous lifestyle and they must save themselves through isolationism, thus shutting down third-world development and freezing economic growth.

I predict the world will not end December 21, 2012. However, our current malaise will continue to exacerbate and make many wish an epic calamity would cleanse our past mistakes. Careful prudence and pragmatism will guide the successful whereas hardship will enslave many of our friends and neighbors unwilling to change old habits. Ultimately we will look back laughingly at the hyped prophecy of 2012 as we do past predictions. Next up, Hollywood can focus on the impending collision of the Apophis Asteroid on April 13, 2036. Happy New Year!

December 28, 2011 by admin Depression Great Recession Mainstream Media

Small Town Newspaper (11/16/2011)

Imagine a world where no newspaper exists. Very soon we may live in such a time. Most people treasure newspapers as milestones of current events. For example, in my possession I have framed front page issues of The Chicago Tribune from November 23 and 24, 1963 detailing Kennedy and Oswald’s assassinations. History books show pictures of Truman holding The Chicago Tribune on November 3, 1948 announcing his defeat to Dewey.

Since the printing press was invented by Gutenberg around 1440, people have used shared printing to record history and news and this the newspaper has been the most popular daily diary of our world. Today, historians scour pages of black and white text to create the synopsis that becomes our history books. However these summaries are swayed by opinion and filter critical details.

The average person typically keeps newspapers clippings; I have copies of my high school athletic feats, graduation announcement and other personal milestones. Most of us save birth, death and wedding announcements. In each of these cases without a local newspaper there would be no record. As I paged through last week’s paper I read about school children, Council meetings, local sports, and crime. Arguably information is captured digitally via the Web and television, but only the small town newspaper remains accessible to everyone.

A March 22, 2009 Time magazine article reported on a Pew Media analysis focusing on the question, “what happens when a town loses its newspaper?” For small towns the consensus seems to be one of indifference other than the loss of primary news sources via the “ecosystem” of local journalism feeding other outlets because only a small town newspaper provides the depth and diversity of local news. Unfortunately, newspapers are closing at an amazing rate, hundreds per year from major cities to the smallest towns. The brick and mortar business model is giving way to a low-cost digital media that many assert will ultimately replace print.

As you page through this week’s paper take an extra moment to scrutinize each page, looking for particulars normally passed. For instance, read the crime blotter and note the detail forever saved to the historical record. Around the local section imagine looking back 50 years from now through an archive at the photos and current events of the day. While reading the editorial page’s letters and opinions picture future school children doing research on “The Great Recession” and compiling future history books from the non-digital account of today’s woe.

I argue newspapers will always have a place in our world and remain the only reliable method to record history and present opinion. Support for our papers must start via circulation and supporting the advertisers. Patronize the businesses you see in print and let them know it was printed media dollars that brought you to their establishment. Let your editor know how columns impact you and take every opportunity available to contribute editorial content.

November 26, 2011 by admin Depression Economic Development Great Recession Mainstream Media

Good Job Mr. President.

Good Job Mr. President (10/26/2011)
President Obama surprised the press, Americans, and in one case, the world, with two major announcements in the last week. I give him kudos for the leadership he exhibited and the specificity of what he put forth. Unlike past political grandstanding, the announcements to withdraw troops and help homeowners with mortgage renegotiation were made without politicking and driven by what was best for others, not his political future. I believe if he can continue to be effective like this his poll numbers will rise and re-election may be possible.

The announcement Monday to help homeowners unable to finance surprised everyone as the President made his way around Las Vegas. Initial reports showed a walk down a typical suburban street with expectations minimized due to the campaign-like presentation. However, by executive order the president bypassed congress and the new rules will take effect. On the surface they appear positive – underwater homeowners who are current on their mortgage may refinance. Underlying this is the risk associated with these loans has been transferred from the homeowner and bank to the taxpayer. But, where the homeowner remains, makes payments, and there is no default I consider this a win for all three parties.

On Thursday President Obama announced all U.S. troops would leave Iraq by year-end, ending the most politically questioned war ever. With this decision a campaign promise was filled. Most Americans tuned out to this war long ago and with more than one trillion dollars spent overseas the real question is “why?” Long ago U.S. presidents learned meddling in Middle-East affairs comes at great expense, both political and through actual blood-shed. This decision is one of President Obama’s highest achievements. It must be foot-noted though, the decision was less a choice by President Obama but more than implementation of a consequence set forth by President Bush and Prime Minister Nouri al-Maliki in December 2008 as part of the Strategic Framework Agreement.

I have criticized the President many times over the last nearly three years for “missed opportunities,” leadership opportunities that were easy to implement but overshadowed by politics. When working for the good of the people and with less personal interest all politicians succeed and survive. The decisions made this week may have unintended consequences which only history will reflect, but their intent and immediate impact is important. Good job Mr. President, you deserve our appreciation this week.

November 4, 2011 by admin Big Government Depression Great Recession Obama

All Lots $79,900

All Lots $79,900 (10/5/2011)

Driving to Gainesville (GA) one morning last week I passed a partially developed neighborhood with an enormous sign advertising, “All Lots $79,900 – Financing Available.” I laughed as I looked at the subdivision: empty lots next to “McMansions” displaying overgrown weeds, and electrical boxes and sewer pipes growing out of the ground like trees. The eyesore of the undeveloped properties is obvious and a developer’s dream is awash in a failed economy.

During the boom I was always troubled by such subdivisions; worthless land with infrastructure added and lots sold like South Florida swampland. Exorbitant prices were supported by the banking Ponzi scheme. How come no one every asked why a piece of dirt was nearly $350,000 per acre I wondered? Farmland returns value and is the reason people homesteaded. However since the first post-WWII subdivisions in Levitown Americans have succumbed to a delusion of home ownership as a measure of success.

Imagery fuels this desire as Hollywood’s settings range from Beverly Hills and Orange County to Chicago’s North Lakeside Drive or beachfront on any shoreline. The middle class believes homes should be large and spacious when the affordable reality is quite opposite. Maybe the “Real Housewives…” should be set in a Toll Brothers or KB Homes three bedroom house in Orange County, Florida to generate a realistic picture of middle class life. In that show Mom and Dad would both work 50 hours per week and good times are replaced with conversations of budgets and staying afloat.

The media continues to find false hope week after week of real estate market bottoms or economic turnaround. Housing starts are the lowest in recorded history, and loans to purchase a home are unattainable. The biggest criminals have been exonerated by “too big to fail” and continue to profit, and taxpayers now hold one-third of foreclosed properties. Instead of reporting on “Obamavilles” and digital soup lines of 45 million food stamp recipients a National Association of Realtors monthly press release reporting “pricing bottom reached” is promoted as gospel to only be contradicted the following month.

The dreams remain alive for a life now gone; large houses, jet skis, and oversized trucks, but signs for $79,900 lots still fly. As businesses shutter, mayhem by youthful mobs continues, prices rise and wages stagnant I hope reality will set in. Across the country there are families living the dream in brand new, overpriced homes looking at the overgrown remnants of lost subdivisions and lost dreams. Someday soon the sign will promote the real value, “All Lots – Worthless.”

October 21, 2011 by admin Capitalism Depression Economic Development Great Recession

Things you don’t know

It’s easy to watch the news and feel the economy is improving. Comically the performance of the Dow Jones is blasted at us each evening as the key indicator of economic success in America. It becomes more ironic when one thinks of Larry Kudlow shouting accolades of “Green Shoots” across the CNBC airwaves, but our neighbors are losing their jobs and homes. The Obama administration’s economic success is measured by the Dow, unemployment, and inflation. The numbers are reported as better than during the recession of the 1980s and especially better than the Great Depression. However, this is far from the truth.

Every evening the swings in the Dow are blasted across the airwaves as the measure of success of our country. However, the Dow has changed so dramatically no one should pay any attention to these numbers. The Dow is an index of 30 companies, originally started in 1896. In 1896 there were twelve companies in the Dow and only one remains existence today, General Electric. Since 1896 the “components,” or 30 companies composing the index, have changed 48 times. Thus, a more technology weighted or health services weighted Dow can look nothing like the Dow of bygone years. When one adds inflation, as the Dow is unadjusted, the numbers become completely meaningless.

The unemployment numbers are currently 9.1% and considered the holy grail of whether we are better off than the Great Depression. Most people don’t realize the methods of calculating the unemployment rate have changed. The most significant change came in 1994 when those out of work for more than a year were eliminated from the numbers, essentially reducing the count by 5 million and in 2003 the statistical models were changed. Using old methods brings the current U-6 rate to 23%, in line with the numbers of the 1930’s.

The consumer price index (CPI) is the measure of inflation and it too has changed. The market basket of goods is to measure pricing averages as this index impacts policy and more importantly government dole like Social Security and Medicaid. Alan Greenspan argued the historic methods were invalid because, for example, if the price of a steak increased then consumers would substitute with hamburger. A somewhat valid argument until one considers rent, heating oil, and gasoline where there are no substitutions. Changes were made by Carter, Reagan, and Clinton to ensure inflation was not “overstated.” Housing is indexed to “rent equivalents” and energy has been eliminated.

In essence, we are not comparing apples and apples to look at today versus yesterday. “There are three kinds of lies: lies, damned lies and statistics.” – Author Unknown

August 20, 2011 by admin Capitalism Depression Economic Development Great Recession