Sunday, November 28, 2010

Is the Recession Over, or is Extend and Pretend More Pervasive?

A hedge fund manager and I had a flurry of e-mails over the weekend, prompted by various “The recession is over” declarations, particularly one lauding Timothy Geithner’s skills as a forecaster. I think our shared view is that to call this recession over is tantamount to calling an operation successful when the patient is tethered to an oxygen tank and needs 24 hour nursing care. In other words, the designation may be technically correct, but also shows how low the threshold of “success” is considered to be.

One of his comments:

It’s weird, but even here in the heart of our wealthy suburb, and people APPEAR to be as affluent as ever, but scratch beneath the surface, and many are experiencing money strains. It’s like we just continue extend and pretend and then people use the recurrence of bad habits as a sign that Geithner was right. It’s nauseating. And somehow 10% unemployment doesn’t matter any more!!???

I also know of cases exactly like the situation he alludes to. One, a successful entrepreneur, with a seven figure net worth not all that long ago, prudenty diversified and bought some small local ventures as well as a second home. One of his ventures was hit with unforeseeable bad luck; one of his homes turned out to have mold; and his business is such that he has to invest a lot with the expectation (or one might say hope) of getting a big payoff. On paper, he did nothing wrong, he’s not a big spender (his expenses were moderate relative to his income and net worth, and his leverage level would have been deemed cautious in 2007) but adverse developments plus a change in the economy now has him with a negative net worth. He can reorient his business to a steadier cash flow mode, but that makes it less likely that he will be able to dig his way out of the hole he is now in.

For the most part, this sorta-recovery has left the lower income strata still struggling, but even the better-offs may not be doing well, just less badly. What do you see? Do you sense strain behind this talk of improvement, or do you see it as solid?

Topics: Guest Post

Email This Post Email This Post Posted by Yves Smith at 3:15 am

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56 Comments:

  • NYShooter says:
    November 28, 2010 at 4:01 am

    Well, not to be corny, but I see the economy analogous to a family. If the family has, let’s say, five grown children, and three are doing fine but two are confined to beds and/or wheelchairs, is the “family” doing fine? Answer: of course not, and so, neither is the economy.

    All theses pronouncements as to how the economy is “picking up steam” is simply more Wall Street “rah-rah” “think, and grow rich” sleight of hand. Bong! Analogies just keep pouring out! If twenty houses on a block are valued at 100K each, but one is valued at 1 million, what’s the “average” price of a house on the block? If five people apply for every low pay, no benefits, part-time “job” is it possible for the economy to be improving?

    The answer is always the same, and, unfortunately it’s the new paradigm, it’s improving for a tiny few, and continues to be a point of pain and struggle for most.

    For empirical evidence, exhibit A, my Seal coating business. We do commercial crack filling, seal coating, and striping for hospitals, hotels, shopping centers, schools, and industrial sites like that. We’re quite fortunate in that the service has, for the most part, well positioned, financially strong companies as customers. Critical maintenance is usually performed regardless of the state of the economy. Or so it has been our experience in the many previous years we’ve been in this business. The three aforementioned services we perform usually go as a “package.” But the year 2010, for the first time ever, more companies have chosen to just do crack filling and striping while forgoing the seal coating than the “complete package.” The ratio of “complete package” to individual service has, historically been about 80% to 20%.This year “complete package” fell bellow 50% for the first time ever.

    My non scientific, George Bush “gut feeling” is sending a signal, and it spells o-m-i-n-o-u-s. When well-heeled companies are hoarding their cash regarding expansion, or hiring, that’s one thing. When they’re cutting back on critical infrastructure maintenance, that’s a pretty onerous, and quite scary signal, in my opinion.

  • heavyjetcaptain says:
    November 28, 2010 at 4:21 am

    I have found that people who still have good jobs are more willing to buy into this nonsense that there is a recovery than people who “had” go jobs, but now realize that it is virtually impossible to replace the job they had. It is a matter of perspective.

    I recently had dinner with some friends who still have good jobs and they refer to the “deadbeat” homeowners as if they would never allow themselves to be in that position because they are “responsible” with their finances. All the while I was wondering to myself how long it would take for their perspective to change if they lost their paychecks–probably about the same length of time it would take them to realize that the jobs they had are never coming back.

    • NotTimothyGeithner says:
      November 28, 2010 at 11:46 am

      A lot of those types would still be pricks and the victims of circumstance as opposed to other people in the same boat who are just deadbeats; although its a different matter, I remember a letter to the editor about opposition to uranium mining in a locality near mine. The guy wrote, “I’m not one of those tree hugging recyclers, but my environment is under attack by the mining operation.” The “treehuggers” are still bad because they were against uranium mining until it came to his back yard. Personally, I’m not opposed to the mining (I am to the people doing the mining), but here is a guy who attacked the people trying to help him when they didn’t even know his name. The pricks you mentioned will still be pricks.

  • Psychoanalystus says:
    November 28, 2010 at 5:00 am

    My wife and I went to a ritzy mall on Black Friday. Not to buy anything, but just to see what’s going on. There was nobody there. We’re talking deserted here. Ghost town. No shoppers whatsoever.

    After that we stopped by a Target store to see how the rest of the 95% of earners are fairing. Just as empty. Of the 10 cash registers available, only one was open. And there was nobody in line. I didn’t buy anything from Target either because I don’t like spending good money on the garbage offered by that racket.

    Finally, we went to a Marshalls store. There were a few shoppers in the store, but not many. Perhaps 3 or 4. We bought our daughter a really nice Polo Ralph Lauren winter jacket for $18 and a toy for $10. Both these items were discounted over 80%.

    So I spent $28 this Black Friday… and it seems I was the only one “shopping” on this Black Friday. Nonetheless, I am sure my activity has already been reported on MSM as a “major surge in sales”… LOL

    Oh, I almost forgot — on Monday I plan to buy a pair of heavily discounted Ray-Ban Aviators from ebay, and then add $25 credit to my Skype account. Unquestionably, the MSM will report this as a major surge in Cyber Monday sales…LOL

    Psychoanalystus

    • Jojo says:
      November 28, 2010 at 1:22 pm

      I am sure there are similar examples from around the country. And yet, we do not see pictures form these places on the news. Why not? Because to do so would show a reality that work contrarily to the message that the government and the media want to send.

      How can we relay on the MSM when their business models all require that they do their best to paint a rosy picture, because that will encourage more advertising, which is where the media makes most of their money?

  • Chris says:
    November 28, 2010 at 6:08 am

    Yves, I can attest to a similar situation. Anyone who was invested in real estate is going to have a tough time surviving a few more years of price declines. I just think if the home owners and investors are going to be left shouldering the entire debt burden of the melt down, then we should be able to market to market as well….or get 0 % loans to strengthen our balance sheets.

    http://financialrealityrevisited.blogspot.com/2009/04/mark-to-market-relief-relief-for.html

  • Larry Signor says:
    November 28, 2010 at 8:06 am

    With the proper numbers and methodology, one must acknowledge the end of a current accounts recession. The folks making 25% of the income are seeing expansion.

    Not so for the other 75% our income. Let’s look at asset class. Assets for the majority of Americans consist of small ticket items such as cars, boats, RV’s, furniture, tools, appliances and collectibles. I won’t include home equity because it is not as universally extant or monetizable as it was. These assets have declined in value in tandem with the decline in earning power among the poor/middle class. With 10% unemployment there is no chance that the most commonly held assets will recover, so what is recovery? A balance sheet trick? The economic psychology of most Americans is still mired in recession/depression. Where’s the pony?

  • pierre says:
    November 28, 2010 at 8:19 am

    There is probably a more systematic way to study this, but I just looked up foreclosures in some very affluent neighborhoods on realtytrac. Greenwich ct, Larchmont ny, McLean va, Bethesda md, Ridgewood nj. I was NOT astonished to see how many million dollar homes are bank owned or pre-foreclosure, and how many >$750k, A dozen or so in each enclave.

    I don’t have figures to compare pre-DepressionII, but I would safely say (living in one of these towns) the number would be close to zero.

    The lure of cheap mortgages and heloc’s, maintenance of an high income lifestyle, hits all social stratas. But once you get into the really rich, they aren’t as affected as their debt-to-income (capital gains mostly) is very modest, i.e., they don’t need to borrow money.

    • Jojo says:
      November 28, 2010 at 1:54 pm

      Yes, I just looked up San Francisco (I live a bit south of SF) and was surprised to find that there are nearly 1,500 houses in foreclosure!

      San Francisco, CA Real Estate Market Snapshot
      updated Monday, November 22, 2010

      Listing Type Number Median Price Price Change from Oct

      Homes for Sale 1,513 $755,000 -4.3%

      New Homes 2 $499,900 -20.1%

      Foreclosures 1,495 $569,000 -1.7%

      • Indigenous Centurion says:
        November 29, 2010 at 9:39 am

        ”
        mold; and his business is such that he has to invest a lot with the expectation (or one might say hope) of getting a big payoff.
        ”

        Reminds me of a retired state department courier turned real estate appraiser who would ask me to look at molding buildings he was trying to unload. Points to the fact that our overbuilt housing sector is at least young thus mold free. Was our mind-set loosing entropy? Loosing the entropy of due diligence? Have we recently regained lot of due diligence entropy? I think we are now stronger in that balance sheet. What is the cycle for that sort of thing? There was 58 years between 1929 and 1987 crash. One investor’s median career time at the helm?

        Has the *sucker list* grown shorter? Well-heeled-sucker-list amputated even more?

        No one left to be had?

        Back to basics
        !

  • wes mantooth says:
    November 28, 2010 at 8:39 am

    I live in a suburb of Raleigh NC. In March of 2009 I used Yahoo real estate to look up foreclosures in my zip code (27603). It came back with 105 including some in my neighborhood. It’s gone up steadily ever since. I just checked it again yesterday and it’s now at 155. Maybe that’s reason for QE2. The garbage on the banks balance sheets became more putrid.

  • leroguetradeur says:
    November 28, 2010 at 8:42 am

    Puzzling remark in one of the links about lower new car prices being a cross subsidy from rich to poor. There is after all a spare parts aftermarket? Even if the manufacturer marks up his spare parts prices, you rarely have to buy manufacturer branded parts.

    How do I know? I drive used cars, always have. Until they are no longer rationally repairable. Cheap and serviceable if you pick them right.

  • Terry says:
    November 28, 2010 at 9:23 am

    Well, Barry Ritholz and you, sitting in the same country, seem to be living in different universes. See

    http://www.ritholtz.com/blog/2010/11/waiting-for-the-end-of-the-world/

    Actually, I’m more with you. My argument is the economy isn’t in “recovery” until everyone (well, almost everyone) is participating.

    Right now, only a woeful few are recovering, and the economic distortions are getting worse.

  • Dikaios Logos says:
    November 28, 2010 at 9:49 am

    I live in one of those affluent suburbs (it may have been mentioned or alluded to in this post and its comments…) right around the corner from one of the biggest fish in PE. It’s weird, everyone seems to believe that what is real is what the hear in the media: that the economy is picking up. But these very same people will talk with great sincerity about the fragile situations of those they actually know, included themselves. I think this might be one of those cases where a lie has been repeated so often as to become truth. Then again, this same area still has lots of new exotic cars showing up on the streets: our local Ferrari, Aston, Maserati, Lamborghini, etc. dealers seem to be doing just fine.

  • Neil D says:
    November 28, 2010 at 10:01 am

    Those who have jobs – and believe it or not we do exist – are mostly doing just fine. The company I work for is even hiring.

  • Eric says:
    November 28, 2010 at 10:02 am

    With unemployment at the level of today it is safe to say that economic activity is not adequate for the needs of society. If you agree with that, then distinguishing between a technical recession and whatever the measures would say about our economy today is not an important exercise. Jobs are needed desperately.

  • John L says:
    November 28, 2010 at 10:06 am

    I too live in a Raleigh suburb, and when I go walk around the neighborhood the number of homes for sale or just sitting empty has been steadily increasing. One of my neighbors has bragged that he hasn’t paid a mortgage in over a year; another filed for bankruptcy but still lives in his house. My wife and I have downsized our expenses and eliminated most of our debt thanks to a sizable inheritance last year, but if I lost my state job we’d be in the same boat as everyone else.

  • karen1p says:
    November 28, 2010 at 10:19 am

    I just found work in the building industry last Feb. The forecast is dire indeed. My manager is freaking out about numbers, all the employees have a bad attitude due to a pay freeze for the last three years. The margins are collapsing as competition is doing it’s level best to stay afloat. And we just had a layoff last month. I am crossing my fingers that I don’t get shown the door until Feb, as then I would be re-eligible for unemployment.

    There is someone in accounting whose husband hasn’t worked in two years, they are trying for a modification….even when I’m telling her that a loan mod is the fast track to foreclosure. Another sales rep told me her mortgage payment just went up by a couple hundred and she doesn’t know where that is going to come from, esp with the wage freeze.

    So, NO, the economy is in the tanker.

  • Mickey Marzick in Akron, Ohio says:
    November 28, 2010 at 10:48 am

    Just survived another RIF – reduction in force – where I work. This time around a number of middle level managers were cashiered in tandem with lower ranking employees. It’s difficult to say whether this is a symptom of the “recovery” or just the “new normal” where periodic bloodletting is the SNOP.

    Companies have concluded that the “boom” is over and expanding productive capacity is pointless as demand is likely to be flat for the foreseeable future. Hence, cost cutting, slashing “excess capacity”, and price increases in some cases are the means with which to maintain profit margins. Call it rationalization if you will, but it’s not likely that economic recovery will result in any reduction of unemployment to pre-recessionary levels [5% - Dec 2007] as companies enjoy the productivity gains made from rationalization without any pressure for wage increases, etc., from below. Simply put, LABOR in the aggregate, has no bargaining power – not with unemployment stuck at 10%.

    Reduction of unemployment to prerecessionary levels [5% - Dec 2007] would seem to be the minimum benchmark for any serious discussion of an economic recovery wouldn’t it? At least for the average American? Even then, there is a disturbing upward trend in official unemployment figures over the course of the past 40 years in which unemployment remains stuck at a higher rate after each recession has ended known as the “ratchet effect” or more recently as “jobless recovery”. In Dec of 1968, it stood at 3.4%. Ever since it has trended upwards. And if one considers the revisions to definitions of unemployment and methodologies used to calculate it since then, the real rate of unemployment may fall somewhere between the official rate of approx 10% and U6 [approx 17%] in late Nov 2010.

    One things for certain though, it’s difficult to see how one can argue that this latest “recession” has ended with one out of ten Americans still out of work. And while unemployment may be a lagging indicator, when coupled with evidence that corporate tills are flush with cash sitting on the sidelines, this is further evidence that investment has nowhere to go – that the recession is not over. Why is the trillion dollar question? [Have to adjust for inflation.]

    “Uncertainty” has become the most recent spin to explain such profit taking and hoarding, blaming the government – Obama Administration – for this situation. Yet many a large corporation factors such “uncertainty” into their strategic thinking and forecasting based on worst case scenarios. And the incumbent administration is NOT the worst case by any stretch of the imagination. Small business owners might be more affected by such “uncertainty” in their business calculus but they too make decisions based on their assessment of local/regional economic conditions. And it’s the latter that tend to win out. To the extent that housing/construction remains depressed in the latter the prospects for investment and overall economic growth will suffer accordingly not to mention the wave of foreclosures, etc in the pipeline.

    Recent elections would also suggest that their worst fears should be put to rest as the surge to the “left” has been put on hold until 2012. Yet this electoral result itself may signal more uncertainty as partisan gridlock grips the nation until 2012. So we may have at least another two or three years of “recession” before any talk of economic recovery will be taken seriously. Meanwhile…

  • jedwards says:
    November 28, 2010 at 10:49 am

    I live in the heart of Silicon Valley. I’m a “middle-class” family of Silicon Valley, meaning that my wife and I combined make over $250k/year. I can tell you that from how my friends and co-workers are spending, the recession NEVER hit Silicon Valley.

    A former coworker of mine that lives 1 hr outside of SF had been out of work for 2 years, but has instead decided to become a house husband and play video games all day long while taking care of his family. A few people I know are an “fun-employment” where they purposefully stay on unemployment insurance to get the free money. A few of my other friends are planning on quitting their jobs and travelling around the world for a year or so. 2 of my friends have quit their job in the last few months and attempted to start their own startup.

    No one here is on austerity plans. My workplace is filled with iPhones and iPads, and new cars in the parking lots. So many of our friends who are in high tech or finance are looking around for new jobs, and successfully find them, with raises.

    Except for the fact that the poorer areas of Silicon Valley have seen real estate drop by about 50%, I would say that we have remained practically untouched by the Great Recession. It’s mind-boggling, but true.

  • jedwards says:
    November 28, 2010 at 10:49 am

    I live in the heart of Silicon Valley. I’m a “middle-class” family of Silicon Valley, meaning that my wife and I combined make over $250k/year. I can tell you that from how my friends and co-workers are spending, the recession NEVER hit Silicon Valley.

    A former coworker of mine that lives 1 hr outside of SF had been out of work for 2 years, but has instead decided to become a house husband and play video games all day long while taking care of his family. A few people I know are an “fun-employment” where they purposefully stay on unemployment insurance to get the free money. A few of my other friends are planning on quitting their jobs and travelling around the world for a year or so. 2 of my friends have quit their job in the last few months and attempted to start their own startup.

    No one here is on austerity plans. My workplace is filled with iPhones and iPads, and new cars in the parking lots. So many of our friends who are in high tech or finance are looking around for new jobs, and successfully find them, with raises.

    Except for the fact that the poorer areas of Silicon Valley have seen real estate drop by about 50%, I would say that we have remained practically untouched by the Great Recession. It’s mind-boggling, but true.

  • MicahelC says:
    November 28, 2010 at 10:57 am

    Show me an unemployment adjusted GDP measure (if that exists) then I’ll engage in a quality of ‘growth’ debate. The GDP discussions may be relevant to investors, but the current priority is employment outlook.

    Till then, marginal shifts in gdp are just noise. The economy may technically have emerged from the recession, but the unemployed population is still solidly in depression.

  • Blurtman says:
    November 28, 2010 at 10:57 am

    Maybe GDP should be replaced by another metric or combination of metrics. GDP wasn’t an accurate indicator in the recent past when it included the contribution of bogus FIRE products and transactions, and illegitimate RE consumption.

    If one person owned 95% of a country’s wealth, and this person increased consumption by 5%, GDP would go up. So what?

  • Leviathan says:
    November 28, 2010 at 11:08 am

    The analogy I would use is of a terrible earthquake. Some of us were right on the faultline and got nailed; others were a few miles away and were untouched. It was pretty random, as acts of nature usually are.

    Within the “damaged” group there was a wide discrepancy in how people responded. Some recognized that their situation was a total loss and walked away promptly, but most have continued to live in their cracked and broken homes, shoring up what they can and hoping that an aftershock never comes. You can’t always tell from the outside what dangers lurk inside–you need a structural engineer to tell you, but then they might tell you things you don’t want to hear, so you extend and pretend.

    Those who were unscathed no longer feel pity for the victims of the quake. They cared at the time and may have given to a charity, but that was years ago, and really, people need to get over it. How many people really care about what is happening in Haiti? I rest my case.

    Interesting personal anecdote. Our house, in an affluent Chicago suburb, bought at the height of the market and let go a few months ago in a deed-in-lieu, just came on the market at about half what we paid for it (25% less than we owed, and we had put 25% down). Our lender would not give us a principal reduction, though we’d probably have moved heaven and earth to “save” it if they had offered half as large a discount to us as they did to the market.

    Yes, I know they did us a favor. But it is galling that TARP banks took their taxpayer bailouts (in this case BofA), snapped up discounted MBS like ours for pennies on the dollar, and refused to cut legitimate deals with homeowners who have suffered loss of income (around 25% in our case). Then they offload our houses onto a colder than death winter market at significant discounts to move the merchandise!

    I hope a pipe bursts before someone buys the place. I’ll be watching to see what it ultimately goes for.

  • Cedric Regula says:
    November 28, 2010 at 11:16 am

    We get a few hopeful blips in the econ data now and then, but things still aren’t that great from a fixed income investor standpoint living in ZirpWorld.

    I generally don’t participate in the big Black Friday saleathon because I don’t really believe in it and this year was no exception.

    However I did go to WalMart on Saturday and purchased a nice 15 lb turkey for 58 cents a pound. T’Day dinner planned for all of next week!

    Due for an oil change on the car, so that is the Monday spending plan.

    Netflix just raised my monthly bill by a buck. That offsets my entire internet checking account interest.

    I’m doing what I can to support aggregate demand in this sluggish economy, but they sure are making it tough.

  • michael says:
    November 28, 2010 at 12:19 pm

    The following letter is more and more of what I am seeing in the world of the long-term unemployed, which measures in the millions. These are people that the media, the American Idol set and the government are trying to sweep under the carpet. If they don’t pay it any attention, maybe it will go away. The extend and pretend as it relates to unemployment:

    To the unemployed, sick, disabled and poor:

    Hello,

    I’m unemployed over 2 years now, a 99er without any benefits for 3 months. I followed Unemployed Friends almost from its start, never posted until now, but am grateful for my time with you all. I did as asked with calls and emails, etc. I’ve a confession to make to you all. I’m a criminal.

    I’ve obeyed the 10 commandments and all laws except: I’m unemployed and that’s now a crime, I’m poor and that’s a crime, I’m worthless surplus population and that’s a crime, I’m a main street American Citizen born and raised in the USA and that’s now a crime, and I’m euthanizing myself as I write this note — so arrest my corpse. This isn’t a call for help, the deed is done, it’s not what I wanted. Death is my best available option. It’s not just that my bank account is $4, that I’ve not eaten in a week, not because hunger pangs are agonizing (I’m a wimp), not because I live in physical and mental anguish, not because the landlady is banging on the door non-stop and I face eviction, not that Congress and President have sent a strong message they no longer help the unemployed. It’s because I’m a law abiding though worthless, long-term unemployed older man who is surplus population. Had I used my college education to rip people off and steal from the elderly, poor, disabled and main street Americans I would be wearing different shoes now — a petty king. Hard work, honesty, loving kindness, charity and mercy, and becoming unemployed and destitute unable to pay your bills are all considered foolishness and high crimes in America now. Whereas stealing and lying and cheating and being greedy to excess and destroying the fabric of America is rewarded and protected – even making such people petty king and petty queens among us.

    Since the end of 2008, when corporate America began enjoying the resumption of growth, profits have swelled from an annualized pace of $995 billion to the current $1.66 trillion as of the end of September 2010. Over the same period, the number of non-farm jobs counted by the Labor Department has slipped from 13.4 million to 13 million – there is no recovery for the unemployed and main street. We taxpayers have handed trillions of dollars to the same bank and insurance industry that started our economic disaster with its reckless gambling. We bailed out General Motors. We distributed tax-cuts to businesses that were supposed to use this lubrication to expand and hire. For our dollars, we have been rewarded with starvation, homelessness and a plague of fear – a testament to post-national capitalism.

    12 years ago I lost the last of my family. 10 years ago I lost the love of my life, couldn’t even visit him in the hospital because gays have no rights. I fought through and grieved and went on as best I could. 7 years ago I was diagnosed with Diabetes and Stage 2 high blood pressure with various complications including kidney problems, mild heart failure, Diabetic Retinopathy. These conditions are debilitating and painful. I am on over 8 prescribed medications, which is very difficult without insurance and income. But I struggled on and my primary care giver was very pleased with my effort overtime with my A1C at 7. Still these physical disabilities have progressively worsened, and I have had a harder and harder time functioning in basic ways. All the while I give thanks to God because I know there are many more worse off than me – and I tried to help by giving money to charities and smiling at people who looked down and sharing what little I had.

    I am college educated and worked 35 years in management, receiving written references and praise from every boss for whom I worked. Yet, after thousands of resumes, applications, emails, phone calls, and drop ins, I’ve failed to get a job even at McDonalds. I’ve discovered there are 3 strikes against me — most 99ers will understand. Strike 1 — businesses are not hiring long term unemployed — in fact many job ads now underline “the unemployed need not apply.” Strike 2 — I am almost 60 years old. Employers prefer hiring younger workers who demand less and are better pack mules. Strike 3 – for every job opening I’ve applied there are over 300 applicants according to each business who allow a follow up call. With the U3 unemployment holding steady at 9.6% and U6 at 17% for the past 18 months the chances of me or any 99er landing a job is less than winning the Mega Million Jackpot. On top of that even the most conservative economists admit unemployment will not start to fall before 2012 and most predict up to 7 years of this crap.

    I believe the Congress and President have no intention of really aiding the unemployed – due to various political reasons and their total removal from the suffering of most Americans, their cold-hearted, self serving natures. Had they really wanted to help us, they could have used unspent stimulus monies or cut foolish costs like the failed wars or foreign aid, and farm subsidies. The unspent stimulus money alone cold have taken care of ALL unemployed persons for five years or until the unemployment rate reached 7% if Congress and the President really wanted to help us – and not string us all along with a meager safety net that fails every few months. In any case if I were to survive homelessness (would be like winning the mega-millions) and with those 3 strikes against me, in 7 more years I’ll be near 70 with the new retirement age at 70 — now who will hire an old homeless guy out of work for 9 years with just a few years until retirement?

    So, here I am. Long term unemployed, older man, with chronic health problems, now totally broke, hungry, facing eviction. My landlady should really be an advocate for the unemployed – she bangs on my door demanding I take action. A phone call and a “please” are not enough for her – she is angry. She is right to be angry with me, I am unemployed – as apparently everyone is now angry with us unemployed.

    211 and social services cannot help single men. Food banks and other charities are unable to help any more folks – they are overwhelmed with the poor in this nation. So I have the “freedom” to be homeless and destitute and “pursue happiness” in garbage cans and then die – yay for America huh? It’s the end of November and cold. A diabetic homeless older person will experience amputations in the winter months. So I will be raiding garbage cans for food, as my body literally falls apart, a foot here, a finger there. I have experienced and even worked with pain from my diseases – hardship I can face. I just cannot muster the courage to slowly die in agony and humiliation in the gutter.

    I have no family, I have no friends. For the past 2 years I’ve had nobody to talk with as people who knew me react to the “unemployed” label as if it were leprosy and contagious. I am not a bad person, in fact people really like me. But everyone seems to be on a tight budget these days and living in incredible fear. It is hopeless since we all are hearing more and more that we unemployed are to blame for unemployment, that we are just lazy, that we are no good, that we are sinners, that we are druggies, yet we are the victims who suffer and are punished while the robber baron banksters and tycoons become Senators, Congress, Presidents and petty kings. So the only option left for me is merciful self euthanasia.

    It is with a heavy heart that I have set my death in motion, but what I am facing is not living. So off I go, I have made peace with God and placed my burden on Jesus and He forgives me. This nation has become evil to the core, with cold-hearted politicians and tycoons squeezing what little Main Street Americans have left. It is not the America into which I was born – the land of the free and the home of the brave with kind folks who help neighbors – it is now land of the Tycoon-haves and the rest of us have-nots who march into hopelessness and despair.

    Every unemployed person I have met over these past 2 years have been saintly. Sharing what little they have, and being charitable – being kind and patient and supportive. Isn’t it amazing that we Americans who suffer so much, have not taken to the streets in violence, riots or gotten out the guillotines and marched on tycoons and Washington in revolt as would happen in most other nations? But rather we plead with deaf politicians to please help us. We don’t demand huge sums – just 300 bucks a week, barely enough to cover housing for most. Most of all we say, please help us get a job, please allow us dignity.

    I can’t help juxtapose our plight to the tycoons and politicians. They are never satisfied with their enormous wealth, and always want more millions no matter whom it hurts. They STEAL from pension funds, banks, The People and government, and little Wall Street investors. Then rather than face punishment, they become petty kings in this world. They are disloyal to America, unpatriotic, and serve their own foreign UN-American greedy causes and demand more and more and more. I feel that this is not the nation into which I was born. I was born in America, the land of the free and the home of the brave. America, where people give as much as they receive. America, where all people work for the common good, and try to leave a better and more prosperous nation for the next generation. American, where people help their neighbors and show charity and mercy. This new America is alien to me – it is an America of greed and corruption and avarice and mean spirited selfishness and hatred of the common good – it is an America of savage beasts roaring and tearing at the weak, and bullying the humble and peacemakers and poor and those without means to defend themselves. I am not welcome here anymore. I don’t belong here anymore. It’s as if some evil beast controls government, the economy, and our lives now.

    I must go now, my home is someplace else. Goodbye and God bless you all. God bless the unemployed and poor and elderly and disabled. God bless America and the American people except the tycoons and politicians – may God retain the sins of tycoons and politicians and phony preachers and send them to the Devil.

    Mark

  • spigzone says:
    November 28, 2010 at 12:19 pm

    http://www.guardian.co.uk/business/2010/apr/11/peak-oil-production-supply

    … in a Joint Operating Environment report from the US Joint Forces Command … “By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 million barrels per day,”

    I’d say sometime next year Declining Oil meets Rising Demand and ‘extend and pretend’ meets ‘lead pipe and blowtorch’.

  • Ron says:
    November 28, 2010 at 12:52 pm

    jedwards says” I can tell you that from how my friends and co-workers are spending, the recession NEVER hit Silicon Valley.My workplace is filled with iPhones and iPads, and new cars in the parking lots..”

    My how times have changed! Ten years ago Silicon Valley wealth was measured by how your stock options were valued,how big the latest IPO was oversubscribed,paying cash for expensive home in Los Altos Hills or Palo Alto.

    Jedwards remarks points towards an illusion of wealth dominated by $600 iPhones and leasing expensive automobiles as the new version of wealth. Taking risk creating a start up company has now become a stay at home dad playing video games or taking a cruise.
    California including Silicon Valley is experiencing RE deflation rising foreclosures and empty store fronts in once very expensive areas such as downtown Los Altos, Menlo Park and Palo Alto. Calif new home construction industry once the engine of growth is now in reverse. Yet the illusion of wealth is now in fashion the iPhone,leasing expensive European auto’s a Disney lifestyle.

    • jedwards says:
      November 28, 2010 at 1:21 pm

      To further my comment on iPhones and iPads, it really seems like almost everyone here has one of them, especially the new iPhones. These are $400 gadgets so it is the cost of a computer, but everyone has them. Outside of Silicon Valley/California, I rarely see them. It’s a testament to how delusional and unafraid people are of spending money on the latest and greatest. Many people are likely in debt, but the fear of debt is nonexistent here, because jobs for the most part are still available.

      It’s very strange how unafraid people are of the Great Recession here. No one seems to care that CA is broke, that we are borrowing $40 million / day just to pay for unemployment, because it doesn’t seem to filter down to Silicon Valley. It’s very much a bizarro world.

      • the philosopher says:
        November 28, 2010 at 1:58 pm

        Stuff happens – disease, divorce, accidents – in a more or less stationary stochastic fashion. In good times or in good sectors of the economy, when stuff happens the odds are higher that you can land on your feet.

        Right now, stuff is happening to me: the house is being sold short; the pension cut in half. But I count my blessings – I still have a good job and a healthy remaining working life in which to recover. There are just fewer blessings to count in these deflationary times.

      • KareninCA says:
        November 28, 2010 at 6:24 pm

        I live in Silicon Valley too. Although I’m not in the tech world, I know a reasonable number of people in tech. It’s my impression that if you have a tech job, you’re *expected* to have the latest piece of tech junk; it’s not optional. And you’re *expected* to have a shiny, new car. If you don’t, you are not in the game; you are less likely to be kept as an employee. These people may well be acting rationally, in making those purchases.

        I know a fair number of non-tech people who have been laid off here. And some tech people, too. What is really evident is the number of empty storefronts, e.g. on El Camino, in Palo Alto and in Menlo Park.

        During the last tech bust, I noticed that the tech people who couldn’t find anything, left the area. They went back to their home states. That is part of the reason you don’t see suffering “tech” people; the cost of living around here (esp. if you maintain the appearances that are needed for employment) is so high that once you lose your job, you have to leave pretty fast. The non-tech people I know never had such high expenses, so they sort of survive on crappier jobs and stay in the area.

        People used to drop their old (often uncut) Halloween pumpkins at the community garden in Palo Alto where I volunteer. We used to get hundreds of them. This year, about five. and the uncut ones disappeared instantly.

        • jedwards says:
          November 29, 2010 at 1:14 am

          “I live in Silicon Valley too. Although I’m not in the tech world, I know a reasonable number of people in tech. It’s my impression that if you have a tech job, you’re *expected* to have the latest piece of tech junk; it’s not optional. And you’re *expected* to have a shiny, new car. If you don’t, you are not in the game; you are less likely to be kept as an employee. These people may well be acting rationally, in making those purchases.”

          Karen, your impressions are completely wrong, there is no such “expectation”. I’ve been here a long time and it has never been the way you describe. If anything, having an old beat-up car and working in tech is a badge of honor. The former founder of a previous company I worked at, a multi-millionaire, drove a 20 years old beat up Toyota, and wore the same clothes every day. He was treated like a god.

          There are plenty of rich engineers here with a lot of disposable income, and Silicon Valley is definitely filled with a lot of materialism and greed, but to characterize it as an “expectation” that people in tech buy the latest gadgets and buy the latest cars, that would be completely false.

          • KareninCA says:
            November 29, 2010 at 1:27 am

            Oh, I’m well familiar with the anti-snobbery you’re describing (it’s how academics can survive on academic salaries, and even save money). And most of the *real* tech people I know are as you describe. I guess I’d make the distinction between engineer-types and administrative/sales types in the tech world. I was referring to the latter. I *do* think they feel that pressure and expectation.

            But, perhaps you’re right.

            In any case, I just got back from the Menlo Park Safeway, and as usual these days, the loss leaders were gone, or nearly so. That’s new.

  • Maju says:
    November 28, 2010 at 1:13 pm

    What do I see?

    I see a Capitalist class entrenched in their grip of power and their luxury spending (essentially a waste) without any ability to propose a plan for the nations it has ruled for so long.

    And I see a Working class lost in their sudden realization of the loss of a dream that was not really theirs but induced and sustained on false premises, whose highest expression was the credit bubble (but let’s reckon that the bubble did delay the crisis for a decade or more).

    As the Capitalist class has no plan but to resist for as long as possible (and then maybe run away), it is the Working class where the issue really is: how long will it take them to become organized and take over the power, reorganizing the economy on real (not financial) and more egalitarian and democratic parameters?

    It will happen, no doubt about this (Capital has no project anymore) but how long will it take and how exactly will happen? That’s where we are allowed to make choices and take action, choices and actions that may be critical for the immediate and even long term future.

    • hermanas says:
      November 28, 2010 at 2:02 pm

      Isn’t that the problem, our responses have been circumscribed so as to be ineffectual. As president Kennedy said before he was assinated, If you do not allow political resolution you get violent resolution, or something like that.

      • Enkco says:
        November 28, 2010 at 2:19 pm

        “Those who make peaceful revolution impossible will make violent revolution inevitable.”

        John F. Kennedy, In a speech at the White House, 1962

  • Constantnormal says:
    November 28, 2010 at 2:36 pm

    The recession is over, but the recovery is unlikely to arrive before the onset of the next recession.

  • PQS says:
    November 28, 2010 at 3:32 pm

    What do I see from the Pacific NW? Lots of tech money still flowing around. Lots of young people buying toys and gadgets. Otherwise, in my industry, construction, still no movement other than Public Works. And plenty of folks I know have been foreclosed on due to lack of work and lack of money to pay the bills. In my neighborhood, plenty of people still buying this and that, but I don’t go to the malls, so cannot report from there.

    There is talk of The New Normal – 6% UI, lowered standards of living. But nobody I know outside my radical circle asks, How come the Rich SOBs don’t seem to be sacrificing anything? Why is Wall Street posting billions in bonuses? These questions don’t get asked, not even by Tea Partiers, who claim to know everything.

  • Steveb says:
    November 28, 2010 at 3:56 pm

    I used to believe that our economy was closely coupled. So that if a substantial fraction of the people could no longer take out profits on increasing house prices, and they decreased their purchases, that this would couple into the main economy and drive the whole system unstable. I also used to think that increased government expenditures, and bond purchases by the Fed, would not fix the problem because the new money was not flowing to those who were now losing. So I thought the economy was unstable and would continue declining.

    But I am doubting that I was correct. There are certainly lots of stories, some mentioned above, that indicate problems, but the statistics on total sales show a slow but steady increase. Imports are rising again. Sales in some types of restaurants are picking up again. Total employment has stabilized. I am wondering if our economy is less tightly coupled than I had previously thought. So that one fraction of the population can fail, and another fraction continues to go on winning. The winners’ expenditures compensate for the losers’ cut backs, and total expenditures increases slowly.There are countries that operate with a small wealthy class and a large underclass, with a moderate-size middle class. Can we really convert into that type of system without our economy going unstable?

    • Maju says:
      November 28, 2010 at 7:21 pm

      The real issue is if you can do that (going Third World) without massive social unrest and/or mafioso degeneration. I don’t think this is possible (nor desirable) as your working class is educated and used to expect better from life than waiting at the town’s main street to be picked by some landlord to work for him in slave-like conditions, nor used to be executed on the spot if they dissent.

      But in any case I also think that the data you posted are just a tiny most feeble pretense of a recovery, not anything with a solid base.

  • Mike says:
    November 28, 2010 at 8:04 pm

    I work in the environmental management/ chemical safety field for a large governmental organization in Washington DC (100K/yr, 35yo). I commute weekly to see my 3 small children in northern West Virginia, and I live in my parents basement.

    Altogether the recession was pretty weak in the MD suburbs, quite a few homes in foreclosure/ but the overall unemployment rate is low. (The unemployed tend to be younger.) The banks have been gaming the real estate market/ controlling the amount of REO they release/ while there minions in the MSM proclaim the “all is well” signal to encourage a renewal of irrational exuberance. We have fulfilled the ancient Chinese proverb of living in interesting times. (Fitting since everything appears to be made in China these days.) I was recently at a large mall which was not very busy. Alternatively, stores like Traders Joe’s seems to be very busy.

    My employer has been hiring, with absolutely tremendously high number of applicants. (We had over almost two hundred for a 75K environmental protection specialist). I get the sense that with the Republicans taking over, the fat is about to be trimmed off around here.

    Northern West Virginia, western MD (Cumberland) seem to be still in tough times. Homes are dirt cheap.

  • allenby says:
    November 28, 2010 at 9:23 pm

    And then the is Bonddad posting once again on Daily Kos, title: Reports of US Economic Demise Are Greatly Exaggerated

    http://www.dailykos.com/story/2010/11/28/923764/-Reports-of-US-Economic-Demise-Are-Greatly-Exaggerated

    Lots of graphs and data cited. He ends with:

    “Conclusion:

    In conclusion, the zombie bears are great at drawing attention to themselves and appealing to a reading populace conditioned to think the worst. However, they have been wrong on a continuing basis for the last five quarters in their predictions of impending doom. Economic analysis is about looking at data and interpreting data. That means the data will show expansion and contraction at different times. Noticing when that occurs is exceedingly important.”

    Methinks the fellow suffers a deficit of class consciousness. Alas, I’ve no chart to illustrate the point.

  • Ishmael says:
    November 28, 2010 at 9:46 pm

    I work for myself as well as subcontract to one of the second tier CPA firms behind the Big 4. I live in Brentwood in LA where I rent. I perform work for mid to large public companies outside of the S&P 500 and a lot of the midsize public companies seem to be hanging by their fingernails. I see a lot of companies where I believe the executives believe the company is short term and just raping and pillaging in an attempt to get as much money as they can because they know the next position could be a long ways away. There are probably 200 biotechs which will probably go out of business in LA in the next 12 months.

    I also spend a lot of time consulting in Silicon Valley and unlike the previous comments I find it in a world of hurt. In 2003 it was hard to find a 3 star hotel for under $120 a night. Now when I go up there I pay something like $65 for the same room and sometimes get a four star for that. I can be there a month or two and I can tell you restaurants are pretty empty. Lots of empty office buildings and lots of companies gone. By the way, I carry an Iphone only because I saved money dumping a wireless card out of my PC. I have not upgraded to the new version because my old plan allowed me to have unlimited data.

    In general my consulting business sucks. I use to generate enough work to keep 4 or 5 other consultants busy. Now it is enough to keep me 50% busy. I am over 55 and had to retrain myself and make more money trading currencies, commodities and futures than I ever did consulting. It has taken me 10 years to learn this skill and probably only because I have a CPA, as well as indepth finance experience, a strong math background. My advice to everyone is learn a skill to be self sufficient even if it means repairing PC’s.

    There has not been any recovery, the spiral downward has just been slowed and data etc covered up to not show the truth.

  • Bernard says:
    November 28, 2010 at 9:47 pm

    Americans are not educated, they are tested to be socially promoted in schools, not educated. Education stopped years ago. Passivity was incalculated into our society along with the proviso of the American Dream. work hard and you’ll get rich too.

    the Dream has broken into a million pieces. yet Americans still are passive, still think wealth is possible through hard work, and the rest of the BS/lies of the American Dreams are being promulgated in the media.

    when the young and poor and unemployed numbers rise to a “breaking” point, maybe, just maybe some resistance to the pretensions might arise.

    and then there is the Peak Oil issue. those who see the writing on the wall, with Bankster theft, EU theft and all the rest of industrial Western society apparently falling apart, are wondering just what, if anything, would do any good.

    the sense of doom is so pervasive for the most part. except for those where things are going good. Like “what’s the matter with those people,why are they so negative.” the next shoe to drop is what most are awaiting, whatever that turns out to be.

    it is an interesting time, indeed.

  • b. says:
    November 28, 2010 at 9:50 pm

    Call me again when the 7-figure dudes figure out that supporting the UAW and other unwashed is in their own best interest. As long as increasingly smaller fractions of a percent making 7+ figures every year are doing better from one recession year to the next, our children is not learning.

    • Doug Terpstra says:
      November 28, 2010 at 10:04 pm

      Are vampires really capable of enlightened self-interest, animal husbandry, or environmental stewardship? They don’t understand how hard it is to put food on your family.

  • david Peterson says:
    November 28, 2010 at 11:11 pm

    Soon the unemployment benefits will stop for millions
    while the congress gets ready for more tax breaks for rich, the hubris of this age will end someday soon.
    No one seems to really understand the immense danger that is almost sure to play out in the US (think Wiemar 2), the elite think it will just be a few riots or a protest march or two. Oh god ! whats coming down the pike will be bizarre crazy violent mix, you be nostalgic for the riots of the sixties and the thirties, look out as they say its going to be a bumpy ride into the abyss of terrorism and despair.
    Expect a third party demigod not Palin but someone akin
    to Stalin or Hitler except religious. After all this
    greed and waste, people will lose it support anyone will promises revenge and someone will fill the vacuum because the law of political physics never changes.

  • barnaby33 says:
    November 29, 2010 at 12:47 am

    “And somehow 10%” Can we please stop with that particular lie, please? We no more have 10% unemployment than we have a strong dollar policy. Its amazing how much of our shared discourse is built on communal dilutions, oft repeated.

    Scratch the surface and we’re all poorer today than anytime in the recent past. The only people who believe we are actually in recovery are those who are paid to spread the lie and those required to believe it (baby boomers near retirement, this means you.)
    Josh

  • dollared says:
    November 29, 2010 at 1:47 am

    From 2005 to today the four trends that just stagger me are these:

    1. The cost of health care is now simply the gravitational center of the death spiral of the US economy. No company wants employees for this reason alone. For me, it is sinking in: I have children ages 3 and 6, and I will need to have $25,000/year, growing at 8% compounded annually, each year for the next 23 years, just for their healthcare. House? Education? Retirement? Just leave it all in a paper bag on the front steps of WellPoint.
    2. Finding a job used to be: define your level, skill set and industry, then be smart and find your way to the best situation. Now it is 200 applicants for every professional position. Good luck, and remember there’s a youngster from Mumbai with an MIT MBA applying for your job.
    3. In a job, you have to watch out every day. I just got GE’d our of a career position – rise to Director, then a reorg and a bottom 10% ranking, and six months later get your little package and your COBRA papers. So everybody who still has a job is desperately scared – at a company with record profits.
    4. The leverage between employers and employees has tipped over completely. Shut up and do what you’re told. Politics and managing up are absolutely the only thing that matters.

    Think of it this way: your house value is either clearly down or stable (at some fake number). Health care is literally swallowing your college fund and your retirement. So your assets are hollowing out and if your career were a bond, its market value declined 40% over the last three years.

    And the “recovery” is making this all better, exactly how?

  • Steve Roberts says:
    November 29, 2010 at 1:16 pm

    When we have to stop forcing stimulus into the economy to keep it from falling apart, that’s when the recession is truly over. Krugman says the recession is over and then claims it needs $8 trillion in stimulus dollars. The two don’t equate.

  • ep3 says:
    November 29, 2010 at 6:03 pm

    From Michigan:

    I am hearing/seeing A LOT of parents that are in their 60s or older, having to spend the large wealth they built up thru saving and investing, spending that on bailing out children/grandchildren. But this is not bailing out in the sense of stupid spending. I am saying the children are not able to pay all necessary expenses because either their jobs do not pay enough, they suffer a divorce, they lose a job and then new jobs do not have health care and/or they pay less.
    I think the children have this expectation that their standard of living would be higher than their parents; this is not true. So the children are living above their means, all the while choosing to ignore the reality that they can’t afford to live life like mom and dad did; no vacations, no big house, no 12 tv’s. Much of this was maintained with the debt explosion. Now, parents are using their personal savings to continue this.
    To answer your question then, I think we are just starting to see this affect mom and dad. Mom and dad will continue to dole out their excess savings/investments with the thoughts that “hey, things will recover and when we go back to 10% stock returns and 6% CDs, I will get my money back”. But the longer it takes to recover, the more average mom and dad’s will end up broke themselves trying to keep the children and grandchildren broke.
    This is just another way the rich elites (called Republicans in public) are stealing money from the middle class.


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