The Long Crisis

Archive for the ‘greater depression’ Category

The December unemployment figures were released on January 8, 2010 and showed that 85,000 jobs were lost for the month. Since the pre-release guesstimate was for only a small loss for the month, or perhaps even a tiny gain, the figures disappointed Team Obama.

Or did they? President Obama is gearing up for yet another job stimulus program so perhaps with politics being as they are today it was decided that a loss of jobs in December might be helpful in proving that a further stimulus package is required. It really has become hard to believe that the government releases the unemployment report without taking into account political considerations.

However the government came up with the figures one telling statistic is the large number of people who have dropped out of the labor force. Over 900,000 former workers have decided that a job is impossible for them to get given current market conditions. Without this reduction in those seeking work and other adjustments the 10% unemployment rate and the loss of 85,000 jobs for the month would have been far worse.

Since President Obama has taken office approximately 4,200,000 jobs have disappeared. While President Obama can rightfully say that his administration inherited a tremendous mess from George Dubya Bush, one that will take some time to clean up, there is no doubt that unless the job market improves considerably before the midterm elections Obama and the Democrats will face a major hit in the 2010 elections.

The real problem is that the Obama team, along with many Americans, have yet to face up to the fact that we are in the early stages of a depression, not an ordinary recession. The talk is still about a recovery. There is no recognition at all that it is impossible to return to the happy motoring days of 2005. Valuable resources are being wasted by the government to prop up zombie banks, dinosaur automotive companies, and undeserving companies like AIG, while trying to bring back an economy that was built upon the wasteful largely unproductive back of consumerism.

It is highly unlikely that with crude oil once again in the danger zone above $80 dollars per barrel, and probably headed to above $100 per barrel by year end, that there will be any meaningful job recovery during 2010. In fact, there is a high probability that the economy will have a double dip recession. Should this prove to be the case team Obama could well face a bloodbath in the midterm elections.

While there are many items on Obama’s overfilled plate, such as healthcare, immigration issues, security issues, and the wars in Afghanistan and Iraq, it really comes down to how the job picture looks by the November 2010 elections as to whether the Democrats will take a real beating in those elections.

One can reasonably bet that the government will pull out all the stops in an effort to give the job market a boost during 2010. This means that Uncle Sam will be spending even more money that it doesn’t really have in an effort to save the economy. While increased deficit spending may well get some short-term relief the prospect over the long-term is downright depressing.

The United States is headed toward one of two things, neither one of them pleasant. One is that the government will eventually be forced to default on its obligations. In my opinion, this is highly unlikely but not impossible. The more likely event is that the government will attempt to control inflation in a way that allows them to pay off more debt with ever cheaper dollars. The danger here, of course, is that Ben Bernanke, Tim Geithner, and President Obama are not quite as smart as they think they are and take the United States into an impossible to control hyperinflationary environment.

The loss of 85,000 jobs for the month of the December 2009 may turn out to be one of the more minor things for the administration to worry about in 2010. One thing is very certain. 2010 will turn out to be an extremely interesting year.

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Are you about to graduate from college and haven’t a clue as to how to find a job? I don’t mean a decent job. I mean any old rotten job at all. Are you a recent college graduate and getting tired of sending out resumes which seem to end up in a black hole? Are you worried about telling someone you hope to have a special relationship with that you are unemployed and living in the basement of your parents home?

Well, stop worrying. There is a way to look respectable even when you are really unemployed. Since everyone knows that the American and world economy is not in great shape just now and that for college graduates of the class of 2010 the job market will probably be pretty bleak it’s a great time to remain a student. Who can tell you that’s a bad decision?

Here are three good reasons why you might want to remain in or return to college, stay respectable, and earn that master’s degree.

1.) With only your undergraduate degree you can not get a job. Not even a lousy job. Attending college was much more fun than hanging around your parents house all day and all night. Especially when all they say to you these days is “get a job you lazy freeloader. What a waste it was to pay for your college education. And now all you do is eat, eat, eat, and sleep,sleep,sleep, and play stupid video games on your computer. Can’t you at least join the military?”

2.) In the long run having a master’s degree will likely help you to earn a lot more money. That is if you can get a job in this lousy economy. But buck up. Going for a master’s degree will buy you time. And it’s cool to tell everyone you are in a master’s degree program. Much better than saying that you are unemployed.

3.) You can improve your mind and better prepare yourself to work for a big dumb corporation. Besides, you have nothing better to do. You don’t have a job and no job means no money and no respect.

If the economy is still rotten after you earn your masters degree than why bang your head up against a wall? Just stay in school and go for that PhD. Maybe you should consider becoming a student in Sweden where you can attend college for as long as you like and the government will pay for most of it.

“The Swedish Institute grants hundreds of scholarships every year to help foreign students make their stay in Sweden more affordable. Currently, tuition fees for everyone are fully subsidized by the state.” Hey! Check it out. Study in Sweden

Masters degree anyone? It’s a great step out of the unemployment line and towards respectibility. For more information visit Master’s Degree Education

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Dubai has many symbols of excessive spending and wild consumption. Dubai has to be the world’s prime poster child for the thinking that anything can be built anywhere, that money is not a barrier, that humans are limited only by their imaginations. Only in Dubai is taking a skiing vacation in the middle of a desert entirely possible. Not only possible but considered entirely normal.

From its humble beginnings as a Gulf sleepy fishing village 20 some years ago Dubai came to symbolize what big dreams fueled with big money can do. A few years ago who would have dreamed that the world’s tallest building, the now completing Burj Dubai would be built in Dubai? Or who would have imagined that Dubai would be home to the world’s first seven star hotel, the fantastic $1,900 dollar a night and up Burj-Al-Arab.

Little concern was given to how much it would cost to cool a huge skiing facility and produce all of that snow within a monster of a building sitting under a blazing desert sun. But then no one seemed to be concerned about the amount of water it would take to keep a championship golf course going in a desert environment either. To reach the sky and beyond was the goal of Dubai.

But to create the miracle of Dubai took money, a lot of money. Dubai had money but then leveraged what they had to extreme levels in order to keep on rapid fire building. No one seemed to consider what would happen if property values fell rather than appreciate year after year. The Dubai powers that be made straight line projections that never varied. Everything would appreciate in value forever and forever and demand would never falter. Dubai was to be a heaven on earth.

Rumors have flown about for months that Dubai was in financial trouble. Those fears were realized this week as one of the State owned firms requested a six month holding period for soon to be due bond payments. The world’s stock markets did not react well to this notification of a bond default. Well, kind of a default. Dubai still promises to pay, just not quite yet. Estimates are that about 80 billion Dollars in debt have been incurred as Dubai created miracle after miracle in the desert sands. The immediate concern is that the impact of a Dubai default may reach far beyond Dubai in this interconnected world.

Here is one reaction to the Dubai story from the NASDAQ website The entire article is extremely interesting reading.
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Now, let me just pause here and say one of the implications of this story that I really like is that human beings, universally, are overshooters. And the people of the UAE have now shown themselves to be overshooters in classic fashion. The UAE obviously looked at its considerable resource inheritance of oil and gas and then got about the business of attaching as much possible debt to this wealth and future growth as the world could stomach. This is yet another example of an infinite debt philosophy on both the part of the borrowers, and the lenders. And by the way, if you think humanity is going to collectively decide to build sustainable, low-growth economies on a voluntary basis then I say dream on. We’re all overshooters now.
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It’s the last sentence that really grabs my attention. Humans being all too human it is highly unlikely that a planned transition to a substainible low growth economy is going to happen in any developed nation or developing nation. Probably not until we are in full crisis mode will any meaningful action be taken by the governments of the world to rein in growth.

We are looking down the barrel of the consequences of climate change, peak oil, and a financial depression as excessive debt is squeezed out of the system. We are not in a recession, it is a depression and depressions take a long time to do their work of rebalancing debt and equity. Dubai follows Iceland as an example of what excessive leverage can bring on and we need to take it as another warning shot very close to the bow.

And as mentioned in the article from the NASDAQ website, another much larger State than Dubai faces massively increasing debt payments that eventually will have to be paid. What can’t go on forever, just doesn’t. Not even for the United States of America.

I wonder if this time next year if it will be possible to take a ski vacation in Dubai?

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