Swans Commentary » swans.com November 30, 2009  



Blips #92
 From The Martian Desk


by Gilles d'Aymery





"There can be no real individual freedom in the presence of economic insecurity. "
—Chester Bowles (1901-1986)
"There are 1011 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers. "
—Richard Feynman (1918-1988)


(Swans - November 30, 2009)   THE RECOVERY is here, finally. The US economy apparently grew by 3.5% in the third quarter (since revised down to 2.8%). TV commentators and news anchors applaud. The Great Recession is over, they confidently assert. Wall Street exults; the Dow is back over 10,000. Banks announce record profits and put aside billions of dollars for year-end bonuses. It is merry-making time again in the land of milk and honey. Time to go shopping and be happy, just in time for Black Friday and the retailing season. (For readers unfamiliar with Black Friday, it's the day following Thanksgiving, when hordes of consumers swamp stores for bargains. It's called Black Friday because it is the day when traditionally stores get into the black -- that is, become profitable. The period between Thanksgiving and the New Year accounts for about 40 percent of annual sales. It is the make-or-break time for the retail industry.) Now, let's get back to August 2009 when I wrote about social behaviorism in my Blips #88. I also mentioned Emile Coué, the French psychologist whose method consisted of repeating daily, "every day, in every way, I'm getting better and better" -- an optimistic autosuggestion.

BUT ONE HAS TO ASK, as Robert Shiller, a professor of economics and finance at Yale, did -- "What if a Recovery Is All in Your Head?" -- in an article published on November 22, 2009, in The New York Times. Professor Shiller also cites Coué and he makes the case that this recovery "may be based on little more than self-fulfilling prophecy"; that "after all these months, people start to think it's time for the recession to end." According to him, since recessions generally don't last more than two years and this one began in December 2007, then "we're due for recovery." Shiller proceeds with a short historical review from the Great Depression onward and how the word recession started being used in place of depression, for it psychologically "had a much softer sound." He concludes that whether "the theory of the self-fulfilling prophecy is correct" we "may still be at a tipping point," and he calls for "continued vigilance."

SO, WHERE DO WE STAND? The surgeon may have squelched the main hemorrhage (thanks to unprecedented and continued government interventions) but the patient remains far weaker than the press releases and official speeches want us to believe, at least if one considers a series of statistics and connects the dots. The US unemployment rate reached 10.2 percent in October (17.5% if one includes underemployment). September saw the loss of 219,000 jobs and an estimated 190,000 were lost in October. The American Bankruptcy Institute reported that October saw 135,913 consumer bankruptcy filings (an 8.9% increase over September and 27.9% over one year ago). Also in October, business bankruptcy filings jumped 7% over the September figures. Banks are not faring better, whatever the spin spewed by the cable news networks. Bank failures are rapidly increasing. On October 23, 2009, the 100th bank (Partners Bank; Naples, FL) had to be taken over by the Federal Deposit Insurance Corporation. Less than one month later, on November 20, was #124 (Commerce Bank of Southwest Florida; Fort Myers, FL). According to calculatorplus.com,

Since February 2007, assets of all U.S. bank failures totaled a staggering $518.2 billion with deposits totaling $352.6 billion. Through November 20th, there have been 124 bank failures in 2009 with assets totaling $142.0 billion and at a cost to the FDIC's Deposit Insurance Fund (DIF) of $31.99 billion, the four largest bank failures being BankUnited with $12.8 billion in assets, Colonial Bank with $25 billion in assets, Guaranty Bank with $13 billion in assets, and United Commercial Bank with $11.2 billion in assets.

IN ADDITION, the FDIC in a November 24 press release noted that "The number of institutions on the FDIC's 'Problem List' rose to its highest level in 16 years. At the end of September, there were 552 insured institutions on the 'Problem List,' up from 416 on June 30. [. . .] Total assets of 'problem' institutions increased during the quarter from $299.8 billion to $345.9 billion, the highest level since the end of 1993, when they totaled $346.2 billion." Funny how this information did not make news in the main media, no?

ANOTHER FINANCIAL TIDBIT that did not make the news is the total debt burden, public and private, in relation to the country's GDP. America's outstanding public debt is about 60% of GDP, but once unfunded liabilities are added, the full public debt is more than 500% of GDP. See this OECD chart. (You'll notice that our European friends, particularly France, face the same predicament.) Furthermore, the full private debt (household, business, financial) in the U.S., according to the Fed's September 2009 flow of funds (PDF), totals 300% of GDP. Therefore, the grand total American debt burden (public plus private) is hovering around 800% of GDP -- and even when leaving out the unfunded liabilities the total debt burden is still over 350% of GDP. (For more on this topic, see Rolfe Winkler's Blog at Reuter.com.)

ACCORDING TO the Department of Agriculture of the "richest country" in the world, 49 million Americans lacked sufficient food in 2008; 17 million children lived in households that faced food shortages (up from 12 million in 2007), of which over one million "were outright hungry." People in 4.8 million households used private food pantries and another 625,000 households had to be fed in soup kitchens. Most of the families facing food shortages had one or two adults with a full-time job. That dire situation led the president of Feeding America (formerly known as America's Second Harvest), the nation's largest domestic hunger-relief charity that provides food to over 25 million people every year, to exclaim: "This is unthinkable. It's like we are living in a Third World country!"

IN CALIFORNIA, my state of residence, the unemployment rate rose to 12.5 percent in October (and about 20% if underemployment is taken into account). The projected budget deficit for next year tops $20 billion, but taxes cannot be raised due to the minority rule that was approved with Prop. 13 in 1978, which requires a two-thirds legislative majority for any tax increase (talk about "democracy"! -- even Raygun raised taxes in 1966 when he faced a budget deficit). Yet, the state Assembly has voted in the affirmative to issue an $11.4 billion bond to overhaul California's antiquated water system. Meanwhile, public servants (teachers, nurses, etc.) are being laid off en masse, and the University of California regents voted to raise undergraduate tuition by 32 percent, from $7,788 to $10,302, making the entire UC system less "public" and more private and corporatized. By the end of August 2009, reported the California Public Utilities Commission, 271,829 low-income households had their utility service (electricity) shut off -- an increase of 27.6 percent over last year. (PG&E in Northern California disconnected 75 percent more families than it did a year ago!)

LET'S HOPE that everybody had a happy Thanksgiving (except the turkeys), went into a spending frenzy on Black Friday and beyond; that the retailing industry will show modest gains, allowing official pronouncements of optimism about the end of the recession; but for those who are able to connect the dots I would, in the words of Robert Shiller, recommend "continued vigilance," for the theory of self-fulfilling prophecy may well have to confront the hard actualities. We won't get out of this crisis through higher consumption, more personal debt, increased public deficits, and the costs of insane wars and military spending. One possible way to get out of the catch-22, in the absence of overthrowing our absurd, obscene, inequitable, and ultimately destructive socioeconomic system, would be to substantially increase the wages of the bottom two quintiles of the polity and redistribute wealth from the top to the bottom.

OH GAWD, What did he say, what did he say -- wealth redistribution? But that's "Socialism," or worse "Communism" (scare quotes included), will trumpet the Teabaggers and other Paulistas that the demagogue Dick Armey methodically manipulates, and the likes of Justin Raimondo and Lew Rockwell and Pat Buchanan, and, and, and...emulate (I provided a short list of those people in my Blips #91), all for the ultimate benefit of the 1% that uses their pathetic populism to make certain that power remains in the hands of the few. Those trite sires will howl and growl against taxes that are always too high and the loss of their cherished "Freedom." Free to starve, free to be relegated to sheer poverty, free to not have access to education or health care, or a decent home with electricity, or simple respect. Talk about Freedom! And talk about too much taxes...

THE OECD (Organisation for Economic Co-operation and Development) just released a report, "Revenue Statistics 1965-2008, 2009 Edition," focusing on the level of taxation within its 30 member-countries. When you look at the tax ratio as percentage of GDP (year 2007) you find out that Denmark comes in first with 48.3% (that is, a Dane pays 48.3 cents out of any one dollar he earns to the "hated" government). Norway is in 4th position with about 40% (Norway has some import as you will see below). The U.S. comes in 4th from last, behind Mexico, Turkey, and South Korea) with about 26.0%. What's interesting, leaving the howling ideologically-blinded crowd aside, is the difference in results between those respective countries. Denmark, Norway, and all Western European countries have a very low poverty rate, subsidized housing, and free or low-cost health care and education (the last two being increasingly challenged in some countries, particularly and sadly in France). The U.S. is rated last (after Mexico and Turkey) for the well being of its people -- last!

YES, BUT OUR "FREEDOM" and low (but still too high) taxes have made Americans the envy of the world. America is the richest, wealthiest country in the world, keeps hammering the brain-dead gang. We are sky-high residing at the very top of the food chain. We are the U S of A, "the land of the free and the home of the brave" they chant in unison as F-16s fly over the stadium or the racetrack and flags aplenty undulate high up multiple poles.

PERHAPS, PERHAPS, but factually the USA is NOT the richest country in the world, at least per capita. Remember Norway? Well, that terrible socialized country ranks higher than the U.S. Indeed, the U.S. ranks #6 (according to the IMF), or #4 (according to the World Bank), or #8 (according to the CIA World Fact Book). Surprised? And consider that most of that wealth is concentrated within the famed 1% of the population. Take that 1% out of the equation and the ranking will fall precipitously.

IN OCTOBER 2008, the OECD issued a far-reaching report entitled "Growing Unequal? Income Distribution and Poverty in OECD Countries." According to the report, "The United States is the country with the highest inequality level and poverty rate across the OECD, Mexico and Turkey excepted. Since 2000, income inequality has increased rapidly, continuing a long-term trend that goes back to the 1970s." (See the Country Notes [PDF]. For the curious readers who wish to delve further, let me recommend that you visit Income Distribution and Poverty data in Gapminder Graphs. According to the Web site, "The Gapminder Graphs allow you to unveil the interactions between income Distribution and Poverty data over time. You can select any two indicators for the axes in the graph, and the size of bubbles reflect the size of a third indicator of your choice. Then you can play with time. You can select countries and track and compare their performance." It's a worthy exercise that will vividly confirm the staggering inequalities and poverty that exist in the U.S.

NOT CONVINCED YET? Allow me to direct your attention to an October 16, 2009, article published in BusinessWeek and posted on finance.yahoo.com, "Countries with the Biggest Gaps Between Rich and Poor," by Bruce Einhorn. From the article:

The U.N. Development Program recently came out with a report looking, among other things, at income inequality worldwide.

The UNDP ranked countries and regions based on a number of factors, including their Gini coefficient, named for Italian statistician Corrado Gini.

We have listed the world's most advanced economies based on their Gini score, with zero marking absolute equality and 100 absolute inequality. Scandinavian countries, Japan, and the Czech Republic have the least amount of inequality. The U.S. is among the most unequal, but it's not No. 1. To see which economy is, read on.

No. 3 U.S.
Gini score: 40.8
GDP 2007 (US$ billions): 13,751.4
Share of income or expenditure (%)
Poorest 10%: 1.9
Richest 10%: 29.9
Ratio of income or expenditure, share of top 10% to lowest 10%: 15.9

The share of income for the top percentile of Americans was 23.5% in 2007, the highest since 1928, according to Emmanuel Saez, a Berkeley economist who won the prestigious John Bates Clark Medal in April. Income for the top 0.01% hit a record-high 6.04%. And the recession may be exacerbating income inequality.

YOU MAY WONDER which countries are at the top. Number 1 is Hong Kong (Gini score: 43.4), and number 2 is Singapore (Gini score: 42.5) -- both beacons of authoritarian capitalism.

BUT, BUT, BUT, you will retort, the U.S. is still the best country in which to live, with all those wonderful cities that are spread over the Land, from New York to San Francisco, to Seattle, Boston, Chicago, etc. Forgive me if I have to throw a bucket of cold water over your heads to wake you up. Let me direct your attention to Mercer -- used to be known as Mercer Human Resource Consulting -- a subsidiary of Marsh & McLennan that deals in human capital planning worldwide. Every year, the company issues a survey, "Mercer's 2009 Quality of Living survey highlights - Global" (last update April 28, 2009). According to their Web site, "Mercer's Quality of Living ranking covers 215 cities and is conducted to help governments and major companies place employees on international assignments. In 2008, the quality of living in many regions has been affected. This is demonstrated by serious political turmoil, increasing unrest and instability, health and climatic concerns. The global financial crisis has intensified in 2008, becoming an area of increasing international concern. The effects of various rescue plans being implemented are yet to be known."

IN ITS INTRODUCTORY NOTES, the Mercer survey states that, "The rankings are based on a point-scoring index, which sees Vienna score 108.6, and Baghdad 14.4. Cities are ranked against New York as the base city with an index score of 100. Mercer's Quality of Living ranking covers 215 cities and is conducted to help governments and major companies place employees on international assignments." The full list cannot be reproduced here (but the first 50 are included in the survey online). Suffice it to say that 8 US cities make the list, in comparison to 28 Europeans cities (Germany alone has 6, all ranked higher than the US cities). The highest-ranking US entry is Honolulu, HI, in 29th position. The others are: San Francisco, CA (#30); Boston, MA (#35); Portland, OR (#42); Washington, D.C. (#44); Chicago, IL (#44); New York City, NY (#49); and Seattle, WA (#50).

EVEN IN THE REALM of quality of life the U.S. is a lagging giant. The question one ought to ask upon reading these various statistics is where is the U.S. competitive, for good sake? Well, the country tops the charts on matters of inequalities, poverty, hunger, uninsured, gun violence, consumerism and obscene waste, number of billionaires, and of course its magnificent killing machine. That's quite a score!


STILL, THERE ARE wonderful Americans out there -- don't want to leave you with the impression that everything is rotten in the land of the free and the home of the brave. Take, for example, Elisabeth Ludlam, who is the branch manager of the Redwood Credit Union in Santa Rosa, California. Earlier this month she received a Google Alert that led her to my article Succumbing To Paypal, in which I summarized my travails with the Redwood Credit Union. She read the piece and gave me a phone call to explain the reason for my having to pay a $25 fee for a check or money order, whether in USD or in a foreign currency, drawn on a non US bank. As a small regional credit union RCU tends almost exclusively to locals and small businesses, which very rarely have banking transactions with other countries. The ability to deal with international banking is a costly proposition, which RCU management felt would be an unfair burden to the vast majority of its members. Consequently, they use the services of Wells Fargo for the very rare occurrence of an international transaction. In turn, Wells Fargo charges $25 for each occasion and RCU passes the fee to its member. I underlined that while their policy was reasonable it still penalized a member who had gone out of his way to open Swans bank account at a local credit union when I could have easily opened the account with Bank of America or Wells Fargo. There was something slightly unfair and decidedly ironic in that situation. Plus, I remarked, imagine receiving $25 from Canada and being charged a $25 fee to deposit it. We laughed.

COINCIDENTALLY, I had just received a $100 money order from a reader in Quebec. Ms. Ludlam most graciously asked where I intended to deposit it. I answered, at the Ukiah branch. She said she was going to phone them immediately and give them instructions to waive the fee altogether, which she did. A small local credit union whose staff tends to its members with courtesy, attention, and friendliness... That, friends, is the America and the Americans I find endearing. Thank you Elisabeth!


ART IN ALL ITS GRANDEUR: Here is something different. Take a moment to look at what I feel are the most beautiful fireplaces and wood stoves in the world even though they certainly are quite unaffordable:

http://www.focus-creation.com/FR/ (in French)

http://www.focus-creation.com/UK/index.asp (In English)

Click on Entrée or Enter -- it will open a new browsing window. (You will need the Macromedia Flash Player). Or you can get there directly at:

French: http://www.focus-creation.com/FR/intro.html

English: http://www.focus-creation.com/UK/intro.html


FINALLY I would be remiss to conclude these Blips without extending my and Jan's gratitude to the many readers who sent us e-mails and postcards expressing their sympathy and empathy on the occasion of the loss of our faithful friend and companion, Priam. Merci mille fois.

 . . . . .

C'est la vie...

And so it goes...


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About the Author

Gilles d'Aymery on Swans (with bio). He is Swans' publisher and co-editor.



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Swans -- ISSN: 1554-4915
URL for this work: http://www.swans.com/library/art15/desk092.html
Published November 30, 2009