Why haven’t I been writing about the economy with the ferocity I used to? Because as we were waiting for something to happen, it all got weird. The fun we’ve been having is just the hurricane party before the real storm hits – people with a happy sense of doom only deepen a good disaster plot. But their antics are always just the prelude to the real show.
How strange has it gotten? At first, President Obama was assailed for the stomach-loosening plunge in the stock market. Then, the DJIA rebounded and everyone shut up. Gradually, many of Obama’s own supporters became angry about how the Troubled Asset Relief Program, or TARP, failed to keep track of where the money was going. Then, many right wingers took to the streets to protest what they called “Taxation without representation”, flinging tea bags at the White House. For a bit of farce, the Governor of Texas openly talked about secession.
What will finally end this nonsense, one way or the other, is going to happen on 29 April; it’s my best estimate for when the storm makes landfall. That’s when the Bureau of Economic Analysis issues their first estimate for the Gross Domestic Product as of the first quarter of 2009. The last such report gave us a whopping 6.3% plunge in the total value of everything made by the USofA, and we all got serious for a bit. This time, Morgan Stanley predicts a drop of a mere 6.0% – an improvement, but nothing like people appear to be expecting.
So what has everyone been expecting? That’s the beauty of it – there aren’t a lot of really good numbers out there; it’s been treated as one of those things that seems better left unsaid. If we all know what’s coming, the party might come to a screeching halt, after all – and by “screeching” I mean the sound of Hurricane Andrew ripping your roof off. The last two quarters of 2008 saw a decline in our economy totaling 6.8%, so another loss of 6% will end the whole recession/depression argument once and for all.
There’s more, of course. In Minnesota, the February Economic Forecast that laid out a staggering $4.6B shortfall was based on a contraction of 2.7% for all of 2009. My own personal guess is that we’ll see a decline of 12 to 14% for all of 2009, which is to say about 20% through the whole Depression. What will that do to the budget negotiations we are having in Minnesota? The most important player, the great storm of Depression, isn’t even at the table yet.
Naturally, I could be wrong. I thought I’d write this here and now so that everyone can look back on it and either laugh or pay me a large salary to be their personal advisor in a few months (no, I’m not kidding). I have an excellent track record so far, if I do say so myself, so why not put that on the line one more time? I don’t see too many other people with greater credentials giving it a go, although that may be because they had the sense to evacuate to higher ground. I think they know at least where this storm is going to track, if not how nasty it is.
Speaking of higher ground and storm tracking, I highly recommend the article, “The Quiet Coup” by Simon Johnson in this month’s Atlantic. Johnson was an economist with the World Bank who saw a lot of third world nations in need of a bailout. His comparison with the USofA today, and how the oligarchy took things over, is chilling. It’s a fascinating read – especially for people who thought I was over-stating things a year ago!
Just about any storm can stir things up in a way that makes people act a bit strange. This economic storm isn’t really an exception. We’ll know shortly just how bad it is and whether our preparations were worth the trouble. My guess is that they were, and that we’re not going to be seeing too much of the partiers anymore.