01/04/10 Bethesda, Maryland We’re back in the USA after 15 years of living in Europe.
Bethesda is one of America’s wealthiest suburbs. Money from all over the nation rolls this way. The playing field is tilted in Bethesda’s direction.
“I was sitting in the Starbucks, having a cup of coffee,” Elizabeth reported. “One man next to me was on the phone. He was talking about some deal he had done with the US Army in Afghanistan. It sounded as though he was very happy with it. The man next to me on the other side was on the phone too. He was a jollier fellow, talking loudly about how much money he had made. I thought he was a stockbroker or something like that. Then, I realized he was talking about a contract with the government.”
While the rest of the nation has suffered a setback over the last ten years…the Washington metropolitan area has boomed more than ever. Real estate prices are down…but less than other areas.
And when we looked for a house to rent, we expected to be able to name our price. We thought it would be a buyer’s market. Not so. Nice houses in Bethesda are still being sought after. How so?
Wars…bailouts…boondoggles – this area loves them. Federal employees’ earnings keep going up…and a higher portion of the US national income goes to Washington.
“Aughts Were a Lost Decade for US Economy, Workers,” says a headline in The Washington Post.
“For most of the past 70 years, the US economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households. But since 2000, the story is starkly different.”
What was different about it?
“There was zero net job creation in the first decade of this new millennium, compared to healthy job growth in each of the previous six decades,” continues the report.
“No decade going all the way back to the ’40s had job growth of less than 20%.”
How many jobs were created since 2000? None. Not a single one, net.
If new jobs are not being created, you can’t expect working people to do very well. And they didn’t. “The Aughts were the first decade of falling median income since figures were first compiled in the ’60s. And the net worth of American households – the value of their houses, retirement funds and other assets minus debts – has also declined when adjusted for inflation, compared with sharp gains in every previous decade since data were initially collected in the 1950s.”
Bummer.
The Aughts were a nasty decade for investors too. Bloomberg reports that the value of all the world’s public companies was a bit more than $60 trillion at the end of 2007. Stocks were cut in half in ’08. In ’09, after the March low, the bounce began. They recovered roughly half of what they lost to end 2009 with a total value of about $45 trillion.
Bummer again.
What went wrong? According to the Post account, economists are scratching their heads wondering. What a bunch of morons!
Long-time sufferers of The Daily Reckoning already know what went wrong. GDP figures were positive throughout almost the entire period. But they were phony…they were a fraud. They just measured the rate at which Americans were ruining themselves – by buying things they didn’t need with money they didn’t have.
It was obvious to us and anyone who bothered to think about it for two seconds that you can’t really get rich by spending money. It’s NOT spending that makes you rich. It’s savings. You have to save and invest…so that you can produce more. Everybody knows that.
But economists don’t work for ‘everybody.’ They work for the government…or Wall Street. Both sectors have a keen interest in making people believe in what isn’t so. ‘We live in the greatest, most flexible, most dynamic economy the world has ever seen,’ said the politicians. ‘Yeah…and it will only get better,’ added Wall Street.
But it was a fraud. It didn’t get better. It got worse. And now, Americans pay the price. Ten years of work…and they’re poorer than when they started.
The Aughts were ruined by Wall Street. Washington will ruin the next decade. It will take the lead in spending money it doesn’t have on projects it doesn’t need. It will lavish money on parasites: Those fellows in the Starbucks…39 million people on food stamps…AIG executives…much of Wall Street…most of the federal payroll.
Instead of competing actively in the world economy – providing goods and services to honest people who are willing and able to pay for them – these people depend on government.
And now, the whole US economy depends on government too – just like the Japanese economy. Now we need (or so we are told) big spending from Washington, or the economy will stop growing. But the ‘growth’ we are seeing now is not real growth – it is growth in government spending. And like all government spending, it rewards parasites, not the people who actually add wealth.
But heck…it’s a New Year. We’ll look ahead. What’s coming up? Another ten years of backsliding? Or ten years of real growth? Better? Or worse? We’ll bet on the backsliding… keep reading.
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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Bummer Dude.
You’re dead on target here bill. What happens to us when the government spending bubble finally bursts?
The end is nigh!
As we let out a sigh,
Let’s fret for the future of our tots
As we bid farwell to the aughts.
More than one American is pissed
At the failures of the chief economist
Our dreams vanish like mirages in the sand
As the Dow sinks below five grand.
What’s this I hear, the cry of gold beckoning?
Nay, it’s just the familiar refrain of the Daily Reckoning.
While you do make some good points, I want to offer this observation: If you don’t like people living off the gov’t dole, then provide an alternative.
After five years of active-duty military service, I spent two years unemployed before finally landing my current civil service position. My unemployed condition was most certainly NOT by choice. Every civilian employer with whom I communicated offered no end of excuses why I wasn’t a “good fit” for their organization: Didn’t have the right mix of skill sets or experiences, didn’t have the right training, “overqualified,” etc. In other words, I wasn’t “perfect” and would require addition investment.
Ironically, after the military, I was resistant to join the civil service–I wanted to get away from government work. However, I find that my current employer (US Army) provides excellent benefits, job and skills training, and a positive work environment.
In my opinion, the reason American corporations are having a difficult time is their flat refusal to invest in the development of their workforce. “Somebody else” is supposed to educate, train, and develop their talent pool for them. I certainly don’t expect employers to fund Ph.D’s for all, but neither are they going to find “plug-and-play” employees–employers MUST train to their desired skill sets. (I also hear a lot of excuses: “We don’t have anyone avaible to do training, we’re too busy, the only guy who knows this equipment just retired, etc.” And who’s fault is that, I wonder…?)
But back to my original point: I don’t see anywhere on DR where someone can apply for a job. How about providing an alternative to gov’t employment, since that bothers you so much?
Mr. Bonner:
Getting to be a long time reader and somewhat amazed at how, more than anyone else, you seem to be able to eloquently write what I have been arguing with my economist friends. We have a bit of an ongoing weekly salon. But yesterday with your trade of the decade we diverged more than usual. I am a statistician and researcher by trade and am usually the foil to my economist friends/sparring partners. Now that you have a picture of who I am, let’s get why I am writing.
Evidence suggests you may be selling yourself short. Why capitulate the trade of the last decade a year early? Since the decade has one more year to go, I would ask you to consider the possibility that “buying gold on dips and selling stocks on bounces” may just be the best trade for the next year, too.
In research, people often reach conclusions that can’t be answered by the data they collected. Like Clint Eastwood’s classic line “A man has to know his limitations.” You seem to have an incredible grasp of what conclusions can be reached by the information you have at hand. That is the primary reason I enjoy your writing.
With that in mind, I may be looking into your description of the next trade of the decade too much, but I have rarely read words from your pen that were as tepid. May I suggest this is because deep down your sense is the next trade of the decade will most likely reveal itself in the coming year as we get a better read of what the winds of government will blow our way. So far, as you noted, all the signs suggest that the coming decade will be the decade of government manipulated economics. And I do not bet, but if I did, I would bet that over the next year we will receive the information needed to make the next decade’s trade of the decade. So give yourself a break and don’t try to pick the next trade of the decade until this one is over!
Please continue to do what you do. I am in the part of my life where I am starting from next to nothing and can’t afford pay services. So I read you, Chuck Butler, and John Mauldin with enjoyment and delight and hope your last year of the decade is bright and beautiful.
Best regards,
OK, Bill, we’ve had about enough nonsense. How can you be so smart about some things and so dumb about others? We still think you are the greatest, but be reasonable. People on food stamps or welfare or even just out of work are not “parasites!” An individual’s fortunes go up and down. One day it’s roast duck, the next day it’s feathers. It is not uncommon for a millionaire to go broke one year and bounce back after a run of bad luck. People who “add value to the economy” just happen to be flush for the time being. What you seem to be implying is that if two ships are sailing along together and one of them sinks, the other should just blythly sail on by and ignore the floundering survivors. Indeed, don’t even throw them a life ring. Such behavior is immoral. A society where a priviledged few are wolves and everybody else is a lamb wouldn’t be fit to live in. What do you mean nothing has been shown to be superior to capitalism? Actually, the “something better” is called regulated capitalism. In a democratic republic, government is simply the will of the people,and not just a few people who happen to be wealthy on the backs of the poor. While we are on the subject, money itself –whether gold or fiat — is nothing more than what everyone agrees it will be. It is a convenience. Otherwise, you would have to barter everything. I’ll give you some eggs for the new belt you just made. As you have heard, money is just a way of keeping score in the commerce game. Sometimes you win a few games, and sometimes you lose a few, but people don’t just dissolve when they lose more than they win. Even Adam Smith agreed that the unemployed were part of a nation’s resources. We have to take responsibility for their survival so they will be available for the contribution they would make when times get better. Now that we have straightened this matter up, I hope we won’t hear anything more about “parasites” and ” those who add wealth.” Too often the roles are interchangable.
With amused brotherly affection,
Oh, yeah. On another subject. Japanese stocks is it? Hummmm. OK, if you say so, the buy of the century it is. While I am picking out my Japanese companies, though, would you please explain again how it is that a country that owes 200% of its GNP (or more) can support companies that will become the buy of the century? Somehow I just can’t seem to wrap my head around the concept…not that you aren’t right, of course.
I too take umbrage on the use of those unfortunates who are relegated to food stamps (or unemployment etc.) due to in so many cases thru no fault of their own. Money is not only fungible but very, very mobile; with a flick of the mouse so to speak. Not so for individuals…..
“Managed capitalism” is the answer, and has been until the slow erosion of those boundaries that were developed after the last Great Depression.
The cries of “foul” from capitalists are only drowned out by their cries of, “help” when they are enmeshed in their own greed and destruction from their own devices.
What about those corporations who suck at the government teat? Are they not on “feed stamps?”
I do enjoy your writings…..BB
….last line:
What about those corporations who suck at the government teat? Are they not on “feed stamps?”
“Food Stamps”
Parasites need love too. And a bigger COLA increase. *Hugs*
Why all of these long-winded essays on the Reckoning Discussions today saying the same things ostensibly by different authors whose names have never appeared here before?
Because they’re probably written by the same person.
Stop your pathetic whining.
You act as though we have actually been living in a free-market capitalist system. We HAVE BEEN living under your “managed capitalism” and this misery is the result – and you can tell that to the folks on food stamps as well, as this is why they need to be on them in the first place.
And Shawn – it is not your employers job to fix you, okay?
I’ve never seen so much weak-willed pathetic whining on these pages – its sick-making.
Oh Boy! Well anyway,welcome home BB. You’re back,back,back,in the USS? We seem closer 2 the R it seems then we were 15yrs ago “sad 2 say!” People seem 2b so much more uptight,and worn-down then they were yesterday. Oh yesterday,all our troubles seemed so far away!Did’int they? Live long and prosper all! 4 2morrow we shall all kick-it… *S*
Hey, Bonner – as regards your parasites paradigm I have the following for ya:
—————————————-
O good Lord do accept
that I’m more than you adept
and you also should admit
that I’m clev’rer quite a bit.
Thou shalt praise me from now on, then.
Or I’ll come down on you. Amen
—————————————-
DL,
I’ll admit I could have done a better job with my career management; however, I don’t expect anybody to “fix” me–but neither should employers expect a super Wal-Mart of labor. Employers MUST invest in their employees in order to obtain the desired skill-sets. It simply isn’t possible to have “plug-and-play” workers (notice how large corporations have a transition plan for their CEOs).
The fact is employers have unrealistic expectations of the skill sets available within the labor-force pool. These same employers are steadfastly opposed to any form of investment in their employees (I’ll point out here that in 2005 Cisco terminated 25% of it’s workforce–their skills were not “up to date.”), and are the same employers who keep job postings open for YEARS, waiting for a “perfect” employee to drop in their laps. (Tangent: If you’re unrealistic in the hiring process, what does that say about working for you?)
Let me ask this: When was the last time an employer (screaming for more “skilled workers”) ever bothered to offer scholarships, paid time off for pursuit of higher degrees, a mentorship program, or other skills development program? Not in my generation (okay, it does happen, but only in rare, select cases). The standard response is to demand more H-1B visas.
My observation is that most employers–with no planning or forethought–wake up one day and suddenly decide they “need” a specific skill-set.. and then proceed to looking for said skill-set and crying that they can’t find workers with the “needed” skills.
I’ll also note that I don’t see anyone (including you) responding to my initial challenge: If you don’t like me living off of your taxes (as a gov’t employee), then offer me alternative employment. My resmue is available via my website.
This is why I think the decade should be called “The Naughts.”
I prefer “The Naughties”. It’s what the British call it, and it’s a tad more exciting.