10/02/09 London, England
The God of Abraham may rule the Vatican. But another group of gods rules finance. They are like the Greek gods…playful and mischievous, with a keen sense of humor. They look down from heaven not like a benevolent shepherd watching his flock, but like a cackling gawker betting on mud-wrestlers.
Here at The Daily Reckoning, this is not the first time we’ve paid homage to these lesser deities. Nor is it the first time we’ve mentioned their perverse method: Those whom these gods wouldst destroy are first cursed with good luck. Today, we look at the bright side: later, they are blessed by misfortune.
According to a pair of researchers from the University of Michigan, a depression does more for longevity than diet or exercise. Life expectancy during the worst years of the Great Depression increased from 57.1 years in 1929 to 63.3 years in 1933, says the report by Jose A. Tapia Granados and Ana Diez Roux. It didn’t matter whether you were a man or a woman, black or white. And it didn’t matter if you were in the US during the Great Depression or in Spain, Japan or Sweden during their economic downturns. The results were the same.
By contrast, life expectancy declined during the boom years. For most age groups, “mortality tended to peak during years of strong economic expansion (such as 1923, 1926, 1929 and 1936-1937),” they wrote in the “Proceedings of the National Academy of Sciences.”
Conventional wisdom holds that recessions are times of stress. People do not eat as well. They skip medical check-ups. They should drop dead earlier. Instead, they live longer. Perhaps it is because the economy slows down, allowing people to live at a more comfortable pace. Maybe the unemployed get more sleep. We don’t know. But if you want to live an extra six years, nothing works like a slump. When it comes to economic health too, nothing beats a depression.
Last week, World Bank president, Robert B. Zoelick, explained to Washington how the dollar made Americans wealthy:
“The United States is incredibly fortunate that the dollar enjoys this special status [as the world’s reserve currency.]” It made it possible for Americans could buy things abroad with dollars and then, rather than come back to the United States as a claim against US assets, the dollars stayed in foreign central bank vaults. It was as if the Untied States, and the United States alone, could issue IOUs and never have to pay up. An “exorbitant privilege,” Valery Giscard d’Estaing called it.
Since the end of WWII, the world had no real alternative. It had to use the dollar in its international transactions, just as it once used gold. This had a marvelous effect on world trade and roughly the same effect on America as a winning lottery ticket. And like a lottery winner, she was ruined by it.
With no effective limit on the number of IOUs they could issue, Americans issued far too many. From a low of around 2% of disposable income in 1945, US debt service rose to nearly 15% in 2007. In terms of total debt/GDP, the ratio was only about 150% in 1945, but that was with public debt from the war years at 120% of GDP. By 1950, the war debt had been cut down to about 70% of GDP, with private debt still at about 35%. At the height of the bubble years – 2005 to 2007 – total debt in America hit 360% of GDP, only 60% of it owed by the federal government.
Of course, most economists saw nothing to worry about. Instead, they set to work proving that such a ‘dynamic’ and ‘flexible’ economy would never fail.
They even won Nobel Prizes for elegant formulae that showed investors how to beat the market, year in and year out.
Then, the bottom fell out of asset prices in ’07-’09. In March of this year, Americans found that their stocks had fallen back to real values not seen since 1968. Their houses were sinking fast too. By May 2009, one out of every four US homeowners was ‘underwater’ – with a mortgage greater than the value of his house. Incomes and profits were falling, along with the net worth of the typical American household. Everything was falling – except debt. How the gods must have roared when they saw the looks on their faces! In the biggest, longest boom of all time – even with a monopoly on the world’s reserve currency – Americans had lost ground.
But while Americans were once damned by good fortune, they are now blessed by bad luck. “Looking forward, there will increasingly be other options to the dollar,” says Mr. Zoelick. Thank the rascal gods. Americans are saving again…rebuilding their balance sheets…and, eventually, their economies. They can even look forward to living longer. And with a little more bad luck, maybe their moron economists will wise up too.
Enjoy your weekend,
Bill Bonner
The Daily Reckoning
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Harry has been awfully quiet lately.
Is he only here on up-days or did someone spray a can of Shill-Away?
Don’t worry Harry will be back I doubt the market really tanks till next year. I am sure he will be like the real estate guys on T.V. seen less and less as the market implodes.
I forgot to post that in today’s T.V. double speak that today news was positive. Why? Because unemployment went up and that is a lagging indicator therefore today’s bad news is really good .So guessing the market will turn to into a rally for the day.
To say that stocks are back to real values not seen since 1968 might be true but is nevertheless misleading.
The S&P has still gained a lot since 1968 in real dollars with dividends re-invested.
Also if we ar 1968 levels at March 9 low, we have certainly fastforwarded into the 80’s in the last six months.
Hehehe. Economists are stupid.
Well done Bill.
There are many studies in animals showing diet restriction can lengthen life, perhaps this is somewhat responsible for this.
Economics has been a dismal science for the most part. Adam Smith’s theory about the invisible hand sums it all up.
“Every individual necessarily labors to render the annual revenue of the society as great as he can. He generally indeed neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.”(The Wealth of Nations).”
We all can speculate, debate, or argue about the future direction of the economy or of our society, but can anyone say with real certainty, where we are heading? Has the pursuit of our own individual interest been to the betterment or the detriment of society?
Will the bad luck of a floundering economy bring people together again? Would a return to the community and collectiveness put us back on the right path? Is this what would make us live longer? What would the Gods say?
“Thank the rascal gods. Americans are saving again…”
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Okay, what are they saving when stashing paper into mattresses?
I’m also not feeling the joy you expressed about the good news of the depression. Maybe it takes awhile for the medicine to take.
US Jobless figures were shocking for September, more bad news was the admission that the job losses were so bad in the first quarter of 2009 that the tool to measure them was effectively broken and there may be a downwards adjustment for the yearly total of upto 800,000 more job losses than recorded and on top of that US factory orders dropped unexpectedly
Still as Harry would say, the news was encouraging and obviously the market agrees as there was no sell off, in fact all seems to be well?
I just don’t get it, like the UK house price rises for the last 3 months, UK houses have hardly dropped unlike US housing and are steady climbing back to bubble era highs, they do not seem to be following the unemployment trends or the lack of mortgage availability, maybe this time it is different?
ha ha.
Whatever happened to the DR discussion boards??
Very good Mr.Bill Bonner. Your name is funny too: Mr.Bill – “OH,NO… or how about Mr. Bonner. Yes, we men get those too. However, Mr. Bill “Oh, No…I have a Bonner, is too much. LOL. Thanks, I feel better now. Reality, out!
Actually, Jesus is supposed to rule the Vatican since they are Christians. Not that anyone here acts like a Christian anyway. Booing at people in wheelchairs at town hall meetings, saying health care is a Communist plot, cheering when the Olympics doesn’t come to the U.S., and encouraging extremists to shoot the president–all smoke screens to cover up the greatest theft in our history. I want things to get much, much worse so perhaps the sheeple will finally pay attention to what’s really going on.
There are many studies in animals showing diet restriction can lengthen life, perhaps this is somewhat responsible for this.