The Teachable Moment: a poem

What czarish beast stalks
by the schoolyard door,
and turns its big brother hand
upon the downcast eyes
of a child?
What insidious thanatos
inflicts sterility
with shameful spewing,
thus undermining daddy's counsel
and mommy's tender wishes?
Oh, It'll take a village
to deliver us from such misdirected trust--
the betraying of education
with a kiss
inappropriate.
Oh, may God help us.

Ben's bluff might work?

For several generations now, we've been gathering a pile of prosperity here in the richest country in the world. And most everybody has gotten at least some piece of the action. How many decades in a row now has it been that Americans have been steadily purchasing cars and washing machines, TVs and microwaves, air freshener and deodorant and movie tickets with popcorn? We're a pretty fat n' happy bunch. What we have here in the USA is a high standard of living, probably the highest in the history of the world.

I mean, how many people do you know who don't have indoor plumbing? How many in your circle of friends don't have a car or a TV? We are rich, I tell ya. Even the folks whose incomes hover around the poverty level all this stuff.

In the developing nations of the world, folks don't have all this booty yet.

In the formerly-third-world places--India, Brazil, South Africa, and even in China, the streets and malls and markets are teeming with millions of people who have yet to acquire the wealth-multiplying trappings of middle-class comfort. These are great, teeming markets yearning to be full. They're the next wave of aspiring consumers, like your kids in the supermarket with miniature shopping carts and little flags that read "shopper in training." So many of these minions have yet to buy that first washing machine, that first microwave, that first automobile.

But they will eventually, as their collective economic tides swell and their proverbial boats rise. Then the enterprisers among them will form companies and employ neighbors and friends to manufacture goods to meet the escalating demands of prosperity. But it's not likely their new acquisitions will originate in Dayton or Birmingham or Oxnard where the costs of affluent American labor render finished prices prohibitive.

We've got a high standard of living in this country that has propelled us, for lo these many decades, ahead of the the thundering herd. But now our opulent baggage has landed us in the dust as the pack passes by. We've priced ourselves out of the world market. But don't go blaming our politicians or our business leaders. This is just the way things work in a world where energetic workers and smart managers are free to make a better affordable mousetrap. It had to happen sooner or later; it's been a long time coming. We had an incredibly long ride on that post-wwtwo wave while it lasted; now it's time for us to paddle out and catch the next set.

Here's what needs to happen: find a way to pump some of the hot air out of our expansive, expensive American standard of living. Position us, once again, as lean and mean, efficiently productive contenders in the world marketplace. We've already, you know, burst one bubble. Can't we puncture another one? Dean Baker opined yesterday that economists should have identified our "over-valued dollar as a main cause of imbalances in the US economy."

As it turns out though, the reserved Fed has issued a prescription for our economic obesity. They have found a way to trim the fat real quick. And it just might work. It's called: the devalued dollar.

If Joe Sixpack and Jane Doe found, rather suddenly, their wallets full of greenbacks that had the purchasing power of, say, 60% of last year's dollar--the effect would be just like knocking our standard of living down by 40%. That might be enough of an overhead reduction to get us back in the game of competitive manufacturing. Then maybe we can again crank out washing machines or widgets or memory chips or hula hoops or solar collectors as inexpensively as they will in Manila or Mumbai or Mombasa.

Devalued Federal Reserve Notes will be a mixed blessing. On the down side, they'll mean less buying power for us yankee producers. But hey, we've got plenty enough stuff to last us for awhile anyway.

Folks would have an abundance of dollars again; everybody could get back in the game, pay off some debts, maybe take the kids out to eat.

Now, if that "over-valued dollar" could be knocked down a notch or two so that it is no longer so uppity, what would it take to accomplish such a feat? Everybody take a 40% pay cut?

No way. It'll never happen. Too complicated, and politically impossible. But there is a fix. It might hurt a little bit, but it would work pretty quickly, though not quite as fast as instant breakfast or drive-up food.

Make dollars. Print so many of them that Uncle Tim can push a big stack of chips out on the table to stay in the game. The bluff might just work if he keeps a poker face, although it's Uncle Hu's face that the world will be watching.

Carey Rowland, author Glass half-Full

Conflicting Signals?

Two days ago, Sold at the Top posed a profound question of present economic conditions on seeking alpha. The soldish blogger asked:

“Inflation or deflation… stag-flation, stag-deflation … hyper-inflation… possibly even hyper-deflation… or maybe just a bout of frisky-flation? Never has it been so hard for the consensus to agree on the coming trend in prices”

After pondering the subsequent content of Mr. Sold at the Top's puzzle, and after reading Klaus Vogt’s article mentioned below, as well as a few other analyses along the way, including a few here on TPM, I’ve reached a conclusion about the matter:

1.) Everything you don’t really need in this life will lose value in the days ahead. This is called deflation, and it's going to happen.

2.) Everything you do really need, like say, food, will gain price in the days ahead. This is called inflation, and it's going to happen.

Is this a contradiction? Yes, but it doesn't matter, because these economic indices are just human concepts.

What's real, and what is more and more real, is what it costs you, in labor and resources, to get a loaf of bread, a taco, or a salad, or whatever.

Are you playing the market? Consider this:

According to Klaus Vogt of Money and Markets, there are three ways to determine the of value stocks that you may consider buying:

1.) the Fundamental Valuation method, which calculates the dividend yield by dividing stock price into annual dividend

2.) the Macroeconomic method, which utilizes the broad statistical indicators to infer value

3.) the Technical Analysis method, which quantitatively compares short-term and medium-term trends in the context of long-term trends.

Mr. Vogt’s general projections on the stock market as a whole, based on these approaches, are:

1.) by the Valuations method: Long-term Negative, Medium-term Meaningless

2.) by the Macroeconomic method: Long-term Negative, Medium-term Bullish

3.) by the Technical Analysis method: Long-term Bearish, Medium-term Bullish

We can surmise here another set of conflicting signals, although (let the reader understand) the "long-term" projection in all three methods is Negative (Bearish.)

Klaus concludes his presentation with this observation: “This is no time for buy and hold investors. But there are attractive opportunities for medium-term oriented investors willing to buy now and get out on a moment's notice.”

“…get out on a moment’s notice”?

We see worlds of strategic difference here between the predominant, speculative modus operandi of many (most?) investors and the substantive, Fundamental Valuations approach of traditional investors. Furthermore, we do not fail to notice in this wide gulf of equity-worldviews an indicator of our present catastrophic, bubbular problem.

The old faithful Valuations method, using profit/price ratio, has been tossed out the window. Does a real, innovative company startup have a snowball’s chance in this heated environment?

Perhaps meaningful financial reform will require something much more apocryphal than just throwing devalued dollars and new paper regs at the problem.

How many speculators are sitting on a keyboard perch trying to decide when is the optimum moment to “get out on a moment’s notice?”

How many mortgage-holders are standing in line for a job?

As Ringo once said: “This is not your father’s Oldsmobile, ” although your dad may have been piloting this same vehicle in September of ’87, or your great-grandfather in October of ’29.

Conflicting interests, conflicting signals, conflicting emotions, conflicting people. . . Get ready. Watch and pray.

Carey Rowland, author of Glass half-Full

From Woodstock to Toxic stock

"Everybody talks about 'transparency' these days like they used to talk about 'free love' at Woodstock. What does it mean?"

This is a question posed by Andrew Butter a couple of days ago on the Seeking Alpha forum, in his article about securitization of mortgage-backed assets, many of which have come to be known as "toxic assets" in the financial markets.

After presenting the problem, Mr. Butter then defines transparency. It means, in the context of investment transactions, that "that participants need to be provided with sufficient information about the stuff they are buying in the marketplace to be able to make rational and well-informed decisions."

This need for transparency comes as a result of a convoluted mess in which investors purchased, during the years 2000-2007, about $14 trillion in securitized debt. But the buyers paid too much for these assets--probably somewhere between $2-5 trillion too much.

Securetized debt based on mortgage-backed securities had contributed largely to the stock market bubble that later burst in 2008, bringing the whole American economy down with it. The toxic securities are just about impossible to evaluate, and so they become a source of confusion, like having millions of little black holes that suck value out of the financial universe. That's my take on it anyway. I'm not a financial analyst, but I did learn a lot by reading Mr. Butter's report.

And Mr. Butter definitely added an element of generational interest in the comparison between transparency in money matters and free love at Woodstock. That's a stretch, but there are, you know, a few parallels.

Alex Garcia-Ditta reports in the Charlotte Observer that "an estimated 200,000 people bought $18 tickets to Woodstock." But then, hey, 400,000 kids showed up. The concert organizers, realizing that they did not have the personnel on hand to properly manage the situation, wisely declared the event to be a "free concert."

So as it turns out, about half the people paid to get in; about half did not. Do you think the paying celebrants cared? I don't think so. Most folks were just groovin on the music and passing joints, and were not interested in asking such questions. (questions like, "who's paying for this thing?") Or that's what I heard anyway. I wasn't there. I was back in Louisiana winding up my first semester of college at LSU.

So this went on for about three days. "Three days, man!" And while a great time was had by all, it was not what you'd call a sustainable situation. It was a euphoria not unlike the bubble that later kept our money floating around, intoxicated, for several years until we all had to come down, go home and wonder what the hell happened.

Many have said that Woodstock was that muddy weekend concert back in '69 where "everything went wrong but turned out right." Maybe so. Jimi's star-spangled finale brought an appropriate end. And it's a good thing it did.

Then Monday morning blues were probably twanging and jangling around in all those homebound hippie heads. And who could have then found, in Yasgur's field, a fresh flower with which to brighten their hair? The place had become a mudhole that would require a major cleanup. This is what humans do.

The coming-down was similar to, like, what we're in right now. The party's over. Time to clean up the mess. And I think, in spite of all the deflowering and deflating, things have gone rightly, because a bubble (there has to be a correction some time) cannot inebriate forever. Janis and Jimi later proved that, and so has our economy.

And I'm like, the coming-down-after-the-free-for-all has come to an end. We've learned a few lessons along the way. Don't eat the brown acid, and don't buy toxic stocks unless you're ready to do some serious cleanup.

Carey Rowland, author of Glass half-Full

The Dreaded Day Has Arrived

Maybe not for you, but for me the day of reckoning has arrived. After successfully eluding the dreaded condition for the better part of a working adult life, today I file for unemployment. 'Tis a terrible door through which I walk, but hey, I'm not the only one. And I must approach this condition with an appreciation that it could be much worse. At least I'm not being terrorized from my home by militant rebels. Nor am I suffering through chemotherapy, sitting on a crashing plane, living on the west bank, or entering a gas chamber.

Being put out to pasture may not be so bad; it's just that I had hoped it would happen at age sixty-five, not fifty-eight. After twenty-five years as a carpenter, then a career change to become a teacher, and two years of part-timing while attending education classes. followed by two more years of jumping through hoops while hovering on the edges of American education, it appears that my bid for educator status was ill-timed. Apparently I didn't make the cut. The Great Meltdown of '08 has overtaken my good intentions and well-laid plans. Or was it my own failings and eccentricities as a human being?

Anyway, at least our three kids are raised and educated, and my wife is working productively as a nurse (although she complains about the drug-seekers and the alcoholics who are milking the system), and I have a roof over my head.

Maybe I'll be a farmer before I die, and grow my own food so I won't have to pay for it, but I don't think my 58-year-old back can take all that hoeing and weeding. I suppose my grandfather did it long ago but that was a different time and place. Am I making excuses here? Crying in my milk? Evading reality? Maybe. Let me know what you think.

Our 1.5 acres is mostly wooded, so there's not enough sun to sustain a garden. I tried growing shiitake mushrooms once a few years ago, but as it turned out I didn't have the thumb for that enterprise. But hey, I'm happy to be an American in 2009, and not a Chinese teacher wannabe in the 1960s, being herded out to the countryside by Mao's cadre of young bucks to spend long hours toiling in a rice paddy to achieve cultural revolution.

Although we are now enduring a cultural revolution of some sort. The times they are a-changin'. And I am grateful that I'm not mired in Albert Camus' existential dilemma, concluding that the most important decision in life is whether to commit suicide or not, as someone pointed out on Diane's NPR show yesterday.

No, it's not that bad. I suppose I'll just wake up with the sun tomorrow and walk through that awful door of unemployment one step at a time, like however many thousands of dazed Americanos have done, are doing, and will do. I'll play my part in the Great Recession. The current debate about health care and the public option becomes a moot point for me. I'll take what I can get. I had hoped to teach the next generation how to deal with what life throws at us. But I still have a few lesson of my own to learn.

Thank God I married a nurse, and she's a good one too. Perhaps, as I walk through that dismal government-agency door this morning, I'll be whistling that old Dean Martin tune, Everybody Loves Somebody Sometime. And I'll be singing the best line: "If I had it in my power, I would arrange for every girl to have your charms (and employment skills). Then, every minute, every hour, every boy would find what I found in your arms..." Thank God I married a faithful one, and she loves me too.

Maybe if Camus had been faithful to his wife he wouldn't have had to grapple so fiercely with the suicide question. Oh, but of course I'm oversimplifying the problem, as most Christians are known to do.

Would you like fries with this entry?

Carey Rowland, author of Glass half-Full

The Glass is half-Full.

The Glass is half-Full.

Chimerica thoughts

Having just returned from two weeks in China, here are a few differences I have noticed between the USA and China.

~Chinese people are thin. Americans are generally much plumper.

~Chinese economy is running on an open throttle. American economy is stalled. I think this is because their economy was crippled for so many years with communist smallthink, aka great leap forward and cultural revolution. After Mao's death, reformers such as Deng Xiaoping and others were able to crank the economy up with a dose of capitalistic freedoms. These new programs are now hitting their stride at an optimum time during the collapse of western economies due to widespread credit abuse.  But the Chinese still haven't figured out yet, or understood the need for, constitutional protections for freedom of speech, religion, and assembly. Ultimately it will be their undoing unless they can lighten up their governmental compulsions to keep tabs on everything that everybody does, instead of tending to the larger issues.  The communist party is nitpicking their people to death. How long the good Chinese people can endure this control-freak mentality in the governing party in an age of expanding electronic communication is anybody's guess.  

~99% of all human hair in China is black. I mention this only as an indicator of relatively low cultural diversity. In America, we have a wide range of hair colors, from blonde to black and everything in between.  We are a melting pot of world ethnicities, whereas China is a melting pot, so far,  of Asian ethnicities only.  The Han and Manchu groups seem to be the two dominant groups. Uighars of Urumqi in the northwest, for instance, are resisting the intrusion of Han influence  into that area. The Hans, some of  whom have immigrated to the northwest from the middle of China, are generally well-educated and have been traditionally a ruling ethnic group for thousands of years. Class differences due to education levels are the main factors here, as well as Han inside-track to communist party hierarchy.  Hierarchy is big in China; I think it goes back to the Confucian heritage, which emphasizes the state or whole of society over the individual. Everybody has a place in the big picture, so to speak, and that supposedly makes everything hunky-dory. Of course, it really doesn't work out that way; communist party spent all those years micro-managing idealistic egalitarianism into ancient culture that had been only recently released (1911) from monarchy.  In America, our emphases have been upon individual freedoms. Admittedly, we've had our problems with ethnic conflicts too. The difference is we have constitutional structures for working these issues out. And although these issues take time to resolve in America, they do get worked out eventually, I believe.

~After viewing three Chinese metropoli from the air--Shanghai, Beijing, and Chengdu--the sight of Atlanta from the air, with its green carpet of trees and relatively clean air, made quite an impact on me, because the air over Chinese cities is very smoggy.  Thank God for our American EPA.  I hope the Chinese can get a handle on this problem of air pollution--particulates, sulfur dioxide, carbon emissions, etc. The governments have recently undertaken new programs for planting forests and greenways. These progressive, prudent measures may ultimately outperform our inclinations toward similar workings in America. But they need the green, oxygen-for-carbon-exchange tree canopies even more than we do, especially in the cities, because they have so many more people than we do. They've been in the same place for thousands of years, whereas most American immigrations have crowded into our continent in the last five hundred years or so.  I suppose that if the expansion of "civilized cultures" (European)  had happened a couple thousand years ago instead of from 1492 AD onward, then we would have the same population density (and hence environmental) problems as China with its 1.3 billion people. 

~The two national parks we visited in the mountains of Sichuan province were stunningly beautiful, and well-managed with great sensitivity to the crystal-clear waters and cold, clean air. 

~Bottom line for me after two weeks in China is: it's a fascinating place; I hope they can get their wild-west growth bridled with effective environmental stewardship. They sorely need it. China was nice, but

~God bless America, land that I love.

Carey Rowland, author of Glass half-Full