Goldilocks and the Big Bears
Submitted by Economy CSI on May 3, 2007 - 5:12am.
Economy | Economy CSI
Goldilocks and the Big Bears
By the Economy Team
You know how it is when you just want to take one lousy week off? Just one week out of fifty-two, one week when the clients and the problems fade to a dim memory. Just a single week of solitary to recharge the old batteries...
Something to remember once you’ve managed to get a week like that to yourself; Do NOT drop by the office to pick up anything you’d forgotten. Because that’s when your week is over. Kaput. Finished.
I woke up on the second day of my self-imposed exile, and remembered I’d left my most recent purchase from the local book-swap shop sitting on my desk. Something recommended to me by my sisters kid, “Boomsday”, by some guy name of Christopher Buckley. Since I had made the purchase specifically for my week of downtime, I just couldn’t leave well enough alone. I decided to run by and grab it. I got more than I bargained for.
As I opened the lock a piece of paper I hadn’t noticed lodged between door and frame fluttered to the floor. I groaned, thought for a second I should just ignore it, but curiosity got the better of me.
“By the time you read this, I’ll be on a plane to Aruba. But I was wondering something - ”
Apparently the retired school teacher who I’d met about a year ago on the Case for Saving , had another question; another job for yours truly. I found myself planted in my chair, and firing up the old PC. It was like a reflex – I couldn’t even control myself. Oh, terrific I thought. One minute I’m Mr. Relaxation; next minute I’m just the Economics Research guy. Great.
The note continued, “Laura Tyson told those attending Davos in 2006 that the next couple of years would be a "Goldilocks economy." Now my question is, for whom? Because as I see it from where I’m sitting, if I hadn’t squeezed every nickel, taken a part-time weekend job at the vegan market, shut off my cable, and started selling hand-crocheted toaster covers on eBay, I’d be spending another spring vacation sitting with my feet in a pail of cool water on the back porch listening to old Beach Boy records.”
The broad has a way with words. Seeing as I also liked the way she dot’s her i’s and crosses her t’s on her check signature, I settled into my chair and fired up my Google to see who's porridge was just right.
Right off the bat I see Jack Mehoffer, CEO of State Farm Insurance, got an 82% pay raise in ’07 to boost his meager ’06 take home of $6.4 million up to over $11 million. Then there’s Papa Bear H. Edward Hanway, CEO of Cigna, who took home $27 million last year, before a few more million in stock options got thrown into the mix. That’s some steaming hot porridge right there, I’m thinking.
Poking around some more, sure enough, seemed like Ms. Tyson had a point. But so did the Teach... For those running hedge funds and trading on Wall Street who had megabucks and the skinny on how to play the market, Goldilocks did very well. For the top 10% income level folks in America, it was a swell year.
For everybody else, it was indeed smoke and mirrors. Just take a look at the GDP for the first quarter and you will see we still suck at saving money compared to every other nation where people have jobs, including China. Yes, China! Back here in the US of A, we are still, for the most part, spending more money each month than we make. The Consumer Price Index looks good if you only look at the core CPI, which excludes the cost of food to fill up the tummy, and cost of gas to fill up the old tank.
Who exactly can afford to buy anything besides food, medicine and gasoline?
America has record foreclosures this year. The debt has caught up with those seeking easy credit and the lenders who thought they had it made. Bankruptcies are up for the sub prime lenders. They are down for individuals. There was a rush to claim bankruptcy last year before the new law took effect, so don't be fooled into thinking it's a rosier picture.
The dollar has had ups and downs against other currencies, mostly downs. That makes goods we import more expensive without adding on the cost of petrol to ship everything around the world. Gasoline for the regular joe? Just a couple of days ago, I shelled out $4.06 a gallon for the premium blend. And that's not chump change.
I glanced over at my abandoned novel, and thought for a moment of the old leather chair by the front window and that 25 year old bottle of scotch that wasn’t getting any younger – thank god. Time to wrap this one up, because strangely, I’m feeling optimistic here. Not too hot, not too cold.
Upside – so long as people do as they did last year; living within their means, saving what they can, they should be ahead of the curve. Of course, that’s providing they aren't trying to sell a house they bought recently. But even with inflation perhaps promoting the Federal Reserve to increase interest rates (which they don't seem to want to do) the cost of borrowed money is still very reasonable. The Fed may have to realize the price of energy and food are out of their hands. It's part of the global economy, which the Fed doesn't control.
So, we’ve got us a silver lining. It’s small, and you’ve sorta got to squint and tilt your head to the left to see it, but it’s there. Social Security and Medicare are solvent for an extra year more than the government thought last year. (And that might even be extended should we get the uber-wealthy paying on full earnings, and get rid of the wild-fire health industry profiteering.) Perhaps the new Democrat controlled Congress is making a difference already in managing our budget. And in a nutshell (from those autumn nuts I stash away for winter) that is the reason for optimism. The grownups have taken the credit card away from the Bush administration. 2007 is going to be another bumpy road, but now there’s oversight that may keep our government from more shopping sprees on our nickel.
But there’s still that cloud called downside – and this time it’s darker than usual. The dollar has sunk to new lows on the foreign market. I found this article that refers to the dollars almost ‘absent minded meandering to record lows’ and had to laugh at the apt metaphor for how we’ve found ourselves here. Of course, it was a laugh that didn’t feel like a laugh, but more like a whimper. At least the rest of the world is unfazed.
And US economic growth? Fergeddaboutit. Read it and weep sister. We’re looking at the same old story, and not any poignant ones about love and glory, but about greed and worldwide easy money. That bubble – it’ll burst too. Downturn on a global scale? A economic apocalypse? Maybe. See, apparently these guys all seem to think that us buying stuff is what drives the economy now. They don't care if we borrow the money or take it out of our houses in equity loans, it's good for business. And that plummeting dollar is also good for overseas business. The big corporations are happy campers. Outsourcing and bottom line, the stuff of psychopathic finance.
I thought for a second that I’d just tell the teacher that saving still equals smart, and leave it at that. But misery being what it is, a creature that loathes solitude, I tucked all the findings -- the meagerly good off-set by the hugely dire -- into the self-addressed envelope that would soon be on it’s way to an undisclosed location in Aruba. I grabbed the wayward novel and locked up. The only thing left between me and uninterrupted relaxation was the seven miles to my driveway, and the knowledge that things are going to probably get bumpier. I stopped off on the way to plant the check from Teach. Into my savings account, natch.
LINKS and SOURCES
World economy 'set for good 2007' By Tim Weber Business Editor, BBC News website, Davos
Consumer prices surge as energy prices jump | USA TODAY Copyright 2007 The Associated Press
Consumer confidence falls Reuters April 24, 2007 John Parry
Inflation Threat Alert: Blue (Guarded) Economists View Blog | April 19, 2007|Mark Thoma
Home equity loans hike spending | CNN Money.com | April 23 2007
Bureau of Economic Analysis News Release: Gross Domestic Product | April 27, 2007
On U.S. debt, it's all quiet on presidential campaign trail | USA TODAY Opinion
GDP growth weakest in four years | Reuters April 27, 2007 | Glenn Somerville
Jeremy Grantham: All the World's a Bubble | TheStreet.com | April 27, 2007 | Brett Arends
Fed's Yellen says economic downturn possible | Reuters April 27, 2007 | Mark Felsenthal
Just how long does it take for that 27 million to "trickle down" do ya think? It must be quite a trickle, as far as trickles go.
The top 10% are going to have to start buying all that stuff that drives the economy, because the rest of us can barely keep up with buying food, gas, medicine and then all those people who can't pay the mortgage!
http://money.cnn.com/2007/04/30/news/economy/spending_income/index.htm?postversion=2007043013
You need an extra job or two today to cover health care. Even if you're healthy!
It's funny out here to see the sudden shifting of perception with SUV's --that used to be cool and now you see people kind of skulking out of them in the parking lot with these guilty looks like, "What? Me? Oh this is my brother's car..." Or frowning as they fillerup.
And then there's the tax breaks bush offered for buyers of Humvee's and mega tonnage vehicles - that sure greased the hand that feeds him.
If the middle class keeps getting squeezed and diminished as it is... I may end up picking my new neighbors grapes in his vineyard... he has a vineyard. That is what 35 million will get you in L.A., house in hills with your own vineyard, no pool. I will be a disgruntled grape picker.
in NYTs. I read recently that whoever wins the 2008 election may be presiding over a depression. Perhaps when looking for the right candidate to be president, voters should think who they want reprising the role of FDR, the Depression and war time president. This time the winner is going to have to preside over both at once from the way things are looking.
Listening to the candidates, they seem to yammering on about ideas that make them sound good, but only result in short term fixes. We need an overhaul that while not jolting the system into chaos, can result in a more stable and a more equitable future.
I'm not an economist, nor do I play one on TV, I'm just a woman facing a bill for a new crown. Maybe my dentist can buy new stuff for his horse farm.
Here's an idea: how about we get out of this empire business!
You have not converted a man because you have silenced him.--J. V. Marley
Just when I'm pining for a new King/ Queen-- even an Emperor will do just fine for my plan-- you go and suggest something radical like we get out of the Empire bizness??
You should be happy to help your dentist with his horse farm. It takes a lot of hands to run a tight horse farm.
Do not begrudge our new serfdom status. Many fine serfs have served before us and died in... um, misery.
Maybe you can work off the costs of that new crown by helping brush down the horses? Clean the stables? Good outdoor work, good for the soul.
Now let's see. Emperor Edwards has a catchy ring to it... How would he look in fur trimmed robes I wonder?
Standard Satire Disclaimer
Longest bull run since 1927.
http://money.cnn.com/2007/05/04/markets/markets_0530/index.htm?section=money_topstories
Then came 1929.
a follow up movie to Wall Street on how money never sleeps. Could it be about the worldwide web of offshore banking and money laundering? Could it be Drudge has figured out where the big bucks were coming from for our gumshoe to be doing the research on the super secret assignment? Research for a movie!! I always thought so:)
to teach people about what happens...
Thom Hartmann just said IBM plans to lay off 100,000 and cut pensions. Hoping share prices will soar...
A caller talked about the myth of privatization bringing prices down asked "Has your cable bill gone down lately? When was the last time your phone bill went down?"
His show is on Monopolies today, and the history.
Then the killer came when he played a Dick Morris clip saying we need to (gotta shout here, sorry)
STAY IN IRAQ -- BECAUSE IF OUR TROOPS ARE IN ARMS LENGTH OF AL QAEDA -- THEY CAN SHOOT THEM THERE, INSTEAD OF COMING TO WALL STREET TO KILL OVER HERE...
He said that on the air.
Ostensibly, that we are expending troops to save Wall Street!? And that the trade off was worth it. Because we all know "they" are ready to follow us back home to Wall St. He is one sick puppy.
What kind of insignia Al Queda has on their fleet of F-16;s and Stealth bombers - and on their flotilla of nuclear-armed aircraft carriers, missle launching ships and submarines. People like Morris and Bush and waaaaaaaaaaaaaaaaaaaaaaaaaaaaay beyond stupid - they're criminally insane.
Wes 08
...something intelligent here, but economics just baffles me.
All I know is the rich are getting richer and the poor (and the middle class) are getting poorer.
Thanks for the time and effort put into this even though I don't understand a damn word you wrote.
;)
People want leadership......and in the absence of leadership, they will listen to anyone who walks up to the microphone.
Lewis Rothschild, in "American President"
It's like the writer read this episode:)
http://www.reuters.com/article/reutersEdge/idUSN2547499220070525
What do you do with 27 million dollars a year anyway. I'd sure like to try, but since I live on coffee, cigarettes and pizza I don't think I'd even be able to spend that sort of money if I had the chance.
Probably a top 10 answer for the average American, but I think I'd end up a philanthropist.
Alternate possibility from the movie "Office Space" deleted from comment. :D