Sunday, October 26, 2008

Destitute Family

This picture was taken in 1936, and captures the human cost of the excesses of the 1920's, and the pain of the Great Depression. The photograph might look vaguely familiar, as the woman pictured is Florence Thompson. She was made famous by the "Migrant Mother" photograph taken by Dorothy Lange. This picture was taken at the same time, and was one of five pictures taken that day of Florence and her children. This one is much less known, but you can see it is very similar to the famous Migrant Mother photograph.

Now, I know that people have become tired of my editorial comments on the economy and the government. I know that people tune in here to see a picture from the past, and are not really interested in my opinion on world affairs. Because of this, I try and limit my editorial comments to the Sunday posting. So, today is Sunday, you have been warned, and here goes.


I am really surprised by the somewhat complacent attitude that people have towards the recent Wall Street meltdown, and collapse of many parts of our financial systems. People now clearly see that Wall Street is in trouble, but I don't think that people yet see that the next shoe to drop will be for the crisis to hit main street. As the stock values continue to slide, companies will first stop hiring, and then they will begin to lay people off. As people lose their jobs, fewer and fewer people have money to buy things. As they spend less, companies make even less money, their stocks slide further, and then more people are laid off. This is the terrible spiral we are about to enter, and it will be almost impossible to predict how far down it goes before it hits bottom. I can, however, predict how I see the crisis unfolding.
The government, and the people, now are seeing that we have a very significant problem. The approach that the government is taking, with the support of the people, is to solve the problem by throwing money at it, and moving the country to a socialistic system. For example, when the economy first started to slide, the government's first response was a stimulus package that sent money out to everyone. This was silly. We have a terrible national debt, and our economy got in trouble due to too much spending and not enough savings. So what do we do? We encourage everyone to spend more. When this did not fix the problem, and in fact made the problem worse, the next thing we did was to start bailing out companies in trouble. At the same time as we are bailing out failed companies with failed management, that same management was receiving obscene bonuses and other compensation. Now we learn that much of the $1 Trillion bailout package will be used to buy equity in the failing banks. This is by definition socialism . . . government ownership of public companies. As the financial system continues to fail, there is now talk of another stimulus package.
It is clear that our approach to the problem, which was caused by too much spending and too much credit, is to throw more money at it. Presently, our National Debt is funded primarily by foreigners. Over 60% is held by foreign entities, much of it by countries like China, which might not actually be our friends. I imagine that very soon these entities will realize that we are in danger of not being able to service our debt and deficit, and that the only way for us to continue to operate is to monetize the debt (print money to pay it off). Just as we saw panic selling in stocks recently, we will see panic selling in treasuries. The US government will no longer be able to fund its operation and debt obligations, and they will do what they have always done . . . print more money. As this happens we will experience hyperinflation at a level unseen in our history.
I believe that this will lead to a new Great Depression, and the human suffering in the new Great Depression will be far worse than the last Great Depression. The reason is that in the last depression, there was some manner of social order in the country. If a man was hungry, he might try to steal your chicken in order to feed his family. He would probably not riot, burn, and pillage a shopping center. If we look at the response of people to various events in the last few years, we see that it does not take much to set people off into rioting and pillaging mode.
So, what should we do? Well, I have more or less given up on the government doing the right thing, so I think we as individuals need to be as prepared as possible. I am not a crazy survivalist. I think it is silly to buy a generator, or store food in the back yard. I think that there are some rational things that you can do. First, as a working person, are you doing a job that is really needed by society? It is like a huge game of musical chairs . . . when the music stops, will you have a chair? I believe that in any scenario, society will need and pay nurses, teachers, policemen, and those that manufacture needed goods like food, energy, or medicine. I think that if I were a salesman at Best Buy, a car salesman, worked at a health club or other such things, I would be concerned. If you work somewhere that offers goods or services which are not absolutely necessary, I would try and retrain and find a "mission critical" job as quickly as possible. The second advice I would give is to drastically reduce spending, and if you are in debt, get out of debt as quickly as possible. Downsize in what you are spending. Save more, give more, and re-evaluate what you consider to be a necessity. I would do things now like cancel cable TV, fire the maid, stop the health club subscription, stop manicures, mow your own grass, stop buying electronic gadgets, and re-evaluate plans for your children's college . . . can they attend a local university, and live at home?
I am not trying to frighten people, but based on my analysis, I am concerned that the economy has crossed the tipping point, and things will get much worse before they get better. Be prepared, and refocus on the things that matter . . . family, faith, and friends.

16 comments:

  1. I think it's going to get worse, too. Much worse. But I'm not afraid. We need to be retrained on our values. This is a 'natural' way to do that.

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  2. You are concerned (in your early paragraphs)that companies will stop hiring and start laying people off. Yet, your solution is for people to stop spending and cut back on things that contribute to a robust economy. I'm not sure I disagree with your advice, but do you see a dichotomy in your own thinking?

    Also, you suggest teachers and nurses will always be needed while I just watched our local School Board delay the opening of school by three weeks so they could figure out how to cut $2.5 Million out of the budget. Their solution didn't include turning off the lights when you leave the room. It was the JROTC instructor, art teachers and bus drivers.

    The hospital where I just had heart surgery has consolidated services so they can reduce staff.

    Nobody is safe, except those who can scrimp by on their "Golden Parachutes."

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  3. Don,
    Thanks for your post. I appreciate your comments. To clarify my point . . . I think you are combining two separate points that I was trying to make. The first is that the layoffs WILL occur, no matter what I or others think or want. They are on the way.

    If you they are on the way, then we, as individuals need to personally prepare for them. If we are wise, we will brace ourselves for what is coming. We can brace ourselves by getting our personal house in order.

    I am not suggesting that there will not be cutbacks everywhere, I am just suggesting that people evaluate what their personal jobs are contributing to society. Are you performing a role that people must have, or are you performing a role that is a "nice to have". There will be job losses in all sectors, but some sectors will be totally devastated . . . I dont want to be part of those.

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  4. "At the same time as we are bailing out failed companies with failed management, that same management was receiving obscene bonuses and other compensation."

    At the same time as we kept reelecting a failed congress, with failed politicians, those same bureaucrats were passing obscene budgets and other compensation for lobbyists and Wall Street fat cats.

    I agree that each of us should be taking stock of our personal welfare. But the most important thing we can do to insure our future, is make Congress work for us. Hold their feet to the fire, and get rid of those that are not being responsive to the good of the nation, the good of the people.

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  5. Wall Street is really feeling the pain:

    "For the last two years, Amar, 36, has run a technology unit in the capital markets division for Lehman Bros. until it went bankrupt and was bought in part by Barclays. He's still there, adjusting with the change in management. His salary at Lehman's was $400,000, including a bonus and restricted stock options. Amar's base salary, about $200,000, remains the same, but there are no reports yet on what will happen to 2008 bonuses and options"

    Dude where is my bailout

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  6. Well said PJM. I now generally agree with your assessment and have made changes around here that will conserve our little piece of the system. I am fortunate (or wise??) to have a really well funded retirement system that will weather this approaching storm, but I have a number of other retired friends that have a pretty bleak outlook ahead. Many of them have health infirmities that will need money to support their health and they will certainly suffer. I hope they have solid families to support them

    I would appreciate as little help as possible from the government. Over time (long?) this will pass but I think we may not be the same country: taking everything for granted and thinking only about ourselves. Maybe we will emerge as strong as we did in the early fourties.

    As you can see I like to work with a cup that is half full. It will be a tough position to hang onto, but it is the best way to get by these days.

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  7. I just found your blog- I have spent about an hour already on it! I am fascinated with these old pics. I miss seeing them in history class when I was in school. Thanks for doing this- I thought for sure you were a history teacher until I read further!!

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  8. First, I would like to say I am impressed by your selection of photographs. Your daily is my main page.

    Today I take exception to your commentary.

    I have been a professional visual artist for 35 years. My work has benefitted mankind tremendously by training surgeons, dentists, scientists, and helping to diagnose many a person . I know my value to society, yet, my profession(s) are considered to be superfluous.

    My point is if you didn't have photographers like me you wouldn't have the photograph you started today's commentary with! So how can you determine what is and isn't "mission oriented" and necessary to society?

    I once heard a jazzman who lived through the depression say he was never out of work. When he asked his band leader, the great Harry Reser, about this, Reser replied, "People scrimp all week just to have enough to hear us play so they can forget about life and their troubles for awhile."

    And by the way, Roger Tory Peterson's first field guide to birds sold out quickly in 1934 at the height of the Great Depression. Certainly people didn't need to purchase a book about birds when worried about having to feed a family.

    I do know what you are saying pjm, but if we move forward courageously and stop propagating fear (as the conservatives do when they bombard us about liberals being too costly right now) then perhaps we can extricate ourselves from this mess sooner.

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  9. Re: "I believe that this will lead to a new Great Depression…"

    I too believe we have yet to hit bottom. No amount of positive thinking and rhetoric will turn around our economic mess.

    Our collective appetite for excess has come home to roost. A "correction" will come, and we all will tighten our belts.

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  10. I think it will get worse. I'm preparing as much as possible stocking up on food, water, emergency/survival skills, guns, etc.

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  11. First the picture. I read an article recently, possible on the Library of Congress website, that the family in the famous Migrant Mother images are not actually an immigrant family. The woman herself did not want her pictures taken and in later years decried the image as untruthful or some such.

    Second the commentary. As a legal secretary, I don't really think my job is mission critical and I pray that I'll remain gainfully employed. At 40 years old, it's a little difficult to retrain myself to be a nurse, teacher, or factory worker, plus some schooling requires money and time, something I have little of to spare.

    Also, I disagree with your statement that the bailout is being made with the consent of the people. No one asked me or my family to vote on it. I don't recall anyone asking my opinion, maybe I just missed that phone call. But to say that just because it's been passed proves that the public is in favor is just wrong. Everyone I know is angry about it and incensed that their congressmen went along with it. Sadly, the cynic in me knows that it won't make any difference anyway, even if it was put to a vote. Somehow that bailout would have been passed, through dirty advertising, voter disenfranchisement or other political trickery. Our political system is broken. What can an individual do to fix it? Basically, nothing.

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  12. I read the same, that the woman didn't like the photo taken. I also told my Congressman to vote NOT but he didn't. I am VERY angry. Most if not all would say it was irresponsible not to bail them out. I say, no more good money after bad, and let the chips fall where they will...

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  13. Personally I look forward to your longer posts and commentary. Keep it coming!

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  14. One of the more eloquent explanations of the probable, but worst case scenarios. It shows how our economy is not adding up these days. My big question is where does the American worker add value? Yes, we consume, but our auto companies are in decline, our manufacturing is overseas, our whitecollar jobs are outsourced (IT), and our exports will fall as the world enters a recession. If we were a people that generally had high savings, we could see it off. But I see a lot of people living in debt with almost no savings. This has been coming for awhile I think.

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  15. You seem very much against a social solution, but it seems to me that the present system cannot find any answer.

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  16. "Now, I know that people have become tired of my editorial comments on the economy and the government."

    Honestly its one of the main reasons i read this site, keep the bias and opinions coming please :)

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