Economic Apocalypse Now?
Bad news is good news, I suppose, if you are starting a blog about the economic crisis and are hoping to find an audience. I feel a bit like a vulture perched on a snag, waiting for the economy to die, but I don’t create the news. I started The Great Recession Blog because the press and the economists quoted by the press have been blindly optimistic in reporting “end of the recession,” “recovery,” etc. To me, such words sounded like the village idiot singing “It’s a Wonderful World” while bathing in a pig trough. Seeing your reality as more lustrous than it is doesn’t do much to get you clean.
But such blind optimism in the press is not the case this week. Suddenly commentators and reporters are turning gloomy everywhere, starkly gloomy, more gloomy than I am … even. Consider what has been reported just during the time I’ve been preparing this site for launch:
Economic apocalypse is all over the news. The head of the Bank of England just said in the past week that the world is facing the greatest economic crisis it has ever known: “This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever.” Now, the head of the Bank of England is not typically known for alarmist statements that could create runs on banks, yet he’s suddenly dredging the murky bottom of the barrel to pull up statements darker than an Icelandic winter.
The Telegraph in London just reported, “Little more than two years ago, global leaders were happily congratulating themselves on having avoided the mistakes of the 1930s, thereby averting a depression. Now it appears that the difficulties of 2008 were but a foretaste of what was to come. With the European banking system again on the verge of collapse, there is a sense that politicians and economists are out of options, that governments and central banks are powerless before events. The best of the cavalry has been sent into battle, and it has come back in tatters.”
And just today, I posted an article from Business Insider that quotes International Monetary Fund Advisor, Robert Shapiro as saying, “If they [European leaders] can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere.” In the BBC video quoted within the article, Lord Myner, former British Financial Services Secretary, says, “We are on the verge of a perfect storm,” and the BBC journalist doing the interview says, “This IS an apocalypse, isn’t it?”
Further, the idea of a recovery in real estate is now officially dead, according to a United Press International article: “The survey … shows that bankers expect delinquencies on consumer loans to rise, underwriting standards to become stricter, and the housing sector to continue struggling far into the future…. Defaults will remain elevated for, at least, five more years…. Many bankers clearly believe prices will remain depressed for half a generation. This puts the devastation of the housing crash into perspective.”
Yet another article reports that “It’s official: the ‘recovery’ has been more painful than the recession….” Median household income fell more during the so-called recovery than it did during the admitted recession. More than double the rate of decline.
If one looks at the last headline, it’s clear there never has been a recovery in any terms that are meaningful to the average working person. Calling economic times like that a “recovery” makes me think deNial is a river that flows deep and muddy.
And that’s just this week’s news!
Just look at the highlighted statements above as headlines for the week. A vulture anticipating a diet of dead meet, could hardly hope to find richer fair. It is a pessimist’s marketplace right now. I, however, am really not a pessimist. I am a realist who tries to see bad news honestly while looking for optimistic but realistic hope. And I do not believe realistic hope ever is found in denial of one’s circumstances.
So, where is the hope? During this time in which I’ve been preparing to launch The Great Recession Blog, “Occupy Wall Street” has gone viral. Similar events spread all over the U.S. and even globally like a contagion. People are finally protesting the endless bank bailouts with taxpayer money and the dismal results they have garnered. Why is that hope? It means complacency is finally giving way. People are pushing their politicians for justice to be brought against the crooks who caused this mess. They are criticizing their politicians for bailouts that did not save the economy. People are getting “mad as hell and aren’t going to take it anymore.”
There is even hope in the fact that the news has turned bleaker than usual. The real truth is that the news was already bleak but was being reported with rosy optimism. Blind optimism does not lead to recovery. It leads to foolishness as an entire nation underestimates its problems, thinking they will go away soon, thinking the government knows how to handle the situation. When people start to see their situation honestly and with gravity, then they can start working on real recovery. Until you see your flaws honestly, you cannot work on correcting them.
At last, the press is questioning the government’s talking points. Words like “recovery” in headlines are now being placed in quotes that indicate the writer questions that economic recovery ever was real.
People are waking up. They are seeing that “the great recession” is really much more than a recession. The Great Recession needs to be capitalized like an epoch. It looks, according to the outspoken bankers above, as bad or worse than the Great Depression. Until now, the term “depression” has been avoided at all costs. (Not by me, but by most people.) Now, the world’s bankers are saying that what we have looks as bad or even worse than what we saw in the 1930’s.
All of that makes this a good week to launch The Great Recession Blog. For the last four months, I have been writing that there would be a market plunge in August followed by a far more severe meltdown in the fall. Now, those kinds of headlines are appearing everywhere in the press. That means more people are ready and willing to hear and to repeat the truth about our economy. If that leads to panic, that will be nothing but genuinely bad news. Panic is always bad. But, if this change in headlines causes people to push our leaders toward more responsible action than the fracas that occurred over the debt ceiling, then it will be good news.
It is time to see things as they are and to stop fooling ourselves with the notion that we have done what we need in order to experience recovery. Then real economic recovery can finally begin. Unfortunately, another thing I said a couple of years ago was that the solutions being employed only pushed the problem further down the road, making it all the harder to solve them when the blinders finally come off. I used the analogy of a snow plow pushing the snow straight ahead, instead of off to the side, until the pile simply becomes too heavy to push. That is one of the major risks of denial: by the time you start to deal honestly with the mess you have in front of you, it may become greater than you can deal with.
Let’s hope this plunge into reality is not too late — that it creates a strong enough drive toward sustainable economic revisions that we are able to push the pile of snow one more time and this time push it off the road, not just down the road.
Further reading on the possibilities of deeper economic crisis:
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