Crisis? What Crisis?

November 18, 2009

The title of this post is taken from two sources. One was a headline in British tabloid, The Sun, in January 1979, when then-prime minister James Callaghan denied that strike-torn Britain was in chaos. The second was the title of a 1975 album by prog rock band Supertramp that famously showed someone sunbathing amidst the grey awfulness of the declining industrial landscape.

Are we now getting blasé about the latest crisis? Not so long ago, perfectly respectable economists and financial analysts were talking about a new Great Depression. The world was on the brink, it was said. Now, though, consensus appears to be that it is all over bar the shouting. The world is safe.

Wealth managers at Barclays have gone as far as telling their clients to get over it.

Move past the crisis …. The past year’s events were deeply traumatic for most investors, but now is the time to move on, and take a more “business as usual” approach ….”

Such bullishness may not be comforting to the record numbers of jobless in parts of the world, but it is bordering on consensus. It is left to the likes of perma-bears such as  Nouriel Roubini to try to burst the bubble of optimism on which many are floating. The economist began one of his latest articles bluntly:

Think the worst is over? Wrong.

Roubini’s main point is that unemployment is likely to get worse rather than better and that many U.S. jobs that have been lost will not come back.

Now, there can obviously be a disconnect between markets and economics, but the former tends to be based on assumptions about the latter. So which is right? Are we out of the woods? Or should Supertramp be firing up their keyboards again?


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We are no longer tipping on the brink, but we’re not far enough away from it that everyone should think we’re safe. Joblessness in the US will not return to pre-2008 levels for years because we have not been promoting long term job solutions.oh, and Bloody Well Right Supertramp needs to fire up the keyboards again! Please Rick? For a youngin’ like me?

Posted by Andy | Report as abusive

I am disappointed in the Obama Administration, the Treasury and the Fed for allowing this second bubble to be blown. With the help of the Goldman’s, Jim Cramers and CNBC’s of the world this group has ill responsibly sucked in the “little” guy to be fleeced….just like always…. pump and soon to be dump.The media is either idiots or liars as they tout things like the stabilization of unemployment without a mention that people are falling off the roles in droves. Ditto the raping of the USD to which China and the oil nations have finally called our lip-service bluff.Mark these words….. the worst hasn’t begun to show its head. The markets are at unreasonable PE’s based soly on the hope of recovery. Roubini and Whitney have it right.

Posted by Matthew Miller | Report as abusive

In 1929 the stock market collapsed precipitously. By 1933 the economy plunged. In that year we endured record property foreclosures, 275,000. More banks closed. Unemployment skyrocketed to 25 percent.While today we foreclose 275,000 homes a month, banks are still more secure for now. Unemployment is also somewhat lower. At the end of the day we are not 4 years out from the 2008 market collapse. We may well be in for a far bumpier ride some time in the next 24 months.Unlike the 1930s, the U.S. has two wars to prosecute today. We are also a net importer of crude while in the 1930s we were the worlds largest producer and exporter of crude. At some point in the near future oil production will fall off the top of the bell curve. As this resource becomes more scarce prices will rise unpredictably. Any nation as dependent upon crude as the United States has to find itself in a position of weakness.We have not invested heavily enough in alternative energy or serious conservation efforts. The money we have spent on defense in the past three decades could have paid for education, health care for everyone, public transportation and alternative energy development. There would have been plenty of resources left over to invest in green infrastructure. We could have been leading the world on all these issues. Instead we pissed away all our wealth to fight wars over the control of oil.

Posted by Anubis | Report as abusive

I’m not as pessimistic as the comments above although with a few poor decisions we could be much worse off. The main priority over the two years has been to right the plane. The problem is that if we try and pull up too hard we’ll go into another tailspin, immediate growth and more bail outs will take us to harder spots. If we take the long hard road back I think that Supertramp can stay where they are.

Posted by Levinson Axelrod | Report as abusive

“The Diary of a Supertramp” by W.H Davis, was far predates the examples you have given.

Posted by james | Report as abusive

Not only is it too soon to celebrate, we are now plunging headlong into economic catastrophe in the west, leaving the reins of true power firmly grasped in the hands of the architects of this misery – the banks.

Posted by Dave | Report as abusive

It’s encouraging that the stock market is doing well, that some firms are reporting encouraging earnings, and that we appear to be turning the corner on housing.But we have ten percent unemployment, another six or so percent underemployed, and another six or seven percent who have simply quit looking for a job.To begin a real and sustained recovery, we need to build our economy with millions of new private sector jobs; a sustained recovery cannot happen unless our GDP makes a huge turn for the better. Our national debt is far too large, and the cost of servicing that debt will kill us and our kids unless we can grow the GNP, and with it, generate a much larger tax base.But our current fiscal policy is killing small businesses. If Obama and the congress do not reverse course on deficit spending, increasing taxes, and increasing business regulation soon, we will be in for a continuing, and possibly worsening recession.

Posted by mike | Report as abusive

Just don´t forget this obvious thing:Mankind can´t still know the future. A positive trend is not a brilliant present, it is just things are going better than before. I think this very evident fact should be remarked to prevent the excesses of some people leading opinion in the sense of talk about the end of crisis. In the old times (two years ago) a GNP growing of 0,3% was called stagnation, not “we´re out and up to the stars”;My god, they say it just two inches over the official deepest reccesion rates from the 30´s.With the fastest employment destruction in history, accompanied with thousand of medium and little range companies, the essence of scale- economy.With the potencially strongest inflacionary process unleashed by central banks.While any wreck of control of public spends has blown away.As Nietzsche cuould say: “Children, enjoy the crisis, recovery will be worst”I live in Spain, this year, publics deficit and debt growing could reach until 23% of GNP.

Posted by Giorgios | Report as abusive

We are only in the first part of the epic titled the greatest deleveraging and wealth redistribution of mankind.

Posted by Andy | Report as abusive

Do we have Time for Breakfast ? You are right Andy. We must just build a new value system with Bricks in the Wall. 2 500 000 000 well-off and 3 500 000 000 less-well-offs will be good as a start. It is simple, each economy must just design two trollies/baskets for inflation and fix the loose connections that have come about. The rest will follow. We are on the fringe of the woods and information age in most interesting times.

Posted by Casper | Report as abusive

These people want the return of the “good ol days” when cooking the books was normal and no one cared as long as profit was being made.They are still concerned about saving themselves by getting the “consumer” to spend money he/she doesn’t have because they don’t have any income. They are doing EVERYTHING except the one thing that needs to be done, which is to invest in the citizen.Unemployed citizens should be allowed to remain on unemployment as long as they are looking for work or furthering their educations. People can piss and moan about it. But it’s the only way the economy will get back on track. You can’t recognize citizens as the backbone of the economy and then simply toss them to the winds and wonder why you don’t have paying customers. That’s just ridiculous.Stores slash prices, and banks are trying to give loans away and it isn’t working. Why? Because no one has any money! Who’s going to buy that Wii without an income? Who’s going to buy that new car if they don’t have jobs or businesses that earn them any money?Investing in the citizenry is the ONLY way this economy will become productive again. They can try to avoid it as much as they want but it won’t change the facts. And as a citizen, if your elected representatives are not set on a path of investing in you, then you would be a fool to elect them again.And at the core of this issue. CORPORATIONS ARE NOT CITIZENS.The courts need to reverse the decision made over 100 years ago that gave corporations citizenship. Only citizens can lobby congress. But corporations have more money in their pockets than individuals do. And citizenship gives them the right to lobby so your issues and mine are not important.

Posted by Benny Acosta | Report as abusive

Absolute rubbish laddy!The economy is doing great! 3.5% Growth in the last quarter alone. We should all be popping the corks on the champagne and partying into the wee hours of the morning!…only when we wake up the calendar on the wall will read… 1932.See people often view The Great Depression (what was so ‘great’ about it anyway, kind’ve like ‘civil’ war?) as a moment in time, a singular event. The cards actually played out over a decade when WW2 spending finally broke the economic malaise.Here we are again. But we are at the beginning of the cycle that will have roughly repeated itself by almost 100 years.If history is anything to go by, another world war is on tap when the economy finally derails. I just hope that people have the sense to keep it a conventional war, as bad as that would be.If, I am wrong abbout that, there will be at least another economic calamity to unfold. Hopefully this time we can uproot the thieves that created this mess and make an example out of them instead of giving them even more control of we poor sods that ultimately write their paychecks, pennies at a time.

Posted by J | Report as abusive

Unemployment, both in the U.S. and the world as a whole, marches ever higher because the field of economics doesn’t account for the relationship between population density and per capita consumption.Following the beating the field of economics took over the seeming failure of Malthus’ theory, economists adamantly refuse to ever again consider the effects of population growth. A pity, for if they did, they might come to understand that once an optimum population density is breached, further over-crowding begins to erode per capita consumption and, consequently, per capita employment.

Posted by Pete Murphy | Report as abusive

The album cover is so relevant today. The man in the chair represents the politicians in D.C. Look up inflationary depression which is just depression hidden by numbers produced when you keep printing mountains of cash. Clearly we all need to be thinking about simplifying our lives, reducing debt, and improving our cash flow. Also, improve your health, no matter what happens in D.C. and around the world, health care will be rationed. Do not listen to the government. They want you to spend the little bit of take home pay you still have. Brace yourselves the worst is behind the silver lining.

Posted by Martha USA | Report as abusive

Talk and flag waving works to a point. I see people buying, but they bought during the depression also. I surely don’t put much stock in what banks, economists, and government leaders say. Herbert Hoover kept saying that prosperity was just around the corner, but we never got to the corner. I see a total lack of planning again as how to remedy the situation. We have not seen the dry up of the Chinese market yet, but it will come.

Posted by f belz | Report as abusive

We are all witnessing the distruction of our freedoms and incentives to get ahead in Obams world. He has never had a real job. He has only worked for social programs or a government job. This is why he does not understand what it takes to keep an economy improving with real legs. This crisis started with the Bush administration with the help of Clinton getting rid of Banking rules and then a democratic cingress that mandated everyone deservs to have a house, without regard to paying for it. The greed spiriled with out the proper rules and now the people of this great country need to make the biggest decision of generations. We have to go back to paying as you go. We need immediate energy independece for this country. This counties companys produce the cleanest energy in the world yet the hurdles to produce energy in this country have put us in a position of impoting our energy from counties that don’t produce it as clean as we do. The jobs created by producing this energy will help also get us back to work. It’s time people go back to work producing in this great contry. The ripple effect from these jobs and cheaper energy will create more jobs and we continue to create new technologies to help every one. The government needs to get out of the way let us produce and not raise our taxes! Vote!

Posted by Greg | Report as abusive

I believe we need to make time for “Breakfast in America” and really look at where we are going. It seems there are a lot of criticisms about spending but I don’t hear many other plans.The FED backed dollar was thrown a life jacket to keep it afloat, after it fell off the yaught. Good and bad; it had to be done because, we are all riding on that same boat.It’s time now to for “The Logical Song.” Industry in America isn’t the boom of steel, oil, cars, and technology; as we gave the process of that all away for financial gains that we ALL capitalized on. It would be true to say some far more than others (can you say bonuses – sorry but wtf). This is still an economic tsunami of continuing waves, each with individual impacts; working away on the substructure of the economy, dignity of Americans, and the respect of a moral modern society. Now don’t jump off this boat yet! Lending money to small businesses in my opinion, is just a leaking inner tube that may or may not save a few jobs/a lot of jobs or default on a lot of loans. Didn’t we just make that mistake in subprime housing loans?Infrastructure is really our only industrial market, unless you like to sell shoes or hand out burgers (service jobs). It’s time we “Give a Little Bit” of thought as to how become a long term, strong, green (as feasible), industrial nation (after the infastrucure market is exhausted). The “American Dream” was/is a comfortable life that was/is earned, not guaranteed.We need to say “Goodbye Stranger,” to old industrial ideals established in the 1900’s and reevaluate on how the world market can benefit what people need, not want. There is a lot of greed thriving on the domestic people of the world these days and people naturally need someone ELSE to blame. I really enjoyed the clichés and next time we should use The Stones… “You Can’t Always Get What You Want” or Chumbawamba… “I Get Knocked Down”

Posted by Dean | Report as abusive

I do feel helpless. Who really knows to whom to give political contributions. Watch Alex jones documentary about Bilderburg and the one world government. Watch “America From Freedom to Fashism”. Read “Grunch of the Giants” by Buckey Fuller. Educate yourself and be aware of others opinions. Read Obama’s “Dreams of my Father. Plan for the worst, work for the best, support your politicians that represent your values. Most of all get your own house in order. Prepare yourself for a much lower standard of living and hopefully not poverty. Right now one in seven Americans does not have enough food on the table. Think long term about what you need to do to help your children and yourselves.Martha – Love USA

Posted by Martha | Report as abusive

It’s not quite over yet but we are at the bottom I think. There’s now a small upturn in hirings which is one of the primary things that will drive recovery. You can’t recover very well when people keep losing jobs.

Posted by Brian Bigelow | Report as abusive

Levinson Axlerod, I was merely stating facts. That is not pessimism. Certainly I am cynical. Cynicism is rooted in the truth. Until people face the truth consensus for constructive action and substantive change will be unachievable. Or are some facts just to negative to mention?

Posted by Anubis | Report as abusive

Dean, you surprised me by one Supertramp song omission. I was sure someone would call the subprime crisis the Crime of the Century.

Posted by Jeremy Gaunt | Report as abusive