Have you ever, while watching cable news, felt embarrassed for (even, insulted by) an anchor and something he said or wore or a visual aid or prop he used to ostensibly enhance his reporting? Of course you have.
Today, CNN’s Allan Chernoff decided his viewers might better understand some of that complicated ol’ stimulus stuff— particularly those “toxic assets” everyone seems to be focused on — if he talked about it while holding aloft a small pink “I Heart New York” piggy bank and speaking in slow, child-friendly sentences, like so:
Let’s use a little piggy bank as an example. I’ve been using this today. This little piggy has been a very bad banker. Filled with toxic assets, right? A lot of bad mortgage loans made. Well, we’ve got to get those mortgage loans out of the bank, out of the piggy. It hasn’t happened yet, but the government is saying we’re going to put private investors to work here, give them loans, give them an incentive to buy those rotten loans from the bankers. That will…
….at this point Chernoff pulled the plug on the piggy and change jangled out…
…free up the banks and then they’ll be in much better shape to make new loans and to get the flow of credit running again.
Fellow anchor Kyra Phillips announced that she felt like she was “back in elementary school” but added that “now I can visualize the whole thing.” If the pink piggy could help just one person, I guess…
Have you ever stained a dried-out, scorched-in-the-sun-for-years wooden deck? The first application is absorbed so quickly it almost doesn't look as though it's been stained at all. The wood literally drinks up the stain as fast as you apply it. In order for this exercise to be beneficial at all, it usually requires two or three applications.
The dried out deck is the U.S. economy and the stain is over $900 billion that will be absorbed as quickly as it is distributed. And then each month and quarter we will wait and watch for signs. Signs that the economy has stopped contracting. Signs that jobless claims are retreating. We have to stop this runaway train from going south before it can begin to travel north again. And that takes time - and patience.
Last Saturday, in an effort to come to a resolution about applying stain to this economy, Congress was in session. And at least one Senator made the point that this would not be a quick fix. Senator Blanche Lincoln (D-AR) appealed to her colleagues for patience - a much needed virtue during this current American Crisis. The last major American Crisis lasted almost 16 years - from October 29, 1929 to August 14, 1945. No one can predict the length and depth of this Crisis, but it won't be quick and recovery will most likely be measured in years for a number of reasons:
A mature U.S. economy. The economy is mature and has been growing at ever-decreasing rates since the 1960s. The U.S. economy is mostly made up of mature corporations, which translates into mature industries, and roll up into mature sectors. Sure there are less-mature growth segments, but they are either not big enough yet (biotech) or are not growing fast enough, or strong enough to greatly impact a $14.3 trillion economy. This makes recovery much harder.
A major consumer mindshift. Consumers have slammed on the spending brakes. Personal Consumption Expenditures (PCEs) make up about 70 percent of U.S. GDP. The rate of PCE growth has been in decline since the 1960s (1960s-4.44%, 1970s- 3.51%, 1980s-3.30%, 1990s-3.25%, 2000s-2.82%) and that decline has only accelerated during the 2000s. Over the last five years, the rate of PCE growth has gone from 3.6% in 2003 to 0.3% in 2008 - with the last two quarters of 2008 registering negative growth rates. And early signs for 2009 do not look good. The U.S. auto industry - coming off its worst year ever - sold almost 40% fewer cars in January 2009 that it did in January 2008. The bottom line: consumers have reined in spending - probably the right thing for them to do personally, but crippling to the economy.
As the largest generation in history ages, it leaves its days of conspicuous consumption behind it. As Boomers retire and/or die, an enormous PCE engine dies with them, replaced by younger generations that get by on less and are increasingly choosing a life built on quality, not quantity. They watched their Boomer parents kill themselves as productivity machines in exchange for more money and a higher standard of living. Just as Boomers did not want to live the lives their parents did, Gen Xers and Millennials do not want to live the lives their Boomer parents did.
So to echo the call of Arkansas Senator Lincoln, we all must be patient. But combined with patience we need to concurrently redefine the measurement of success on so many levels. Our economy must not be measured against historical levels going forward or we will be terribly disappointed for a very long time. It's time to adjust expectations and build a better life on less - a lesson that companies such as General Motors have remarkably yet to learn.
The U.S. economy is no longer a heel-clicking youngster. It's our aging uncle who sometimes falls asleep on the couch when he comes to visit. He may not be capable of running the New York Marathon anymore, but we don't love him any less and we make the most of the time we have left with him.
We will get throu
#1 Posted by TOM OSENTON, CJR on Tue 10 Feb 2009 at 05:09 PM