Real Economic Recovery Requires Common Sense and Knowledge of History, Not Ideological "Purity"

Federal Reserve Chairman Ben Bernanke has proclaimed that the 2008 bank bailout, in which Congress voted to spend up to $700 billion to prop up the nation’s financial markets, was effective, and averted a significantly more devastating economic crisis. While most economists agree with the claim, for most citizens, the crisis that threatens them looms as ominous as ever, and the anger they feel is likely to have a big impact on the November elections.

There is no small irony in the fact that while the TARP bailout is frequently described as a Democrat program, it was actually initiated during the Bush administration, and finally passed with an atypically bipartisan final Senate vote tally of 74 in favor and 25 opposed. Only one senator, Edward Kennedy, did not vote due to his well-publicized health problems. Of those who voted to approve the bill, 40 were Democrats and 34 Republicans. Of those voting against it, 10 were Democrats and 15 were Republicans. Yet, as voters’ anger about the bill increases, most politicians are scrambling to desistance themselves from it in preparation for the November elections.

As part of the attempt to prove TARP’s effectiveness, Herbert Allison, Treasury’s assistant secretary for financial stability, stated that three-fourths of the money that was loaned to banks has been repaid (see http://www.recovery.gov for actual figures by state). However, repayment of the loan was not its actual purpose. The intent was for banks to feel sufficient relief from pressure to begin lending again, and thus far, that hasn’t happened. What has happened is that financial institutions are reporting significant profits and positive cash on hand. Some, such as Morgan Stanley and Citigroup’s Smith Barney, which received a combined $60 billion in bailout funds, went so far as to award executives with multimillion-dollar “retention awards” – PR spin for bonuses – even as they were preparing to lay off workers. To those workers and millions like them throughout the country who have lost their jobs, the anger is both palpable and justified. And those angry people aren’t likely to be enthusiastic consumers, the most essential element in any real recovery.

The manufacturing sector is another essential element that seems to have been left out of the recovery. Manufacturing companies rely upon consumers to purchase their goods, and banks to provide them with working capital to meet consumer demand and remain competitive. Unfortunately, at this point in the “recovery,” those manufacturing companies can rely upon neither, since both the consumer and the lender remain fearful for the future, and are hedging that fear by hoarding what resources they have, rather than spending or lending. Lacking orders for goods and confidence in the availability of capital, companies aren’t too enthusiastic about hiring, further fueling consumers’ uncertainty about improvement in the employment market.

The end result is that some corporations that dramatically cut expenses – in great part by means of layoffs – during the recession are seeing soaring profits. According to the Federal Reserve, company cash reserves topped $1.84 trillion in the first quarter of this year, up $382 billion from last year. But they are sitting on those reserves as a hedge against potential future crises, rather than investing and re-hiring. They’re also cutting back on dividends paid to investors, further eroding investors’ imperative to further invest.

It has been shown that historically, corporate profits and the stock market rebound earlier than employment figures following a recession. History is certainly repeating itself, only in a significantly more dramatic fashion this time around. According to Adrian Cronje, CIO and partner at Balentine, an Atlanta-based wealth management firm, “There is a record level of cash on balance sheets – something like 15% of the market cap.”

With unemployment approaching 10% nationally, consumer demand remains weak. The job gains of the last quarter or so are encouraging, but not enough to offset the fact that the country has well over eight million fewer jobs than it had before the recession officially began in 2007, according to the U.S. Bureau of Labor Statistics. Obviously, “consumer confidence” is something of a misnomer at this point. As long as consumers continue to hoard what they have, rather than save, invest, or spend, it is inevitable that businesses follow suit to some degree.

Citizens’ anger over the disparity between Wall Street bottom lines and their own financial hardships is certainly justified, made worse by the level of government spending in efforts to turn the recession around. Perhaps borne of a sense of helplessness, a number of very vocal groups – most notably, the Tea Party organizations – are calling for dramatic cutbacks in government activity and corresponding spending, and a significant percentage of citizens are taking up the cry, essentially blaming the attempted cure for the disease.

In Franklin Delano Roosevelt’s inaugural address in 1932, he said, “The only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.” Ironically enough, when the nation began to emerge from the Great Depression, Roosevelt – like the current administration – came under tremendous pressure from a fearful electorate to cut back on the programs that had been implemented to turn the nation’s economy around, thereby reducing the tremendous debt which those programs had caused. Ultimately, he succumbed to that pressure, and a rigorous austerity campaign was instituted across the board. Rather than improve the situation, however, in 1937, the country fell into a deep recession; not as severe as the Depression itself, but still bad enough to threaten a return to the horrors of the early 1930s.

The question we must ask ourselves is whether history is likely to repeat itself this time around, and whether we are able (and willing) to learn from history’s lessons. Certainly, there are mechanisms in place nowadays that didn’t exist before the Great Depression, designed as fail-safes against a repeat of such a dramatic fall. However, the sheer scale of our modern economy, along with the complexity inherent in a now globally-interconnected economic structure, renders much of that machinery inadequate. For all our efforts to protect ourselves from economic meltdowns, we have come dangerously close, and aren’t out of danger yet.

Perhaps it is time for us to put logic ahead of fear, and to assign our loyalties to the well-being of our country, rather than to an allegiance to a party or ideology. If our focus remains upon ideological purity and our efforts upon “winning” by making those with whom we disagree lose, we could well experience economic devastation that dwarfs that we experienced during the Great Depression. At no time since have Roosevelt’s words been truer. The only way to move beyond our fear is to set aside our efforts to assign blame for political advantage, to commit to rebuilding the world’s most affluent economy, and to see that the recovery isn’t limited to spreadsheets and stock tickers. The economy is founded upon a system of interdependence, and neither Wall Street nor Main Street can thrive while the other founders. And despite what the most partisan elements in both parties would have us believe, the same holds true in our system of governance. When proponents of one or the other ideology holds absolute sway, our nation suffers. It is only by working together in an atmosphere of compromise, with each side willing to give ground, that we can hope to realize the goal of effective governance so essential to a thriving society.

When "What if..." precedes "If only..."

I was inspired this morning to submit a comment to Steve Salerno's excellent SHAMblog, and thought it only fitting to post my thoughts here on my own blog, as well. The discussion began with Steve's assertion that much of the self help & actualization movement (SHAM) depends upon its followers ignoring not only proven science, but plain old common sense, as well.

Having administrated a psychophysiology of sleep research facility years ago, I found myself daydreaming and remembering what it was like to actually create research studies.  I recalled the research team sitting around a conference table, formulating plans and structure of various studies. Inevitably, one or the other of us would begin a presentation with "What if...?" Recalling these meetings caused a light bulb to go on in my normally dim mind, as I recalled other places where the same phrase had recently found favor: the folks who inspired me to coin the word hustledorks. And I find myself thinking that perhaps one of the most insidious accomplishments of the SHAM industry is the widely successful effort to change public perception of the proper chronological placement of the phrase "what if."

In the scientific method, the phrase represents a starting point, an hypothesis upon which to structure research in order to establish (or discount) the viability of an idea or process. In SHAM nomenclature, however, "what if" is offered as a means to discount the value of actually determining that viability and encourage customers to purchase something that has no demonstrated evidence of efficacy.

If a prospective customer ("mark" is more accurate, IMO) finds a marketer's claim to be inconsistent with available evidence or even common sense, the marketer's typical rebuttal is something along the lines of "What if it works?"

Don't believe that a clipart doll that you buy for $40 and print out on your inkjet has the power to change your life for the better? Don't get all bogged down in all that common-sense-y stuff. Just wrap your mind around the really pertinent question: What if it works? Does it seem like a real stretch to believe that by merely wishing for and visualizing something, it will magically appear in your life, without you even having to do anything beyond dreaming? Again... what if it works?

With such a rebuttal, the marketer attempts - apparently, with an alarming frequency of success - to dissuade the prospective customer from using their brains. It's a technique that predates even the first sleazy used-car salesman's attempt to get a customer to focus on the pretty paint job, and ignore the funny noises emanating from the smoke-bellowing engine. It worked enough times to move a lot of clunkers, and it's moving a lot of clunkers now, it would seem. A lot of folks who bought the paint jobs ultimately found themselves saying things like, "If only I'd had the thing checked by my mechanic..." And an increasing number of people nowadays find themselves with a smaller balance in their bank accounts and nothing real to show for it beyond the need to salvage their pride by continuing their admiration of the emperor's new clothes. Some - such as the several attendees of the recent James Ray sweat lodge in Arizona - have even paid the ultimate price for buying into the spurious logic of, "What if it works?" And their families are the ones left saying, "if only..."

As I've frequently stated, humans are the only creatures in the animal kingdom who can hope to survive to maturity and be stupid. The stupid examples in all other species die off at a relatively early age. We humans are coddled and protected by various societal mechanisms and institutions, and can live well beyond our genetically-provided ability to survive... barring being sold on some expensive, death and common-sense-defying shortcut to "enlightenment."

BTW - Over the next few days, we'll be putting up the new and improved website for Schmidt Kaye & Co (our day jobs). Stop on by when you get a moment... just don't antagonize the webmistress. As she says on her Twitter page, "I won't be mean to you, but sometimes I like to play with my food before I eat it."

Wounded Warrior, Madman, or Psychopath...
or perhaps all three?

In the months since the tragic events at the "Spiritual Warrior" retreat in Sedona, you can't swing a dead e-cat without reading something about James Arthur Ray. Many have condemned him as a dangerous psychopath, willing to spend followers' lives in pursuit of profits. Some describe him as merely inept, having given little or no forethought to the possible negative effects of his programs. And somehow, there remain those who look upon him as a highly-evolved sage, unencumbered by the "negativity" with which others ascribe to recent events. As we've observed on the political scene of late, there seems to be little room for compromise in our judgments, and I think we're serving ourselves poorly by adopting such myopic attitudes.

I'll be the first to admit that my own judgments have leaned toward the "psychopath" definition. Like many others, I wanted not only justice; I wanted blood. After all, how could anyone but a narcissistic psychopath proceed merrily upon his way while people are dying as a direct result of his programs? Late last night, however, in one of those just-awakened moments of clarity that can only occur when we're not coherent enough to construct our agenda around our feelings, another thought occurred to me: perhaps the man is a melding of all the above descriptions, with deeper dimension than can be packaged within one descriptor. What if...

In recent days, Ray has been a frequent contributor to his Twitter page, offering mostly obscure ramblings that have, at best, been insensitive toward those who have suffered profound loss. Who but someone categorized as having an antisocial personality would be so brazenly callous as to rub salt into the fresh wounds of his victims and their families? I - along with many others - have derided him for his callousness, for offering obscure platitudes in an obvious effort to distract observers from the seriousness of the situation. If I wanted blood before, I really wanted it after reading some of the swill he was bandying about.

My ah-ha moment arose from remembering that a psychopath will first and foremost act in his own interests, oblivious or unconcerned as to how his actions will affect others. A true psychopath, therefore, would act in such a manner as to foster sympathy for himself. A textbook scenario would have him portraying himself as someone who struggled to rectify the situation in Sedona and ease the suffering of those who were injured, those who died, and those who were left to grieve. Someone who was suffering as deeply as anyone, and more than most. Surely, such a person would avoid doing anything that might make him appear unfeeling and unsympathetic. So what the heck is Ray doing, issuing his platitudes, while ignoring the cries for penance, regret, and even punishment? Is he an unfeeling monster, or is he just crazy as a peach orchard boar?

I think that there may be a number of factors guiding his behavior. I'm certain that his attorneys have advised him to avoid saying or doing anything that might be considered an admission of personal responsibility for the tragedy. They might even be advising him to act in such a way as to support an assertion that he lacks the mental competence to act in his own defense. His recent public postings have certainly given evidence that he has dissociated himself from the pain that so many have suffered. The real question, as I see it, is whether that dissociative behavior is genuine, evidence that he has suffered a psychotic episode as a means of dealing with his own sense of guilt, or perhaps a calculated ploy to insulate him from civil and criminal repercussions.

My own compassionate side would reach out and comfort a man who has broken under the weight of his own self-incrimination and feelings of guilt. Yet there remains a more cynical part of me that, having studied his actions over the past few years, thinks this is just another in a long pattern of manipulative games being played at immense cost - to others. Truth is, neither I nor anyone else outside a small circle of therapists can really be certain. And even within that small circle, there remains the realization that even the most astute professional can often be played by an intelligent psychopath. I think that only time will tell us who is the real James Arthur Ray.

I also find it interesting to observe how the rest of the New Wage hustlers are reacting to Ray's situation. Some who once claimed him as friend and mentor have quietly removed any mention of him from their public offerings, counting upon their followers' short attention spans and memories. Still others have come forward and publicly disassociated themselves from their one-time colleague, attempting to show that they knew all along that he had "strayed from the path to enlightenment." In short, throwing him under the metaphysical bus, and defining their own integrity in the process.

And what about those fellow hustledorks who have praised Ray in the past, and who brush aside as irrelevant the whole sequence of events, claiming that even discussing them is "negative thinking" to be avoided at any cost. These are the individuals who refuse to even acknowledge that something went horribly wrong, preferring to "wait until the facts are in" before admitting that there was any kind of a problem. I'll leave it to others to decide for themselves whether this kind of person is worthy of being listened to or followed.

As I said before, I think that only time - if even that - will tell us who is the real James Arthur Ray. What I think is more important than our judgment of him (or the eventual ramifications he faces) is our willingness to look with open eyes and common sense at the practices that some would claim to be essential to our spiritual evolvement. No matter what happens to Ray, even if he is allowed to continue pursuing a livelihood that endangers others, a populace that is more informed and objecitve will be infinitely safer than one which ignores or rationalizes destructive behavior. If people began using good common sense, and looked beyond wishful thinking on their journey to greater awareness, even the most skillful sociopath would be unable to harm anyone.

I don't propose establishing a system of strict regulation to oversee the self-help industry, mostly because it wouldn't work. Remember: You can't idiot-proof the system; they'll just come up with better idiots! The scammers would simply find ways to work around the rules, and their marks would just rationalize that some malevolent "they" are trying to deny humanity of its birthright. If you doubt the second statement, just go to your favoirite "guru's" website and compare the bold-headline promises with the fine-print (and frequently difficult to find) disclaimer statement. What you'll find is a deft volley, in response to the FTC's latest serve. And if you're willing to lend as much credence to the former as you are willing to put "faith" in the latter, there's little chance you'll be hoodwinked, wounded, or even killed.

Welcome to Political Jonestown!

Well, the talking heads are all abuzz, what with the big upset in Massachusetts. The Republicans see it as a clear sign that they're just an election away from re-assuming their rightful majority status. The Democrats see it as a warning that they need to shift more to the right if they hope to maintain power. I suspect both groups are in for a big surprise. Big.

The tea-baggers claim the outcome of the Mass. election as proof that America is ready to give them the keys to the car & let them drive. But what would you expect from a group that inflates the head count at rallies from a few thousand people to a couple million, or who actually believes that screaming obscenities and threats through a louder megaphone makes you powerful? Rush has been telling them what's gonna happen for years now, but they haven't seemed to notice that he's been pretty universally wrong. Perhaps they're taking the same stuff he is.

And the Democrats? They seem to think that the only way to stay on top is to pretend they're more like the wingnuts, and to capitulate to the far right's demands. Never mind that the majority of Americans want a public option included in the healthcare package, or that the last thing the majority of Americans want is a return to the same kind of corruption that got us into our current mess in the first place. Nope... the answer, as they see it, is to Lieberman-ize en masse, and to abandon the principles that got them elected, all in the name of a "bipartisanship" that exists only in speeches.

So here's what I see happening in the next round of elections. On the Republican side, the wingnuts and tea-baggers will be energized. They'll gather up enough money to wage high-profile primary campaigns, all with getting rid of the incumbents as their primary focus. As usual, they won't offer any real platform beyond an, "aren't you pissed off at [insert incumbent of choice]?" The incumbents, of course, will feel the need to defend their records, even if those records consist of nothing more than saying "no" to anything the other party suggests. End result? A circular firing squad, where all candidates are so damaged, and their coffers so depleted, that there's little ammo left for the war of the general elections.

While that might look good for the Democrats, we've seen too many times how adept they are at clutching defeat from the jaws of victory, and I suspect they won't disappoint this time around. Massachusetts scared them. Many of them are actually starting to believe that the dittoheads might be gaining traction. And they'll do what they've always done when they feel threatened: pretend that they agreed with the wingnuts all along, but were simply misunderstood. Just like their friends on the far right, they'll pay more attention to the noisemakers than to the people who actually elected them, and stage their own version of mass suicide.

So who will be left standing after the smoke clears? Well, you can bet that the industry lobbyists & PACs won't be hurt that badly (at least, not right away), because they aren't stupid enough to let something as mundane as political ideology compromise their interests. They'll throw money at whomever they think will do their bidding. Lots of money.

I think that the independents - the real ones - stand to gain the most from all the infighting and shape-shifting. Even those who have meager records of accomplishments, or who might have previously been perceived as being too marginal in their views, will find themselves the darlings of the hour once all the dust settles. There's so much anger - both at the ones who screwed things up in the first place, as well as the ones who didn't provide an instantaneous fix for all our problems - that the devils we don't know will end up looking like the angels we long for. We might see some real progress toward populist programs (perhaps even health care) that most Americans want. But most importantly, we'll see a significant erosion of the dominance long enjoyed by the two major political parties, as well as the big-moneyed interests on whose tit the Dems and Repubs have suckled for such a long time. Massive amounts of money will be spent in their attempts to delay their death dance, but the effort will prove futile. The only ones who'll buy into their scheme are the same ones who failed to see the writing on the wall in the first place.

Ultimately, I think that the American people will be the real winners. Sure, there'll be whining, screaming, and widespread gnashing of teeth among the more entrenched partisan groups, along with their protestations that they're the ones who will offer "real change." In the end, though, the fringe element on both sides of the aisle will find themselves marginalized to the point that they can no longer claim relevance with anything even remotely resembling authority, and the most powerful players of the past will find themselves not only marginalized, but vilified by the vast majority of voters.

Of course, there is one very major caveat to these predictions: the intelligence of the American people. There's always the chance that enough will listen to the rationalizations and finger-pointing, and leave the same impotent scoundrels in place. As we learned in 2004, millions of Americans can indeed be that stupid. Ironically, the very recession that has caused so many of us real pain these last couple of years may well be the greatest gift this country has gotten in a long, long time. No matter how loudly the old guard protests, they won't be able to avoid the truth of the matter: that they dug the hole in which the country finds itself. And even the most blindly partisan voter will, I think, finally listen to and vote his or her own self-interests, rather than the interests of those who have done our country so much harm.

Much like in The Wizard of Oz, the Republicans need to get a heart, and the Democrats need to find courage. It's up to the rest of us to get a brain. We'll see how it goes.

RINOs, DINOs, and CINOs

There was a lot of noise being made yesterday about how MLK was actually a Republican, and I think that the assertion bears some scrutiny. While Rev. King was, indeed, a Republican back then, there's no way he would relate to the party of today. Heck, even I found myself more closely aligned with GOP principles at one time, but Nixon effectively ushered in a new set of principles with which I disagreed. And some of the more recent actions by some Democrats have inspired me to abandon that party, as well.

It is worthy of note that many groups have aligned themselves with Christianity, yet engage in actions and promote ideals that are diametrically opposed to Christ's teachings. From the Crusades to the current actions of people who bomb Planned Parenthood clinics or claim that the poor are merely lazy and should therefore be left solely to their own devices, I seriously doubt that Christ would align himself with groups that would abandon - much less, kill - the very people he would embrace.

By the same token, in China, the Dragon of Retribution Tong was originally a noble organization, comprised of Shaolin priests who devoted themselves to protecting the temple against the warlords who would destroy it. Over time, the Tong evolved into the Chinese equivalent of the Mafia, killing at whim to enforce its own power, and was ultimately banished by the priests.

The focus and imperative of groups can and does change at will, whereas the core ethics and principles upon which the groups were founded do not. When those imperatives change as significantly as have the groups mentioned above, they forfeit the right to portray themselves as instruments of the original, noble principles. And that applies to all political parties, religions, and even governments. Martin Luther King was indeed a Republican. In today's political environment, he would likely be ashamed to be so aligned - with either party.