Where the stimulus money is coming from

I've said this to many people in several different ways, but what this recession really means for most North Americans is that they won't retire as early as planned or that they'll have to continue working at least part time to buffer their savings.

Well, here's some talk from Calculated Risk with a great quote courtesy of the NY Times.

“What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” said William H. Gross, co-chief investment officer of the Pacific Investment Management Company, or Pimco.

Of course, this basically screws over fixed-income retirees, but it also damages prospects for those close to retirement. If you're 60 and planning to retire at 65, you're basically making no money in safe investments, but you also don't have any time to "ride out" highly volatile investments like stocks. Unless, of course, you wait until 70 or 75 to retire.

It sounds absurd, but what else are you going to do? We've put ourselves into a really tight spot here. The Obama plan (for better or worse) is to inflate the money supply, which is going to be done at the expense of those people who want to retire. To be fair, the McCain plan wasn't really any different.

I guess the big question is really if this is simply to be expected? Personally I think the whole concept of everyone retiring at 65 and living to the ripe old age of 90 is also pretty absurd, so though I blame the US for making some pretty bad financial decisions over the last 3 decades, I also think that we have to get over our delusions of multi-decade retirements for everyone.

Classic fluff

 Here's a recent ZDNet article: 10 ways to make your boss love you

This is pretty must a classic fluff piece. Filled with specious comments and even contradictory.

"Simply doing your job isn't enough anymore..." 

Huh? My job is to bring in more money than I cost my employer (i.e.: to provide profits). If I continue to provide direct profits for my employer how am I "not doing enough"? 

"...- you have to make sure your boss knows how well you're doing it." 

No really? Wait a second, isn't it my boss's job to know how well I'm doing? If my boss doesn't know how well I'm doing and I don't know how well I'm doing, am I actually doing my job? 

If you and your boss don't know how well you're doing then you have problems way beyond these tips. 

If you really dig into these tips, most of them are your job. 

#1: Make your boss look good

Your job. 

#2: Do more with less 

#9: Automate it 

IT is automation. Automation is fundamentally "doing more with less". 

#3: Be positive, proactive and professional 

#5: Get back to basics 

Be professional = Behave as if this was your profession = Do your job 

#4: Talk the talk 

"Speak the language of the business...Make sure you are seen as involved in activities that lead to revenue generation" 

Language of the business = Your job 

Generating revenue = Your job 

#7: Stay informed

 Welcome to IT. 

#8: Become a collaborator 

Your job in IT is to solve other people's problems. Failure to collaborate is a failure to do your job.

#10: Be special 

"If your existing skills don't match up with the needs of the business then make sure you develop some news ones."

Does this quote even make sense? If your skills don't match up with the needs of the business, what the heck are you doing? I mean *your job* is to meet the needs of the business, but if you don't have the skills to do that what the heck are they paying you for? 

So like I said, the piece is really fluffy. Basically tells the reader to do their job.

The Times they are 'a-changing

Well, we know that Newspaper are going to die, and we'll have to see about print media in general. In fact, my current guess is that the next decade of iPhones and Blackberries and Kindles and podcasts and audiobooks will signal a "paper reversal". In no way do I expect "paper" copies to go away, instead I expect them to slowly be limited to only specific, revered content.

But hey, I'm already receiving my bank statements and pay stubs electronically. So the amount of paper-only content is fast diminishing.

However, I have two great links about paper today.

Time Magazine talks about the End of Excess. Which opens with a great line:

Don't pretend we didn't see this coming for a long, long time.

A few other choice quotes:

We cannot just hunker down, cross our fingers, hysterically pinch our pennies, wait for the crises to pass, blame the bankers and then go back to business as usual...This is the end of the world as we've known it. But it isn't the end of the world.

Which echoes things I've been saying for a long time. The US is going to change and it's going to change very dramatically. The "middle-class" is no longer going to be the center of this giant bell curve, things will tier much more. The US will need a broader base of producers, of people working dirty jobs.

Of course, with such a small population (on a global scale), the only way the US can stay ahead of the curve is to become an intellectual mecca for the new generation of problem solvers and thought leaders. Of course, with such a small realy population base and an underfunded education system, there will be a need to import these people.

Further increases in productivity and prosperity require ingenuity and enterprise applied at the micro scale... As China and other developing countries finally achieve the industrial plenty that we enjoyed 50 years ago, the U.S. can stay ahead once again by pioneering the next-generation technologies that the increasingly industrialized world will require...And no other nation assimilates immigrants as successfully as the U.S.

Those are just my choice quotes, the whole article is a good read.

And here's a good summary about the death of the newspaper. I think this one quote really sums it up nicely:

It makes increasingly less sense even to talk about a publishing industry, because the core problem publishing solves — the incredible difficulty, complexity, and expense of making something available to the public — has stopped being a problem.

He goes on to mention that we don't really have a good replacement model for all of these journalists we're putting out of work. Personally, I get the feeling that between ease of publisher, ease of search/aggregation and ease of rating, it's quite probably that the future of news will be a truly distributed network. Not an Associated Press style of "distributed network", but rather a loose network of data collectors and aggregators and researchers. Each of which can produce data for the next set.

In the article he makes a mention of reporters attending a town hall meeting "just in case". But in this new era of data, it's quite possible for one to film the event, have it edited for highlights, transcripted and then reviewed, blogged, twittered & pod-casted by multiple people all within hours. And unlike the previous model, these people don't even have to be the same the same people or the same group.

Of course, none of this is very conducive to being done with paper, which may be why Time is calling for changes and the Times will be changing.

Irrational Pessimism

This is in reply to a post on MillionDollarJourney.

@Ed:This recession is, of course, not over yet and may deepen, but none of these statistics are expected to get as bad as the prior recessions.

There are several logical flaws in the comparisons here:

#1: The interest rate on today's mortgages cannot reach the level of those previous recessions. There is already an excess of available homes and lots of people still on ARMs. Interest rates that high would absolutely destroy the economy.

#2: The interest number in 1981 was high b/c of inflation. Volcker, the Fed Chairman, wanted to wring out inflation by slowing the growth of money. He basically raised interest rates until the stagflation stopped.

#3: Your S&P 500 and TSX lines are both based on nominal differences. For a fair comparison you should calculate net change plus inflation. Either way, it's still pretty clear that the drops last year are in line with the drops in the other to recessions.

#4: Inflation, what models do we have stating that this isn't going to sky-rocket?

Clearly, the 0% inflation is due to the fact that the gvmt "printed" money approximately equal to the amount of money that was simply lost via bankruptcies. Of course, the 0.1% number dates back to January, but the most recent number that we have is from February.

Since the end of February, Obama has agreed to a trillion dollars.

The US is likely going to run a $2,000,000,000,000 deficit this year. That's two Canadian GDPs. Much of that money is going to come from Quantitative Easing, i.e: simply inventing money. In fact, that's the goal, the government wants to create inflation. From Paul Krugman of the NYT:

...having some inflationary effect — is what the policy is all about

So we're going to have inflation. We have to, but you haven't seen it yet b/c the money is being invented right now.

What's more, Obama has promised more trillion dollar deficits. Without a dramatic increase in US production, these deficits are going to cause significant inflation.

#5: The numbers are still getting worse.
An average of 55 forecasters in the January 15 Wall Street Journal survey expect real GDP to eventually reach only -2.1%

January 15 predates the enstatement of the Obama administration. Obama has likely seen the most active 100 first days of any president ever. He has produced several plans that simply did not exist in any way on January 15. You need to get more recent data than this.

Industrial production appears to have bottomed in September 2008.
Industrial production in 2009 has been down for 4 months.

The numbers I'm reading are even lower: From February 2008, industrial production has declined by 11.2%.

The news is full of stories of massive lay-offs, but unemployment is only expected to rise to 8.9%
Unemployment numbers are currently at 8.1% (from 7.6% the previous month). And across all sectors:
In February, job losses were large and widespread across nearly all major industry sectors.

The US national debt is into record highs outside of WWII.

The US is operating a tremendous trade deficit and has been for 25+ years. That number will not turn around.

The only politically feasible way out of the mess is (sadly) the printing of money combined with real economic growth. Of course, China's not really happy about the part where the government prints away its debt (and Canadians should be pretty peeved as well).

But the US has to find a way to convert their dollars into real assets and frankly they have some of the most expensive assets in the world, so they're not doing really well in that category.

#6: Everyone is wondering how low the stock market will get, while trillions of dollars sit in cash on the sidelines waiting for the right time to jump back in.

Where does this data come from?

From what I can see, the banks and insurance companies are tragically under-capitalized (i.e.: lacking in cash). The banks don't want to mark their assets to real market values b/c they're complaining that there is a lack of liquidity in the market. The current US plan with the "private/public partnership" is founded on the concept that these assets would be under-valued if sold at current market prices b/c of a lack of competition and liquidity. So the US government is betting a 500 to 1,000 billion bucks and providing massive leverage to private investors in an attempt to heal the banks. And while this is happening you're claiming that many trillions of dollars are sitting around just waiting to be invested.

If these trillions are waiting to be invested, why does the US government have to cook up plans with 12:1 leverage?

@ED, I don't think that you've made a very good case for yourself with one chart, old data and zero hyperlinks. It's obvious that your data doesn't add up. It's also clear that you're missing something really key about the US economy.

If they do not reverse the trade deficit, the economy will collapse. It's very key that we understand the size of the deficit. The US has been on a 25-year credit card spending spree and they don't have an easy way to even start paying back the money without dramatically "tightening their belts".

Even then a trillion dollars represents $33,000 for every US citizen. That's one median income here in Kansas City. That's a lot of debt, it's not going to be easy to pay off.

I'm going to posit that we're actually under-estimating the breadth of this financial crisis but that we'll have to wait until 2010 for it to widely understood.