What really counts, we ask ourselves this morning? What really matters?
We have been thinking about several things at once this summer — some private and personal, others macro-economic. All of which concern values.
Every day, we get new headlines, statistics…new prices…new information. But prices are short-term. They will change tomorrow. Values, on the other hand, change very, very slowly — if at all. Financial theorists say that prices are "perfect" — but they are, in fact, perfectly worthless, for they tell us nothing about what things are really worth. We have to figure that out for ourselves. Besides, prices are subject to change without notice.
And statistics? Almost all the statistics used in economic discussion are misapprehensions, scams or lies. The GDP "growth" numbers tell us how fast the U.S. economy is growing poorer. The inflation numbers tell us only how fast prices are rising for people who don’t exist — those who buy a 1990s computer today! Guess what…it’s cheaper. And the employment numbers are a swindle too, says Paul Krugman in today’s International Herald Tribune. He quotes J. Bradford DeLong of UC Berkeley: "We have four of five indicators telling us that the state of the job market is not that good and only one — the unemployment rate — reading green." It reads green, rather than black, because it fails to count people who are not "actively" looking for a job. "The addition of these hypothetical participants," writes Katharine Bradbury, an economist at the Boston Fed, "would raise the unemployment rate by one to three-plus percentage points."
Why have so many given up looking for a job? We don’t know, but we can guess: because the jobs they had hoped to find no longer exist.
"The United States is being virtually de-industrialized," writes our favorite economist, Dr. Kurt Richebächer. "The sector has lost 3 million jobs since 2000 and keep losing them month after month." America used to be a country that made things for export. It employed millions of well-paid people in factories where they made things to be sold overseas. The bars in "industrial" cities, such as Milwaukee and Baltimore, were full of working stiffs with money in their pockets. In the Highlandtown section of Baltimore, for example, near the Bethlehem Steel plant, there was a bar on practically every corner. Now, the old bars in the old working class neighborhoods are closed. The new bars, downtown, have a different clientele — office workers, real estate hustlers, and young professionals. Wine has replace beer at many of these places. Bragging about house price gains has taken over from bar fights. Wage earnings have given way to credit card and mortgage debt.
The good-paying factory jobs are disappearing. A man can still find work — but not necessarily at the same price.
We note in passing that the Dow has gone nowhere for a very long time. From the late ’90s to today, an investor would have made nothing. But in India, stocks have more than doubled in the last three years. These are just prices, of course, not values. But people are beginning to ask questions. Not only are stocks soaring in India, wages throughout most of Asia are rising. How come people are earning more and more in Third World "basketcase" countries…while their hourly wages in America go nowhere?
William Greider takes up the interrogation in today’s IHT. He comes remarkably close to understanding what you, dear reader, realized a long time ago:
America’s imperial finance business no longer pays.
"Why is the United States one of the few advanced economies that suffers from perennial trade deficits?" he asks. "Why do new trade agreements, despite official promises, always leave the United States with a deeper deficit hole, with another wave of jobs moving overseas? How do the authorities explain the 30-year stagnation of working-class wages that is peculiar to America? Are we supposed to believe that everyone else is simply more competitive or slyly breaking the rules?"
The United States has had a positive trade balance only once in the last three decades, Greider notes, and that thanks to a recession.
And then, Greider comes to a point that makes him a genius and a schmuck at the same time. "The possibility that the United States can no longer afford globalization, at least not as it now functions, is what opinion leaders do not wish to discuss."
Here we are not opinion leaders. Nor opinion followers.
So we can discuss what we like. We have made the point many times: globalization no longer favors the global hegemony. That is, it no longer favors the empire that pays for it. The cost of "fighting terror" alone is $150 billion worldwide. America pays $130 billion of it. What does it get for the money? People are beginning to wonder.
• Greider is a genius because he sees the problem the way we do; he is a schmuck because he is unwilling to look at it square in the face. Instead, he averts his eyes in the usual greasy way…and imagines he sees something shifty. Part of the problem, he says, is that U.S. companies are "generally free — and even encouraged by Washington — to shift production to low-wage locations…. The practice works for companies and investors, but not so well for a nation."
The idea seems to be that the nation would be better off if the people in it were less well off. If a company were forced to make inferior products at home, and sell them at higher prices…somehow the nation would thrive. If anyone understands the logic of it, he’s not working here this morning. But having reduced the problem to a matter of public policy Greider is able to get a grip on it:
"…Governments must together shift the balance of power so labor incomes can rise in step with rising productivity and profits," he says.
Why not rising stock and house prices too? And longer life spans? And slimmer women…handsomer men…and teenagers without acne or bad manners?
We understand why wages in the Orient go up: because they are making more and better merchandise. But why would wages rise in the Occident, just because governments say so?
• Your columnist’s mother fell over backwards last week and hit her head on a granite step. She is recovering, more or less. But we are all wondering how much longer she will be with us. She says she wants to go back to the U.S. to see her old doctors…and to be close to the rest of the family. "I’ll come back when I feel more sprightly," she says. We wonder if she ever will.
We can’t help but think these summer days may be the last we spend with her.
What are they worth, we wonder?
We have no answer. And so, with moist eyes we turn from the quotidian sorrows of this "deathward going tribe," as Sophocles put it, to less important matters. That is, we turn from tragedy to comedy…and farce.
Some things are priceless, we recall writing a day or two ago. We have a hunch that price-less things are often under-priced. Since they are priceless, people assume they are worthless. Expensive things, on the other hand, are thought to be worth a lot, even though they may have no value at all.
For easy reference, we have prepared a short list:
Things that are overpriced and overbought: Stocks — Junk Bonds — U.S. Residential Real Estate — Modern and contemporary art — Terrorism — Republicans & Democrats — Television — Electronic gadgets — Automobil
es — Shorts — Casual meals — The Da Vinci Code — Baseball caps — Debt — Newspapers — Suburbs — Employment — Higher education — Shopping — Retirement — Health insurance — Movies — Running shoes — Comfortable clothes.
Underpriced or undervalued things include: Gold — German real estate — Good manners — Privacy — Mothers and Fathers — Crispy duck — Gardens — Wood heat — The Daily Reckoning — Savings — Thrift — Elegance — Walking — Leisure — Europe — Private businesses — Old people — Extended families — Long skirts — Dresses — Hats, especially berets.
him mail] is the author, with Addison Wiggin, of Financial
Reckoning Day: Surviving the Soft Depression of The 21st Century.