denial and anger

Elizabeth Kuebler-Ross a Swiss physician did what many believe is pioneering work with dying people. She wrote a book called "On Death and Dying," describing the emotional states people go through when confronted with a terminal illness. It has been said that these states also apply to other significant life events. I am not sure if anyone has ever postulated that these states also apply to entire populations. The Western world, and especially America is one such population that is now faced with a terminal event.

The five key states are denial, anger, bargaining, depression, and finally acceptance. It appears America is largely in denial. This isn't happening, there must be a mistake, the turn-around will come, we "may be" in a recession, we have bounced back before, it will be short-lived, etc, are all statements typical of this state. Some of our more "advanced" citizens have already made it to the anger, "why us and not them?" stage.

Soon-to-be-ex President Bush is clearly in denial. As a matter of fact, Mr. Bush's middle name is denial. He for one, never seems capable of progressing. Although he did show some signs of minor anger -or at least annoyance- at some questions that were repeated too often, he is a rock of stability when it comes to denial. The lone cowboy.

The financial system is also in deep denial. So are many policy makers trying to bail them out. Although the government already owns the worthless banks, nobody wants to say we nationalized them. That would be admitting death of our fabled economic system. The right word for such behavior is denial. A denial so profound that Mr. Paulson and Mr. Bernanke, without admitting the error in their way, finally agreed to purchase shares in these undead banks. Earlier these geniuses -maybe they too were bewitched by W?- had proposed a simple handout to their former colleagues.

However, even when they bought shares, they had to forgo buying common stock and getting a board seat. That would be admitting failure. It is also the only reasonable thing to do. The symbolic gesture is of great importance, because it sets the stage for further mayhem. A denial akin to alcoholics with liver cirrhosis who can't stop drinking.

Some Republicans have expressed anger, but they are angry at the bail-out and having to pay for it, not so much angry at the demise of American style capitalism. When it comes to that, those very same Republicans are in very strong denial. These are the type of believers who will go to their grave without ever leaving phase one.

Many in the Obama administration forgot about denial and blew through their brief anger periods. They are now trying their hand at bargaining. Bargaining as in bargaining with fate. Please dear god, if you cure me of this illness, I will rebuild the bridges and highways and make America great again. 

If anything, we need to dismantle America's infrastructure and rebuild it in a more sensible way. A way that favors public transportation. A way away from cars. Depression comes next in case you wonder.

Here is some quick arithmetic to cure your current denial. Most financial institutions in the country are undead. They are lifeless but they keep wandering around sucking away our savings. The sooner they drop dead the better, because until they do, we are wasting our hard earned tax dollars trying to keep them afoot. They need a stake through the heart, and have their heads cut off too.

Half of the American households have zero net worth. You can give them rebate checks and tax cuts all you want, but they won't start spending again. They are done, period. The best you can do is give them a reasonable job so you won't end up paying for their retirement. Most of them promise to be around for another 15-20 years for sure.

The more jobs we cut, the worse it will get. Another quarter of the American public is teetering on the brink of zero net worth. Keeping these people employed should be priority number one. Forget about corporate profits for now. Forget about what you learned in economics 101. It does no longer apply.

An economy driven by consumer spending is no longer an option. The consumers are done spending. The sooner we realize that, the better.

Rather than revamping America's infrastructure, we need to redo it. The current layout is problematic. It depends on cheap energy and is unsustainable in the long run. It is also environmentally destructive. We need to dismantle it before it does us in.

zero net worth

Half of the American population has a net worth of zero. You read that right, zero. They are worth nothing. They own nothing of value and they are deeply in debt. They are also about to lose their jobs if that has not already happened. Nevertheless those 150 million citizens and residents still need to eat, find shelter, get medical care, get retirement, and get an education for their kids.

Meanwhile the Bush administration is trying to free up offshore drilling. You have to give it to Bush, he is persistent until the very end. He will run into a wall at a hundred miles an hour and keep going until he makes contact. On Friday, effectively the last day of his administration, he managed to open the door for some more environmental damage. Fortunately, it won't matter much.

How about those fancy white shirts, designer suits and ties? Guess who are the major contributors to Mr. Obama's inauguration party? How about the Wall Street crowd? How about those dressed up in the costumes of deceit? Mr. Obama already "owes" more in favors than several of his predecessors combined, so why worry? Living on credit is our way of life.

There are Americans whose net worth, while collapsing all around them, is still astronomically high. These fortunate souls -or should we say greedy?- will do all that is in their power to safeguard whatever they have left, while trying to get some additional handouts and favors. Only it is hard to see who will pay them now.

For almost three quarters of a century now, the American economy has consisted of wizards shuffling wealth from the masses into the hands of a few. Starting after world war two, and employing the latest discoveries in psychology, marketing, and rip-off technology, these "architects of fake prosperity" have managed to suck the world dry.

At first they provided some marginal value, but soon enough they learned that selling hot air was both more profitable and a faster way to riches. They favored an economy based on senseless spending. Spending for the sake of spending. They convinced the American public that such spending was happiness or better than happiness. They lured people into exchanging their life's work and their life's savings for ever bigger cars, bigger homes, more stainless steel, and more useless gadgets.

Now the party is about to end. And maybe that is a good thing, although it will surely be a very painful end for most.

white shirt, designer suit and tie

The Wall Street Journal had an article on white shirts the other day. In it they quoted fine gentlemen extolling the virtues of such cloth. According to said gentlemen one can learn a lot about a man from the whiteness and thickness of their shirts. Or the designer labels on their suits and the fine silk of their ties. 

The next day, one reader remarked this was certainly true, but that the conclusion was decidedly false. The wearers of these fine shirts, suits and ties hail from places such as Lehman Brothers, Goldman Sachs, Merrill Lynch, and Madoff. What we can learn from these folks is that we should look past and through their finery, and keep our wits about us, lest we fall prey to their ignorance, grotesque egomania, deceit, and swindle.

Today Merrill announced a $15.3 billion loss for the most recent quarter. As one economist put it recently, these gentlemen took manure and convinced us it had turned into rose water. They then dispensed their concoction to the savvy and not-so-savvy alike. No doubt they were wearing their white shirts and fine ties to fully dissociate themselves from the color and stench of their product.

water use in 2008

In 2008, we averaged less than 40 gallons per day or just under 10 gallons per person per day. I think it is probably the lowest water usage in the whole utility district. We have a 3,200 sq ft home with four people in it and a small garden, where we grow vegetables. It rains very little in California, and not at all during the summer.

In reality we have a two season climate. In winter it rains -sometimes quite hard- and in summer it is dry. In winter we average close to 20 gallons for the entire household, while in summer we use slightly more than 45 a day. The summer number is higher due to our small vegetable garden and because we do not have access to clean rain water for washing.

How do we do it? Simple, but not exactly elegant. We use grey water for everything except cooking and (brief) showers. It works. It isn't exactly what people living in the 21 st century have in mind, but it isn't entirely ominous either. We also collect rainwater (automatically) using rain barrels. One average storm can yield as much as 300 gallons of water, and we aren't even collecting all of it.

We do all that with what is probably one of the most water-wasteful washing machines in the country. It gobbles up almost 45 gallons to do a load. It is an old top loader. I know it uses as much because I collect the grey water and I need a full size rain barrel to do it. The water looks pretty grey so I guess it is appropriately called grey water. One can use it to flush toilets. It is a bit primitive and not something most Americans could live with but it works quite well.

Above all, what our experience shows is that one can easily live a comfortable life-style using very little water and very little energy. There is no need to ditch modern amenities to do so. If one is aversive towards using buckets to flush the toilet, then it would be rather easy to install an automated system to fill the tank with either rain water or grey water. The first is straightforward and our rain water is very high quality (esp. after the first couple of storms clean the roof) so it could go in as is. The grey water from the washer would probably require a filter of some sort to get rid of particulate matter. I eventually plan to install such a system but for now, things work fine as is.

double digit unemployment

The job losses for 2008 were the worst since 1945. So says the Wall Street Journal. It is good to note that there were half as many people then, and that the nation was switching from a war time economy, where everyone -young and old, firm and infirm- were put to work producing much needed ammunition and machinery. It is also good to note that there was huge demand after world war 2 to rebuild all the devastation. There wasn't a glut of housing and a mountain of personal debt.

Furthermore, since the US won the war it was in a dominant position to make sure that a huge chunk of that rebuilding effort went to US companies. The country also took over many lucrative foreign businesses, both in Germany and to a lesser extent in Japan. Stimulus plans to rebuild Europe created ample opportunity. An era of unheard of prosperity was waiting in the wings.

Today is much different, the job losses that started in the last few months of 2008 are by no means a thing of the past. Many more layoffs were announced in January of 2009 and there are many more to come. 

Not only is the population much larger now, it is also older and aging fast. Despite glorious ads of retirement spent in luxury and travel, older people spend far less than young people, and if one excludes health care, the difference is even larger. The situation in Europe, where many of our customers are is even worse, and many countries have an even older population.

There are two further complications. Our aging population has overspent like there was no tomorrow. They are deeply in debt and without savings. Many don't have pensions or other guaranteed income. They also don't have good health care coverage. They have no more money to spend and most can't even save up enough to keep living the way they are now.

A lot are deeply in debt and in danger of losing their homes. Most of the negative amortization mortgages have not reset yet. The majority of people with such mortgages could never afford the reset, let alone if they lose their jobs. Furthermore, they are deeply underwater as is and that makes it nearly impossible to refinance. Their 401k's, IRA's, and other retirement vehicles have lost tremendous value.

Advertised unemployment hit 7.2%. The number is overly optimistic. In the US we count people applying for unemployment, a very short-lived remedy that is often bypassed by a significant number of out-of-work persons. It makes our numbers look good, and better than European numbers. But 7.2% in the US is much, much worse than 7.2% in Germany, where all jobs come with a decent wage, health and retirement benefits and the like. Germany also has a safety net that is almost completely absent in the US. The same applies to most other European nations.

Real unemployment, or actual number of people out work, a number that includes workers who have dropped out of the labor force, or work part-time at odd jobs because they can't find full-time jobs, hit 13.5% in December. That is solidly in the double-digit range. I predicted previously that real unemployment could hit 15-20% and I stand by that prediction.

As I mentioned before, many of the forces that will make matters worse have yet to show their faces. Housing losses are far from hitting bottom. Retailers still think of spring and summer fashions. Fashion is one of the concepts that may disappear for a while. I can't see cash strapped consumers ditching good items simply because they went out of style. And while it will be painful, the latter is actually a good thing. Good for our habitat, and good for our long term survival.

remodeling craze

According to Tuesday's Wall Street Journal, Americans spend $400 billion per year on remodeling their homes. That includes both do-it-yourself and professional remodeling. Entire industries have grown up around this wasteful and destructive craze.

Says David Crook: "Magazines and television programs entice homeowners to spend tens of thousands of dollars for new kitchens with custom-built cabinets, granite countertops and designer appliances."

Magazines, TV shows, talk shows, architects, builders, Home-Depot, and everyone else wanted a piece of the action. This was large scale environmental rape.

Unfortunately for those very same Americans, they also "paid" for it with money they did not have. Money that came from second mortgages and home equity loans. Loans that pushed many of them, some of whom were almost done paying off their original mortgage, into foreclosure. Now we are supposed to feel sorry for them too.

Those oversized mansions, stuffed to the gills with useless stainless steel and granite, are now standing empty, wasting away in the sun. 

Fortunately, the crisis put an end to all that nonsense. Nothing like a depression to save the planet.

save, save, save

More wisdom and advice from the WSJ. The front page today brought the alarming news that Americans are starting to save. This is surely frightening in a country where two thirds of the economy depends on consumer spending. The Journal points out that this trend is "Aggravating Nation's Economic Woes." 

The article implies that this "paradox of thrift" is the wrong medicine for the recession. This is not so different from soon-to-be-ex President W. pointing out in 2001 that we should do our patriotic duty and shop. Cut from the same cloth?

First of all, even if we wanted to, we Americans can no longer spend like we used to. We spent too much money recently, and almost all of it wasn't ours. Now we have to pay the bills, and in many cases suffer the economic consequences. Some will end up on the street and nearly all will end up much poorer than they were. In the end that is not so bad as all that wealth was nothing but a lot of hot air.

Second, a consumer-driven economy based on wasteful spending is not sustainable in the long run. The sooner you take it apart the better. Better in the sense that it can be done with less turmoil and less suffering. This economy does not need a rescue, it needs to crash. However painful that may be. It needs to be replaced by a more sane system.

Thirdly, finally something good is happening for the environment. What Al Gore and his 35,000 sq foot mansion and his Nobel prize could not accomplish, the recession will.

Even though conservative papers like the WSJ will eagerly point out that recessions lead to cuts in "green" energy and "conservation" plans, this does not matter. Less consumption is always preferable and better for the environment. Nature does not care about efficiency, it only cares about the absolute amount of pollution and resource depletion. The less resources and energy we use, the better.

Much of what is called alternative energy and the green economy is just a disguise for more spending and more consumption. It is not the way to go. Replacing your good possessions with "better" ones is bad for the environment. No self-respecting environmentalist should give in to this lure. Throwing away functional items is ALWAYS a bad idea.

As for saving, it is an essential skill for survival. Never mind bogus slogans such as "your patriotic duty," or the idea that you could become a white knight and save the economy. Neither is true. You will need to save if you and your offspring are going to survive in the end.

You need to stop buying stuff you don't need, and stop burning fuel for no reason. It isn't just good for the environment. It is good for you.