by Andy Oram
American Reporter Correspondent
May 3, 2008
REPLACING JOURNALISM: NEW FOUNDATIONS FOR EXPERTISE, DIVERSITY, AND DEBATE
DUMMERSTON, Vt. -- There's been a lot of talk of late that there are glimmers of hope in the American economy. Since President Obama's economic stimulus package was enacted and the Federal Reserve and the Treasury Department both announced plans to buy up distressed assets and backstop mortgage-backed securities, the financial markets seemed to have steadied themselves. The S&P 500 - the broadest of the main stock indices - rose 28 percent between mid-March and mid-April.
But buried in that good news is a tidbit reported by Bloomberg News last week: executives and insiders at U.S. companies are unloading shares at a rate not seen in several years. Insiders from New York Stock Exchange companies have sold $8.32 worth of stock for every $1 bought in the first three weeks of April. According to Washington Service, which analyzes insider trading activity, consumer and technology companies have been selling the most stock.
Corporate America has seen seven straight quarters of earnings decreases, and as a result, companies are getting cautious. Do business leaders know something that the Obama Administration doesn't know? Are the glimmers of hope just a false dawn?
We do know this much. Our current recession, now officially the longest since the end of World War II, is quite different from any economic disruption we have ever experienced as a nation. Over the past 18 months, America's standard of living has been sharply reduced. The combination of falling real estate values, the collapse of the financial markets that devoured 30-50 percent of people's retirement savings, increased joblessness and the cratering of the consumer economy has left this nation in a precarious position.
We've had three decades of economic expansion fueled by revolving credit in an era of cheap energy and resources. Those days are gone and they aren't coming back, no matter how many times President Obama and his Administration invoke visions of a return to the way things were.
"How come Mr. Obama doesn't just lay out the truth, undertake the hard job of cutting the nation's losses, and get on with setting this society on a new course?" social and economic observer James Howard Kunstler recently asked. "The truth is that we're comprehensively bankrupt, and no amount of shuffling certificates around will avail to alter that. The bad debt has to be 'worked out' - i.e., written off, subjected to liquidation of remaining assets and collateral, reorganized under the bankruptcy statutes, and put behind us. We have to work very hard to reconfigure the physical arrangement of life in the USA, moving away from the losses of our suburbs, reactivating our towns, downscaling our biggest cities, re-scaling our farms and food production, switching out our Happy Motoring system for public transit and walkable neighborhoods, rebuilding local networks of commerce and figuring out a way to make a few things of value again."
If Americans were a mature and intelligent people who could handle the truth, perhaps we could begin to face these realities. But we are not. We don't want to confront the possibility that the activities of everyday life - standards of living, ranges of commerce and levels of governance - will likely need to be downscaled to match the current circumstances.
This scenario makes the Great Depression look almost pleasant. At least in the 1930s, this nation still had plenty of family farms, plenty of oil and natural resources, plenty of factories in good running order, and a population that was tough enough to not only survive a massive economic collapse, but to rise up and win a global war of survival. Do today's Americans have the mettle to adapt to an age of long-term austerity in an increasingly unsettled world?
We need to get real. Obama needs to get real. It was easy to make fun of the Fox News Channel-inspired "tea parties" that were held recently around the country, but they are an early symptom of something we should be concerned about - people who are angry about their financial circumstances and are looking to lash out.
As unemployment keeps rising and vast swaths of the American economy - banking, manufacturing, retailing, construction - are stagnant or falling, will Americans give themselves over to rage? Or will Americans summon up the strength and resourcefulness of our forebearers and work to create a new economy from the rubble of the old?
Randolph T. Holhut has been a journalist in New England for nearly 30 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at email@example.com. For extra added thrills, read his ongoing daily blog on The Harvard Classics.