thepacesetter

By Pacesetter

We Americans are collectively holding our breathes to find out what kind of dog Sasha and Malia will get, but also that we can get Barack sworn in before George can break anything else. Not to dump on Bush whose victory lap is not really going according to plan, as he touts his many accomplishments the pundits continually want to bring up his administrations few little failings. He’s leaving two wars, the worst economy since the Great Depression, reduced standing on the world stage, and lest we forget that little “Pool Party” down in New Orleans. In just a few days millions of Americans will brave the cold at the mall in Washington DC hoping to hear one of the most inspiring speeches in American history, we’ll need it.

 It's a recession when your neighbor loses his job; it's a depression when you lose yours -
Harry S. Truman

 Joseph Stilgitz

I’ve been paying close attention to a couple of Nobel Prize Winners in Economic Science Joseph Stiglitz and Paul Krugman, both these learned men agree that we are headed towards the abyss. Both also see eye to eye that the planning coming from the Obama Administration could stimulate the economy to undergo a strong recovery within 2 years. Just like the rest of economic academia they cannot say how bad things will get, but that it will be worst than anything since the “Great Depression”. 


Paul Krugman

 Well if the “Great Depression” is our worst case scenario, don’t you think we should know a little about what was so “Great”?  Here are a few first hand accounts that might give us a little perspective. 

 Things were hitting bottom in September, 1933, when Queens resident Albert H. Amend wrote in a small notebook:

``We are flat cold stony broke and no place in the world to get any money. Have been living mainly on boxes of food from the Red Cross and received the last one yesterday as they have stopped giving them out. We owe 6 months rent. Resources all drained. I wonder what will happen now. God help us.''  

Sorry Al, but that option doesn’t sound appealing at all.

 Betty Bezas, 85, of North Babylon; Born in Greece in 1912, she married a Greek-American mathematician, Zachary Bezas, who had a good job with a New York bank, and they settled in Brooklyn in 1928, where they bought a house near Coney Island. She said he belonged to the Sheepshead Bay Country Club, wore expensive clothes and was an avid bicyclist.

``When he lost his job, he went and dug cemeteries at Pinelawn to support his family. When the banks closed and everything went to pot, my husband had some property here on Long Island, in Wheatley Heights. When we lost the house he said he was going to be a chicken farmer, and everybody laughed.''

The first building they built was a chicken coop. ``We divided it in half. I had my daughter and myself in one half, and the chickens in the other.'' They sold eggs and broilers, delivering them to a market in Garden City, a business that lasted until the beginning of World War II, when her husband went to work for Republic Aircraft.

``We never took it hard, that we were poor. This was something that happened. We always said; we’ve reached the bottom. You can't go lower than this. We made the best out of it. We never said we were poor.''

The Bezas were living the American dream before the stock  market crash of October 29, 1929, economist disagree with this being the day that the Great Depression started, but they all agree ended around the time of that massive public works program called World War II. This upper middle class family’s lives were turned upside down because of forces beyond their control. Imagine this young couple today.

Betty and Zach would have a big mortgage, two car payments, student loans, credit card debt, and an assortment of installment loans for home improvements, furniture, and appliances. As is common amongst with upwardly mobile, they would have less than one month’s expenses in the bank. Oh, by the way they have no idea that one or both of them will be laid of within six months.  How do you think couples like the 2009 version of the Bezas are going to fare in conditions eerily similar to the summer of 1930 when the wheels came off?

 Carmen Carter - In 1929 Orlo and I had been married two years and had a year old son, Douglas. We were just nicely getting started in the turkey raising business on his parents' farm near Bridgeton. We had about a thousand young turkeys that spring and we bought feed on credit during the growing season and paid for it when we sold the turkeys at Thanksgiving time.

But that year was different. The newspapers were full of news about bank closing, businesses failing, and people out of work. There was just no money and we could not sell the turkeys. So we were in debt with no way out.

But when we read about the bread lines and soup kitchens in the cities, we felt we were lucky because we raised our own food. Our house was rent free, just keep it in repair. Our fuel, which was wood, was free for the cutting. Then our second child, Iris, was born and our biggest expense was doctor bills. However, this too was solved when our doctor agreed to take turkeys and garden produce for pay.

About that time my husband and a friend started operating a crate and box factory near Maple Island. After expenses they were each making about a dollar a day. Food was cheap. Coffee was 19 cents a pound, butter 20 cents, bacon the same, with a five pound bag of sugar or flour about 25 cents.

Gasoline was five gallons for a dollar so for recreation we would get into our 1926 Overland Whippet and go for long rides. We also had an Atwater Kent radio we could listen to when we could buy batteries for it.

I had always liked to write poetry so I decided to submit some to Grit, a weekly newspaper. I was delighted when they accepted them and paid me $2 each for them. That money bought a large bag of groceries at that time. I continued to write for Grit for several years.

Orlo finally got a job as a mechanic at a garage in Grant. He earned $15 a week and for us the Depression was over. But it taught us to really appreciate what we had.

Carmen and Orlo were in a recession when everyone else was in a depression, they teach lessons that we need to pay close attention. 

1. Live modest
2. Save cash and have inventory you can barter with
3. Develop multiple streams of income. Own a business 
4. Appreciate what you have

 "All days are not same. Save for a rainy day. When you don't work, savings will work for you." - M.K. Soni


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In my next article "BREAKING AWAY FROM THE MATRIX" we will start preparing ourselves for the storm.

 By Pacesetter

“You can do anything you think you can. This knowledge is literally the gift of God, for through it you can solve every human problem. It should make of you an incurable optimist. It is the open door.” - Robert Collier

 Over the summer I took my six years old son out to play catch. The kid’s got a very good throwing arm, but catching with a glove was still a work in progress, so as he was retrieving the baseball he discovered a small ant dragging a piece of bread. We watched the ant struggle with this object ten times his size, and he didn’t take a break. He must have struggled with that thing at least 15 yards which to him must have seemed like 100 miles, before he was joined by a whole slew of ants as he approached the entrance to the nest.

 I can remember thinking “that ant just went through hell to get that bread home.” Then my son announces  “He sure knew where he was going”, then I looked up and I saw what my child was looking at. We were standing in the center of this big field, yet the ant knew where he was going. While I was looking at the rough 15 yards, but my son observed that if this ant could know where he was going in the center of all this then fifteen yards was nothing.    

 “Visionary people face the same problems everyone else faces; but rather than get paralyzed by their problems, visionaries immediately commit themselves to finding a solution.”-Bill Hybels

I have studied President Elect Barack Obama’s plans for America’s future and regardless of your political affiliation our national battle cry for the next four years needs to be “Yes We Can”. This guy has made a believer out of me, the ability to survey the field, figure out where he wants to go and get there defying all odds. Think about it for a minute; a junior senator having served only half a term, no money, a Muslim name, and did I mention he’s black. Talk about the deck being stacked against you, yet he prevailed by raising more money, and ran the most innovative campaign in the history of campaigns, and won by a landslide. Go figure.

When you put ideology aside and you look at where he wants to take America for that matter the world, though you may be a skeptic you too may realize that fifteen yards is not that far.

 "The significant problems we face cannot be solved at the same level of thinking we were at when we created them." - Albert Einstein

 Obama possesses a brilliant record of getting stuff done, so let’s assume that his vision has a chance. Granting him this possibility would mean that in 2014 my son will be a sixth grader being taught science by possibly a PhD in physics, because as a teacher he can earn as much shaping young minds as he can working for Dow Chemicals. By the time my little boy graduates high school his class will be prepared to compete in the global economy, with math, science and technology skills, that will spill over into a university and community college system that families can afford. This alone could make me forget the next fifteen yards; but there is more.

 
Addicted to Oil
In 2014 the Big Three automakers will produce twenty-first century vehicles, hybrids and plug-ins that will get over 100 mpg. According to Pulitzer Prize winning author Thomas L. Friedman’s documentary we could see cars that get as much as 500 mpg (and it could be natural gas). Utilizing lighter safer alloys we will be able to drive our big gas guzzlers without guzzling gas, on a renovated road and highway system. That’s if you decide to drive, because our mass transit system will have a makeover, which in many cities will make driving to work the second option. The Auto Industry’s supply chain will expand to include manufacturers of the innovative products to efficiently power the vehicles of the future.

 There will be whole new industrial complexes that will develop wind, solar, and other methods of generating power that we will also sell abroad. Our outdated power grid will be upgraded to a state of the art system that will transmit, but may even have provisions for Americans who produce their own power to sell the excess back to the power companies.

By 2014 millions of Americans will be back to work on infrastructure programs, and green energy initiatives that will have given the economy the shot in the arm to get back on track. Thousands of Americans will supply the goods and services to these booming industries, while allowing workers to earn good middle class incomes.

We will lead the world in healing many of the world’s conflicts and the planet itself. It should be an exciting time to be alive. With good leadership peace and prosperity will return to our nation soon, but we’ve got to get through the next 15 yards.

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 For those not prepared it will be a tough ride. Read my next blog: “What was so great about it” to find out what you need to do to be ready.    

Happy New Year!!! Hip Hip Hurray!!!

2009 is finally here, but I’m not feeling my usual excitement of moving into a new year. Maybe because going into 2009 reminds me of an auto accident I was involved in as a teen. The car slid on ice and we were headed for a telephone pole, my best friend had absconded his dad’s car and none of us had a license. Oh it was wrong on so many levels, but as time seemed to slow down after we hit a curb and launch head on in the air towards the pole, how we got there didn’t really matter we were going to hit that pole. Whether you’re the driver or the passenger in the back seat everybody is going to hit the pole.

Well, America we’re about to collide witht the pole, so whether you’ve gotten ahead financially during the 2000s, remained the same, or feel it slipping away, our common bond is that we all need to brace ourselves for the impact. The current economic crisis that we have all heard so much about in the past few months is very real, and if we are not properly prepared we will suffer dire consequences. The mortgage bubble that we heard pop is just the tip of the iceberg, the contraction that is about to occur in our economy is going to affect all of us.

How it will affect you and your family will depend on how well you prepare for the crash. In order to get ready it is imperative that we examine how deep the rabbit hole is. The truth of the matter is that those who actually know the real state of the economy can’t tell us; if they did we would stop our reckless spending, and the house of cards would fall. The one thing that they are willing to share with us is that it will get much worse before it gets better.

If you’re like most people you really have no idea how we got here in the first place or who the real players are. Quite frankly we are all to blame from out of control government spending, corporate greed, and the auspicious consumption by the American public we’ve all got our signature on the bad check. You might say we’ve been on an insanity pill for quite a while, and if we don’t make some good decisions the American dream will become your nightmare.

Here’s the condensed version; we are in what economist call a “liquidity trap", meaning that the Fed rate is too close to zero so the central bank cannot stimulate the economy with lower interest rates. Even with the bailout, AIG is still in trouble and so are thousands of US banks. We are in two wars that will probably end up costing us over 3 trillion dollars (Most of which we are borrowing from the Chinese). We consume 15 million barrels of foreign oil per day, a majority of it coming from countries not to happy with us. We will have almost 10.3 million unemployed citizens by the end of 2008, mostly due to a shrinking manufacturing base. From, textiles, electronics, toys, and automobiles not only are the rest of the world making them cheaper, but in many cases making them better. And lest we forget we’ve added over 15 million undocumented people to our population.

Reading the tea leaves on where the economy is heading for 2009 is a little tricky, but let us consider five distinct possibilities:

• By all indications we are in for a second larger wave of residential mortgage failures
• There could be massive auto loan failures and repossessions by the end of the summer maybe sooner
• We may face over $40 billion in credit card defaults in 09
• By August we could see major commercial mortgage failures and foreclosures on shopping malls, office buildings and other commercials
• The real kick in the groin will be something you’ve probably never heard of (but if you work on Wall Street you know what I’m talking about and it’s not good) CDS Credit Default Swaps originated with No margin money or down payments! According to some analyst the losses could be in the 100s of trillions that’s right I said trillions

If only three of these events occur cancel Christmas 09.

When you’re headed towards the pole the driver is doing one of three things:

1. Has lost control and prepares for impact
2. Tries to get control of the car, but knows he’s going to hit the pole
3. Tries to get control of the car, miss the tree and avoid the ravine and sure death that’s 30 yards beyond the pole.

The good news is that it appears that President Elect Barack Obama and his administration have a formula that could very well avoid the cliff; the bad news is that we’re in mid air and we’re going to hit the pole.

I discovered first hand from the back seat that as a passenger your only option is to brace for the impact. This blog is dedicated to seeing the collision coming, bracing for the crash, and walking away unscratched while those around us are bloodied.

That night it was snowing like crazy and I was the last man, so I was stuck sitting alone in the back holding the driver’s Chihuahua while my three buddies were in the front where the heat was. Extreme weather and young boys out joy riding is not a good combination, give that some thought when Junior wants the keys during a storm. Of course we were going too fast for the conditions, and I remember weakly saying “Maybe we need to slow down” and got a reply something like “I know what I’m doing.”

"What gets us into trouble is not what we don’t know; it’s what we know for sure that ain’t so" – Mark Twain

If you know that we can keep living the way we’ve been living, it ain’t so. The crash is coming and those of us who are well positioned can be sitting pretty when the recovery starts to take place sometime around the end of 2010. We all need to make some drastic changes and we don’t have much time. By August a great unsettling should begin to take place in the financial markets that could usher in another “Great Depression”. The incoming administration will go down as one of the greatest ever if they can get us back on the road to recovery within four years. By some of the policy statements and appointments coming out of that camp they may just pull off an even stronger economy, but we’re still going to hit the pole.

Over the coming months we will discuss drastically reducing our expenses, building a war chest of at least 25% of our annual income, and also discovering opportunities that can fatten our pockets. We’ve only got seven or eight months before it really gets silly out there, so wasting time or resources is not an option. Don’t expect to see this type of information coming from the main stream media.

“It is difficult to get a man to understand something when his salary depends upon his not understanding it.” Upton Sinclair

No matter what the "talking heads" say about this crisis, just multiply their statements by ten. If they say economic down turn it’s a recession, if they say recession think depression, if they say depression brace yourself it’s going to get ugly.

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