Small Change

A writer in a trade journal put it this way: “Only time will tell what our government will do in order to spend our way out of this current economic cycle … history has always repeated itself, which means we will see economic conditions improve at some point”.

So if “history has always repeated itself”, maybe that writer can tell us what happened to the Roman Empire? And maybe he can tell us what became of the Golden Age of Greece?

In still another trade journal we read that the Italian Trade Commissioner, unperturbed by the depressed markets around the world and predicting an early economic recovery, said, “This has happened many times before”.

The truth of the matter is that “this” has never happened before. On January 1st analysts warned that thousands of businesses will “disappear” in 2009. They’re predicting that many will be forced into bankruptcy in a domino-like collapse. In that respect they seem to know what they’re talking about.

“Circuit City to shut down —
• “Court approves bankrupt electronics retailer’s motion to liquidate and close its remaining 567 stores … The company said it has 34,000 employees.”

“Falling cargo rates sink US shipping firm – Goes under with $ 333-m debt —
• “US Shipping Partners LP, a carrier of petroleum products, is holding talks with its lenders after defaulting on $ 333 million of debt, becoming at least the fifth shipping line worldwide to be pulled under by sinking cargo rates.”

“Mitsui OSK to cut fleet expansion —
• “(Tokyo) Mitsui OSK Lines Ltd., the world’s largest merchant fleet operator, will reduce its expansion plans by 50 ships as worldwide demand for sea cargo shrinks … Mitsui OSK and rival Nippon Yusen KK, Japan’s biggest shipping line by sales, are reducing their plans to increase their fleets after the Baltic Dry Index, a measure of commodity shipping rates, tumbled 92 percent last year.”

“No 4th quarter containership orders —
• “Need a way to gauge how far demand has fallen for container lines? Not one containership was ordered in the last three months of 2008, according to AXS-Alphaliner. ‘It is the first time in at least two decades that no containership orders were recorded for three months in a row,’ the Paris-based maritime research company said in its latest newsletter.”

“US foreclosures spike 81% —
• “WASHINGTON – US home foreclosures, the epicentre of the global financial crisis, spiked 81 per cent in 2008 despite efforts to slow the ‘tsunami’, a data tracking firm said on Thursday.”

“Worst of economic crisis still to come: JPMorgan —
• “LONDON – The chief executive of US bank JPMorgan Chase, Jamie Dimon, told the Financial Times on Thursday that the worst of the economic crisis still lay ahead as hard-hit consumers default on their loans. ‘The worst of the economic situation is not yet behind us. It looks as if it will continue to deteriorate for most of 2009,’ he told the business daily.”

Announcements such as these may come as a surprise to those who rely on local news sources for their information, but this economic ‘tsunami’ has been building for a long time. In Vol. XV, Art. 35, a commentary written last March, we criticized those who made light of deteriorating conditions in this country and around the world as well. We wrote:

“Next time someone smugly tells you that this ‘recession’ can only last for another few months, or that the ‘economic turnaround’ is inevitable because that’s the nature of economic cycles, ask just one simple question … how? Ask how this expected recovery will come about. Ask the seer to describe to you the forces that will actually create the jobs needed to restore our buying power, because buying power is the sine qua non in this issue. You’ll be greeted with dead silence.

“There is no government official, no economic guru, no pundit of any stature who can provide an answer to that question. This country is in an irreversible tailspin, but those at the top aren’t at all concerned about the less fortunate majority. They’re comfortably attired in their blinders and in their ignorance.

“In past commentaries we’ve discussed the only possible way of reversing this country’s free fall. Starting from the bottom, a number of nations have advanced with astonishing strides, and like Portugal, Spain, the Netherlands and the British Empire in earlier times, these emerging nations are now in positions of prominence. First, post-war Japan, then post-war South Korea, and now China and India, each in turn recognizing that a strong maritime presence inevitably leads to national wealth. And in happier times wasn’t it our enormous merchant fleet that enabled us to become an economic superpower?

“But of course we can’t build a new merchant fleet. We’d have to pay the hired help too much. Somehow … somehow … the honchos running this country came to the conclusion that it would be to our advantage to allow the overseas competition to pick up all the marbles. We’d let them build all the container ships and we’d just pay them for whatever services we needed. That’s right. We decided to pay their workers rather than our own shipbuilders. We know now that this asinine strategy has put us in a hole that’s getting deeper by the day.

“But those honchos and their ilk are still with us, unfortunately. But so is Title XI of the Merchant Marine Act. And so is the patent we own – the patent we’ve been assured will ‘revolutionize the world’s economy’. Blinders and ignorance are all that block our economic recovery.”

There have been many changes since the above paragraphs were written last March … all bad … and as JPMorgan’s CEO said, “The worst of the economic situation is not yet behind us”. One change hasn’t been made, however. Those blinders are still being worn by U.S. policymakers.