As of April 4, 2011, PennyWise Network will be inactive. We’re sorry we will not be able to maintain the daily news and write new blogs, but we will keep existing blogs available on the site for those who may want to read and comment. We hope this site was helpful while active, and we wish you well with planning your financial future. All the best…PWN.
If you ever wanted to know my favorite jazz work of all time, I can relieve your suspense once and for all (LOL). It’s ‘Round Midnight, and for those of you who’ve never heard this classic, I’ve added it to the blog today and hope you take a few minutes to enjoy:
After listening to this masterpiece by Thelonious Monk, perhaps you’re not as big a fan as me. And honestly, I can understand. After all, by most musical standards this piece is a train wreck. It’s not the kind of stuff that’s worthy of a huge record deal and a few months in the studio with your favorite hit-making music producer. It’s not zippy, or bouncy. It doesn’t soothe or make you feel like falling in love. And it certainly doesn’t make you wanna dance. No, ‘Round Midnight does none of these things. Instead, Monk’s masterpiece captures a more unpleasant mood that’s all too familiar – a sort of dark, disillusioned and confused brooding that has a pace of its own: slow, methodical, heavy. It’s how we feel when hard circumstances, whether unexpected or not, take us to discomfiting places – places of unease. This is why I love Monk. This is why I love ‘Round Midnight. It resonates and registers at a deeper level of human experience and emotion that’s off the beaten path. And as Monk takes you down that path, he has a way of leaving you there to feel around in the darkness for just a few minutes, making sure that when the music stops, and he lets you go, you realize that this too is life – sometimes dark, sometimes lacking clarity, and oftentimes very disorienting.
As more people take stock of national and personal economic trajectories for 2011 and beyond, there seems to be a growing realization that all is not well. (‘Bout time, right?). More and more, we’re starting to hear about a growing and disorienting cognitive dissonance, if you will, particularly in the U.S.
On the one hand, the usual suspects (mainstream media outlets, field “experts”, government officials, etc.) tell us that we’re still in an economic “recovery”, and that any challenges we have in front of us will be met and overcome just as others have been met and overcome in the past – so don’t panic, all is well. And most of us believe what we’re told. On the other hand, we have the following realities that just don’t seem to fit the popular rhetoric:
Poverty (from U.S. Census Bureau):
Unemployment:
Income Inequality:
Foreclosure:
Public Assistance:
National Debt Statistics:
Key National Rankings:
Energy/Fuel Resources as of March 6, 2011:
Food and Other Non-Crude Commodity Price Increases:
Disorienting dissonance, indeed.
In the U.S., mainstream story lines point to a present, and future, that’s akin to Reagan’s famous “Morning in America” construct. And don’t get me wrong – like everyone else in the U.S., I want that Morning in America (without the Reaganesque policies and politics). But unfortunately, we’re not there. That’s not our reality now, and it will not be our reality in the future should we continue to ignore our deep and profound issues which require immediate attention.
To the shock of many who aren’t suffering through unemployment, poverty, lack of opportunity, and the like, or who just flat out could care less about our dying economy and only want to get back to watching re-runs of Two-and-a-Half Men, we’re much closer to midnight than morning. And in this dark place, you have a choice:
These alternatives are sobering, and serious. Given the economic crises at hand, many of us will make it, or not, based on our action, or inaction. And if we really think about it, once we’re willing to see the crises as they are and without the convenience of denial, appropriate measures that can be taken to protect oneself should be fairly easy to identify. Even as we approach our darkest hour. Even, of course, as we get ever so close to ‘Round Midnight. As you prepare and take steps to protect yourself and your finances, PWN wishes you God’s speed.
Well, we knew it was coming, right? U.S. budget cut proposals are starting to trickle in at the federal and state level, and those who are severely impacted by the cuts are angry – very angry. In Wisconsin, a large group of public employees is being asked to take more than a few bullets for the sake of the state budget. Those same employees have responded by banding together to take their emphatic “NOT HAP’NIN’” to the streets. Financial cuts are actually not the biggest issue in the Badger State; apparently, public employees are willing to take their fair share of financial pain. Instead, the larger issue centers around a move by the Wisconsin Governor to take away key public employee collective bargaining rights. Or, put another way: the Governor is tryin’ to bust up unions in Wisconsin. And so it begins (sigh).
America is getting its first real taste of massive protests against austerity measures by states that are flat broke. Over the past couple of months we’ve seen austerity in European countries, and in the January 15th BlogSpot we highlighted some of the places where serious backlashes took the form of riots and protests. In this same blog, we also mentioned our contention that austerity would rear its ugly head in the U.S., and with it will come civil unrest. Here’s what we said in the BlogSpot:
“In the U.S., we’re probably going to see this play out in a similar manner as individual states struggle to maintain what little solvency they have left. States that try to fix the solvency problem via austerity and personal income taxation with little to no balance in areas such as corporate taxation, for instance – watch out. In these states, civil unrest will most likely be coming to a city or town near you.”
We, and others who are paying the least bit of attention to what’s going on in the world, could see this coming in the U.S. from a mile away. And we didn’t rely on any crystal balls, or consult with self-proclaimed psychics like Ms. Cleo (you remember her, right?) to reach our conclusions. No, we just made sincere attempts to use clear sets of lenses and common sense that The Good Lord gave us to make reasonable projections and take events to their logical conclusion. So in the U.S., we could reasonably say that with budget austerity taking root at all levels of U.S. government, and with the middle class still reeling from the collapse of 2008, tensions will mount as governmental bodies try to implement what will be very painful fixes. No genius there, just the ability to see things as they are. But admittedly, the union busting tactic was a surprise. Unions have had a bull’s-eye on their backs for quite some time, so honestly, we shouldn’t have been surprised at all and it’ll be interesting to see whether the union card is played in other bankrupt states.
Thankfully, protests in Wisconsin have so far been peaceful and we’re all hoping it stays that way. However, as we look out in time, and as economic conditions worsen and the ranks of the unemployed continue to swell from continued workforce cuts, peaceful protests in this nation can very easily give way to destructive demonstrations of discontent. And if state governments continue to add the little kicker of threats to cherished freedoms such as collective bargaining rights, tensions will certainly escalate further. Truly, the suppression of unions is one of the more disturbing aspects of what we’re seeing in the U.S. When the solution to a crisis of any kind is the suppression of labor freedoms, it’s a signal that the foundations of worker protections and the middle class are beginning to crack.
As the world’s eyes begin to focus on fiscal crises that are wreaking havoc on all levels of U.S. government, everyone will get a first-hand view of the internal battle lines that we’ll draw amongst ourselves. So, will an assertive, protesting middle class, whether employed in the public or private sector, be flagged as an “enemy” of the state, or will it be recognized as the backbone of this nation and supported as such? If the actions of Wisconsin’s legislative branch are any indication of the general mood of this nation’s lawmakers, I think we may have our answer.
Something interesting happened on the evening of February 8th. That’s actually quite an understatement, so let me rephrase. Something very important happened on the evening of February 8th. The UK Guardian ran a story on WikiLeaks documents that reveal U.S. correspondence, and fears, on Saudi Arabia’s oil reserves and production capacity. Bottom line – the news ain’t encouraging, but it’s rather consistent with what oil depletion hawks have understood for quite some time: the world’s oil production and supply situation is nearing a tipping point, if it hasn’t already been reached. Since February 8th, PWN has pointed its readers to the Guardian article, and we’ll do it again here because the story is that important. But why? Well, it validates long held suspicions on Saudi reserves and production capacity. This is critical to the oil depletion discussion since those who believe our oil situation is just fine often point to Saudi reserves as the global oil scarcity curative. Looks like those folks need to at least take a second glance at their Saudi reserves assumptions. But the documents are also important because they put the issue of oil scarcity on blast yet again, picking up where the oil/economic crisis of 2008 left off. We can only hope that people will take these WikiLeaks documents seriously lest we continue to ignore the crises that await us as oil resources continue to be constrained. Jeremy Leggett, convenor of the UK Industry Taskforce on Peak Oil and Energy Security, put it best in the Guardian article:
“We are asleep at the wheel here: choosing to ignore a threat to the global economy that is quite as bad as the credit crunch, quite possibly worse.”
‘Nuff said. Well, not quite.
On the way to writing a new blog post on the Wikileaks documents, or what we call the “Massive Oil (Wiki)Leak”, we stumbled on a great interview that covers the issue of oil depletion and the WikiLeaks very well and decided to present it here in the blog. The interview is through Yahoo! Finance’s Tech Ticker, and the interviewee is Stephen Leeb, Chairman of the Leeb Group and author of “The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel”. So, without further ado…
Two weeks ago, President Barack Obama gave his annual State of the Union address wherein he outlined his strategic legislative agenda for the United States. The speech, like many others delivered by President Obama, was eloquent, moving and a source of hope for a country still reeling from economic conditions not seen since the Great Depression. As I watched the President, I couldn’t help but wonder what was going through his mind as he delivered the address. I tried to put myself in his shoes for a few moments, thinking about how I would speak to a nation whose future is more uncertain now than at any other time in recent history. How would I deliver the appropriate mix of honesty and optimism, challenge and encouragement, vision and pragmatism? Not an easy task given the obstacles we face in our country.
As I pondered further, I remembered a speech made nearly 35 years ago by a president who has been called everything but a child of God, undeservedly so. Recently I watched the video of this speech and was absolutely blown away by the words, and how those words ring true for us even today. Here’s a portion of the speech given by James Earl Carter, Jr., our 39th President:
Amazing, huh? With the exception of Eisenhower’s military-industrial complex speech from 1961 and Carter’s Crisis of Confidence speech from 1979, I can’t think of many other presidential addresses that so honestly highlighted critical issues facing our nation. Carter reminded Americans of the U.S.’s energy predicament, and he made a call for sacrifice so that America could maintain its competitive position and ensure its long-term viability. Well, we know how this turned out. Carter’s message from 1977 and his follow up call for action in 1979 were ignored. In fact, Carter himself has been largely ignored, his contributions have been disparaged, and in some political circles he is mocked regularly and labeled as the weakest U.S. leader to ever hold the office of president.
All presidents have their shortcomings, and Carter was no different. But weak? I can’t see it. Look at the speech again. Carter had to have a backbone of steel to shrug off political risks associated with ruffling the feathers of incredibly powerful oil and gas special interests. Throwing political expediency to the wind, Carter simply laid out the truth to his constituents. And as a preacher once told me, when you hear the truth being spoken, you have two choices: you can say ‘Amen!’, or you can say ‘Ouch!’. I suppose Americans yelled out a collective ‘Ouch!’ after Carter’s speech and have been in denial about his warnings ever since.
Telling the truth takes courage, and what we saw from our 39th president was an act of political and personal courage rarely exhibited in American politics. President Obama recently made headlines with the inclusion of Ronald Reagan’s biography in his vacation reading list. Presumably Obama is reading about Reagan to pick up some tips on how to navigate the complex waters of U.S. presidential politics. If Obama wants to get a few tips on extraordinary political courage, I might suggest something else for our current president to review. That’s right, President Carter’s speeches from ’77 and ’79. Now, this isn’t to say that Obama lacks courage. In fact, exactly the opposite is true. Obama stuck to his guns on controversial reforms in healthcare and finance, and for that he should be commended. But I’m talking about extraordinary political courage that matches the extraordinary clear and present danger we face right now in energy and fiscal policy. This is where Carter’s example would be most instructive, with one caveat. Unfortunately Carter’s honesty was rewarded with a failed re-election bid in 1980. So with Obama, there needs to be an ever so carefully crafted message that’s bold, honest and places energy and fiscal matters at the fore of a national conversation without damaging prospects for re-election. [Let’s be real. Love him or hate him, Obama is the best 2012 presidential candidate we have in America.]
Whether Americans realize it or not, we need honesty and candor more than anything else right now. And we need a leader who has the courage to level with the American people. How else are we to fix our messes unless our leaders clearly communicate what they are? With President Obama’s creation of the Simpson-Bowles Commission, we seemed to be close to an honest conversation regarding our challenges on the fiscal front. But the closer we get to the 2012 election cycle, the farther away this commission and its recommendations appear to be placed in the country’s rear view mirror. A real shame.
President Obama’s State of the Union address from two weeks ago was necessary to kick start a national conversation about the challenges we face. And now that the SoU is done, President Obama should tee up another address that very clearly outlines our energy and fiscal crises along with appropriate, and most likely very painful, solutions. No one will want to take these hard steps that will give us hope for avoiding fiscal and energy catastrophes. If and when these hard but necessary solutions are identified by our President, you’ll more than likely hear very few folks saying ‘Amen!’, and a lot of folks yelling ‘Ouch!’. But we can’t wait any longer to put the issues on the front burner. Our country’s future is in jeopardy, and we all have to kick-in to get this mess straightened out – ASAP. It’ll take courage, and we can look to what some may consider an unlikely source of inspiration:
Roll that tape from ’77 and ‘79…Welcome Back, Kotter.
Errrr, sorry. Wrong cat from the ‘70s. I meant to say, Welcome Back, Carter.
“You will not be able to stay home, brother.
You will not be able to plug in, turn on and drop out.
You will not be able to lose yourself on skag and skip,
Skip out for beer during commercials
Because the revolution will not be televised…”
– Gil Scott-Heron
What we’re seeing in North Africa is breathtaking. Or to be more accurate…what we’re barely seeing in North Africa is breathtaking. The Egyptian government has shutdown some of its communications infrastructure, so unfortunately those outside of Egypt can only see flashes of an unfolding revolution that is gaining tremendous momentum with each passing day. The people of Algeria and Tunisia lit the fuse of economic and political emancipation this month, and now that spark has inspired Egyptians to protest Hasni Mubarak’s 30-year reign as a not-so-benevolent dictator. As the people of Egypt and other Arab nations continue their struggles with regimes that are long overdue for change, I’m reminded of the conditions that gave rise to the widespread turmoil. Higher rates of unemployment and poverty, combined with a lack of opportunity to improve poor standards of living, were already present and made life miserable. But add to that toxic mix a dose of rising food prices, reduced subsidies for staples and energy, and worsening employment prospects, and we can see how life for many in Arab states has moved from miserable to intolerable.
History tells us that the only way folks without connections, without wealth and without anything to lose can improve their situations is through regime change. Well – here ‘tis. Check out this stunning (albeit limited) footage from Egypt. We’re also providing video from Yemen and Lebanon, neighboring countries that are the latest to experience unrest:
Needless to say, folks who have been paying attention to what’s happening around the world are not surprised by these recent revolutionary events. On this blog, about three weeks ago, we discussed what happens when food prices skyrocket. In countries where food comprises a massive chunk of personal spending, sustained upticks in food prices result in hunger and unrest.
So what are the lessons in all of this for those of us in the West? Well, there are many, but I want to focus on one in particular. And any discussion on lessons has to include a statement of support for those who are struggling for the freedoms and economic opportunity that we in the West take for granted. God’s speed to those who are working for a peaceful resolution to difficult political and socioeconomic issues that will take a tremendous amount of time and effort to fix. And with regard to the key take away, or lesson, we can glean from the unrest we’ve seen thus far in 2011, we can peg it thusly – the events of January 2011 serve as a warning signal to people in Western nations such as the U.S. Look around you. Energy prices are increasing. Food prices are increasing. Governments at federal and local levels are careening towards insolvency. Unemployment is high. The gap between rich and poor is increasing. And despite the rosy rhetoric being pumped out by mainstream news sources, government officials, and others who have a vested interest in not sounding any alarms until the titanic, aka western economies, are almost fully underwater, it’s clear that the West and the Middle East have much more in common than most in the West realize, or will acknowledge. The only thing missing in Western countries is people in the streets. Might this be at our doorsteps if economic conditions worsen – this isn’t a stretch at all. And if the crisis in Egypt begins to impact trading routes through the Suez Canal for oil and other goods that are vital to the economic health of the West, you can bet we’ll see declining economic conditions that are catalysts for widespread protests and civil unrest. If that worst case scenario comes to the West, let’s hope our freedoms are held together long enough for the world to get an in depth view of a revolution that is not hidden, but instead is fully televised.
On January 17, 2011, we Americans will observe a national holiday for Dr. Martin Luther King, Jr., one of our greatest heroes. Dr. King’s achievements, which include a host of successful humanitarian efforts and acts of civil disobedience, continue to resonate with, convict and inspire people around the world. During this holiday I usually take time to reflect on what life would have been like in America without King’s contributions and sacrifice. Certainly wouldn’t be the America we know today. Despite its many warts and failings, and at least in the realm of racial equality, most of us can honestly say that the country has made progress since King’s assassination over 40 years ago.
So what does MLK have to do with financial and economic matters of today?
Well, lots. We tend to forget that Dr. King’s civil rights causes were often focused on economic inequality in the U.S. Whether organizing the Poor People’s Campaign in 1967, or supporting public works employees striking for better treatment and wages just prior to his death in 1968, King was a strong advocate for the poor and disenfranchised, and he understood that the United States’ promise of opportunity had to be extended to all Americans if the fragile union of the ‘60s was to survive.
Sound familiar? Over the past couple of weeks, Daily News Shots have been full of stories that describe disturbing events from around the world, letting us know that the causes for which King fought are alive and well today. From Algeria to China, England to Tunisia, and many countries in between, we’re starting to see a trend – government imposed economic austerity, rising food prices, unemployment and general income inequality are driving protests, violent riots, and in the case of Tunisia, government collapse. All of this because the world’s economic balance is off, and continues to worsen. Here are some of the countries that have experienced civil unrest recently due to economic upheaval (see articles here and here for more):
Tunisia – President flees country amid escalating violence over unemployment and the need for political reform
Algeria – riots ensue over sudden price hikes in staples such as sugar, flour and milk
England – govt austerity measures send people to the streets, including college students whose tuitions increased dramatically
Greece – govt austerity measures, including pension and wage reforms, result in rioting
India – food inflation sparks protests
Sometimes pictures are worth a thousand words – here’s video of some of the aforementioned unrest:
The world is starting to boil over with reaction to an economic climate that, for the typical person trying to make an honest living, grows more hostile with time. Moreover, the contagion of sovereign economic and fiscal crisis is spreading and mutating very quickly – no country is immune. As we begin to grapple with several daunting challenges that lay ahead, understanding the connected nature of our problems is key. Dr. King understood this principle – he understood that as Americans we all sink or swim together, and if we proactively assist those among us who are most vulnerable, all of us win. Given the interconnected nature of our financial and economic systems around the world, might we reasonably expand this principle to our global community? Let’s give it a shot.
Europe is putting the “least of these” principle to work as we speak. The EU has tried to focus its attention on weaker economies with an understanding that the loss of solvency in a weaker sovereign creates ripple effects and jeopardizes the stability of the sovereign’s sister countries. On its face, a great macro story indeed. However, as the macro plan transitions to micro implementation for individual sovereigns, the “least of these” principle is being turned on its head. At the outset of the EU rescue project, there was an understanding that no fix would be without considerable pain. The question was, who would feel this pain, and how? So far, taxpayers with limited resources have shouldered the burden as taxes have gone up in the case of Greece and Ireland, while austerity in these nations has resulted in a decrease in government services. Meanwhile, significant resources have been expended to prop up Greek and Irish debt/bond holdings of banks and other investors worldwide. This sends a strong message – debt investors, along with fiscally compromised and sometimes irresponsible governments, will be kept whole at all costs, and taxpayers, the expendable and vulnerable masses, will be forced to foot the bill. There be the rub. The vast majority of folks in any country (i.e. those of us in the lower and middle economic strata) is incredibly vulnerable in tough times. Until at risk populations in sovereign nations feel as though they’re not being sacrificed and forced to bear a disproportionate amount of austerity pain and suffering, civil unrest will continue to rear its ugly head.
In the U.S., we’re probably going to see this play out in a similar manner as individual states struggle to maintain what little solvency they have left. States that try to fix the solvency problem via austerity and personal income taxation with little to no balance in areas such as corporate taxation, for instance – watch out. In these states, civil unrest will most likely be coming to a city or town near you.
Oh, if we could just learn our lessons from the wisdom of folks like Dr. King. When it comes to these kinds of tough crises, I suppose one can only dream.
If you’ve surveyed the Daily News Shots over the past couple of weeks, I’m sure you’ve noticed several articles covering food prices. Also, with last week’s blog, we showed 2010 food commodity price increases and discussed some of the top reasons for the substantial increases. It appears that high price levels for food commodities will be here for a while – good articles on why this seems likely can be found here, here and here. Not good news at all, and the seriousness of the issue certainly warrants the attention of those of who have greater resources at their disposal.
The last time we saw escalating food price levels, as measured by the United Nations’ Food and Agriculture Organization (FAO) food price index, was 2008 when the FAO index hit 191. At this level, riots broke out around the globe. In December 2010, the price index hit 215, and now those who care about the poor and hungry are starting to sound the alarm.
For a little context, compare budget allocations for food in various countries as compared with the U.S. as of 2008:
Nigeria – 73%
Vietnam – 65%
Indonesia – 50%
Poorest 20% of U.S. Households – 16%
UN Statistic: Over 1 Billion People in the World Starve
More context – here are three charts from FAO that provide a good picture of price level trends for various years and food commodities:
Now we can see why the high price of food is such an important topic. In fact, it’s a life and death topic. Even small price fluctuations have a huge impact on whether people eat, or not. It would seem that rich countries are partly to blame for some of the increases we’re seeing since food commodities are not only necessities, but they’re also investment goods that are being hoarded by traders in rich countries for financial gain. You’d think folks somewhere in private or public segments of these rich countries would support more aid to ailing countries whose populations are dying in front of our eyes, but the budgets in these wealthy countries, at least in the public sector, are such a mess, wouldn’t hold my breath on that one.
[BTW, I'm using the words "rich" and "wealthy" rather loosely here to describe the U.S. and many European countries - one could argue that these sovereigns, with their incredibly high levels of debt, can't be considered wealthy since, for all intents and purposes, they're on the hairy edge of insolvency. A valid argument indeed. Access to debt markets and/or electronic "printing presses" enables these countries to only keep up the appearance of wealth]
Another miserable situation with no easy solutions. However, there are organizations out there that are trying to help, and a couple of lists of such groups can be found here:
USDA List for Nutrition Assistance Programs & Organizations
This isn’t just a non-U.S. story. And the number of poor and hungry will grow substantially in the U.S. as our economy continues to decline.
In addition to the many secular NGOs and organized programs dedicated to fighting hunger, religious institutions world-wide are pitching in to help those who are in dire need, and support for their efforts at the local community, national and international levels is always helpful.
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