Monthly Archives: January 2009

Silk Lining

The last time the economy was in a fix similar to today’s was during the 17-month-long recession of 1981-82. Nationwide unemployment approached 11% (about two points higher than today), and as many as 450,000 jobs were being shed each month.
Annual inflation exceeded double digits then, so the Federal Reserve Bank didn’t dare embark on a rate-cutting strategy for fear of plunging the nation into a hyper-inflationary wasteland like 1920s Germany or present-day Zimbabwe. Instead, they were permitted to hover between 15% and 20%.
Americans read a lot more newspapers back then, and presumably they wished to be well-informed. Having been shellacked by three steep recessions in less than a decade and their purchasing power relentlessly degraded by inflation, many had to wonder what would happen next.
Most of the best-known economic observers of the time graced the pages of the New York Times, and they were often unapologetic about their position in the world. William Safire noted in early 1982 that “if ever there were a good time for hard times, now is that time,” noting that a “ring-a-ding recession” would vanquish inflation. The highest-paid columnist of the era professed sympathy for the unemployed, but didn’t sound too convincing.
Such conflations of authority and a niggling sense of inauthenticity carry over today. Nobel Laureate Paul Krugman’s knowledge about economics is obviously unsurpassed, but he channels it into writing that speaks mostly in generalities and of politics. He can even get petty, as in his nitpicking of Barack Obama’s inaugural address. Thomas L. Friedman is sometimes visionary, but a recent profile in the New Yorker revealed he lives in an 11,000-square-foot mansion on a seven-and-a-half acre lot just outside of Washington, land which he claims he and his wife purchased to rescue from subdivision. Profile author Ian Parker wryly remarked that “could sound like someone buying a lot of champagne to protect society from cork-related injuries.”
Which brings me to Leonard Silk.
Silk wrote “The Economic Scene” column for the New York Times from 1976 until 1992. An economist by training, Silk didn’t enter journalism until his mid-30s and wasn’t hired by the Gray Lady until he was in his 50s. Silk’s writing is a revelation: entirely unadorned yet crammed with hard data and interviews with the nation’s leading economists.
In March1982, Silk embarked on a series of columns about the possibility the country was headed toward depression. He didn’t make any hard or fast judgments; instead he pored over data and worked the phones. His conclusion: depression wasn’t likely, but it could happen. Most occur after periods of flat growth, and the prolonged stagflation of the 1970s might be a case in point.

Former Atlanta Journal-Consitution columnist Mark Silk believes there's too much "heavy breathing" in today's economic coverage.

Former Atlanta Journal-Constitution columnist Mark Silk believes there's too much "heavy breathing" in today's economic coverage.

Silk suggested some contingencies, such as “western governments need to prepare plans for dealing with the threat of failures, bankruptcies and defaults that might otherwise become epidemic.” He also recommended that we develop “industrial programs to foster growth in sectors where the United States has or, can, develop a comparative advantage.”
I could stoop to citing Yogi Berra’s musings on déjà vu, but I’ll pass.
Silk’s son Mark laughed when I read to him a reference his father made to 19th century Swedish economist Knut Wicksell, a name not exactly bandied about by today’s chattering classes. He notes that his father, who passed away in 1995, had developed an abiding fondness for Sweden when he wrote his doctoral thesis on its postwar housing policies.
Mark Silk is himself an academic, a professor of religion and director of the public values program at Trinity College in West Hartford, Conn. But he also spent nearly a decade as a columnist, editorial writer, and reporter for the Atlanta Journal-Constitution. He tried very hard to model his reporting after his father’s. “I think journalism as a whole has become a lot more heavy breathing,” he says, adding that many of today’s financial pundits are more inclined to tell us what they think rather than what they observe.
“My father always believed in a reported column, or at least one where you tried to do some fresh thinking, and maybe some reading of this or that,” Mark Silk says. “It’s not so common anymore.”
Mark Silk thinks it also helped that his father actually came of age in the Great Depression. “When people think about that period, they see the pictures of breadlines and hoboes. At its worst point, 75% of the workforce still had jobs, and they were paying taxes, and society still functioned,” he says. “He had that knowledge and perspective, and brought it to his writing.”
Perspective counted for more back then: when his father was hired by Business Week in the early 1950s, Mark Silk notes it was part of a shift by the editors of the magazine toward a more Keynesian point of view and away from an embrace of wholly unregulated markets. By the time Leonard Silk had begun dissecting the early ‘80s recession, the Reagan Revolution was in full force, and the audience for highly sophisticated financial discourse had apparently begun to wane.

Did Ronald Reagan's tack toward the 1981-82 recession affect future economic coverage?

Did Ronald Reagan's tack toward the 1981-82 recession affect future economic coverage?

As a result, Mark Silk says “everyone wants answers now, and not what a lot of economists say,” though he adds that the current climate is beginning to temper that. Were his father was writing today, he’d likely be doing what he did best: gathering all the data he could to formulate a cogent viewpoint.
“My father never professed to have the answer, just a fix on all the different perspectives,” Mark Silk says. “His philosophy was, ‘if you stay tuned to my column you might get the answer with time.’”
I certainly wish we could.


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Hillary’s “Mad Men”

Watching “Mad Men” is a useful tool for analyzing Hillary Clinton’s career path.
AMC’s remarkable television drama is set in the advertising industry during its Eisenhower-era heyday. Although the period milieu is meticulously re-created, what really matters is the conduct of the liquor-soaked, chain-smoking clique of ad execs. Their secretaries are regularly groped, their wives and mistresses marginalized and humiliated. The daily lives of these men in what seemed a feel-good era is a cocktail of petty power grabs and cheap secrets.
These pre-Feminist Era women are resigned to such behavior. Yet they spend much of their time weeping in the restroom, crashing their cars, and struggling to reveal their feelings to psychiatrists. These shrinks are all men, of course, and in the strictest Freudian tradition say little in reply.
Hillary Clinton came of age as this era began to wane. The fact that she just became the third female Secretary of State out of the last four appointees demonstrates how far both American women and men have come in the decades since. But the fact is, Clinton’s career has been shaped in many ways by such sleazy male conduct as her grand ambitions.

Sen. Hillary Clinton, D-N.Y., takes the oath at her recent confirmation hearing to become the next U.S. Secretary of State.

Sen. Hillary Clinton, D-N.Y., takes the oath at her recent confirmation hearing to become the next U.S. Secretary of State.

Clinton’s confirmation hearings have been routinely described as a love fest, which is both close to the truth and not entirely accurate. Although the Senate Foreign Relations Committee overwhelmingly approved her nomination, there is a great irony behind the lone dissenting vote cast by Sen. David Vitter, the conservative Republican from Louisiana. Vitter was one of only two Senators to vote against Clinton in her full confirmation vote.
Vitter expressed concerns about the operations of the Clinton Global Initiative – former President Bill Clinton’s charitable organization. He was particularly worried how it would publicize donations after Hillary Clinton is running the State Department. The Clintons had agreed to disclose the current donor list to allay any worries about a potential conflict of interest.
“Would you support and help produce an amended (agreement) that would bring the same disclosure to future contributions to the Clinton Global Initiative?” Vitter asked Clinton. When she began what he believed a rambling answer, Vitter cut her off and groused that her response was cutting into his question time.
It was amusing to hear Vitter grumble about having the clock run out on him. No doubt it happened to him more than once when he patronized the services of Pamela Martin & Associates, the cover name for the call-girl ring run by Washington madam Debra Jean Palfrey. It also likely happened when Vitter procured services from a similar business in New Orleans a decade earlier.
Sen. David Vitter, R-Louisiana, is understandably suspicious about having the clock run out on him.

Sen. David Vitter, R-Louisiana, is understandably suspicious about having the clock run out on him.

To Clinton’s credit, she at least tried to answer Vitter’s question. She could have deeply vexed him by sighing and counting the ceiling tiles.
Even more ironic was Vitter’s calls for Clinton to provide greater transparency. When his extracurricular activities were exposed in early 2007, he issued a brief statement that said, in part: “Out of respect for my family, I will keep my discussion of the matter there – with God and them.” One wonders whether Vitter’s made any charitable contributions for repentance.
While Vitter is a mere blip on Hillary’s career radar, Bill Clinton represents the full-frontal assault. His serial bimbo eruptions, Oval Office trysts and twisted interpretations of sexual relations make him a “Mad Men” fellow-traveler. Such behavior – along with his petulant outbursts during his wife’s campaign – helped contribute to her future reign over Foggy Bottom rather than Pennsylvania Avenue.
Yet the ying of Bill’s philandering was counterbalanced by Rudy Giuliani’s yang. His affair with Judith Nathan in the last months of his tenure as New York City’s mayor (one of at least two liaisons while he was in office) caused him to be embarrassingly banished from Gracie Mansion by aggrieved wife Donna Hanover. This contributed to Giuliani’s pulling out from the 2000 New York Senate campaign, making an uphill battle for Clinton pretty much a breeze.
One wonders what Hillary Clinton – whose acute intelligence and self-control were on full display during her confirmation process – makes of how this boorish behavior has shaped both her career and personal life. Like the women of “Mad Men,” she holds those feelings in as if her very survival depends upon it. But as I continue to enjoy the show – both the one on DVD and the continuing performances of the former First Couple – I wonder when one of the female characters will draw a knife to confront their antagonists. It would surely mark the first time in their lives these men have shielded their waists.

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Sink Big?

‘‘I wonder what it would be like if we went into another depression,” a friend wondered aloud in his arch baritone voice. The question was floated over lunch some six months ago, when the economic climate seemed uncertain but not yet unsteady.

I said there would be no sequel to the Great Depression. The shrill fear and catastrophic war it spawned made governments much more responsive during fiscal crises.

Indeed, the Treasury is currently a blur, bailing out lenders and insurers; the Federal Reserve Bank is all but throwing money out its office windows. The incoming administration may well approve another stimulus package as early as inauguration day.

The end result remains to be seen. Some of the actions will work, some won’t. However, the mere act of acting will prove far better than what was done during the first one-third of the Great Depression: virtually nothing.

Despite this flurry of activity, you would think we’re partying like it’s 1929. The Los Angeles Times recently ran a graphic in its business section of a once middle-class family standing in a soup line. A New York Times columnist sourly joked that we’ve all taken up squirrel hunting as a new vocation. Many such dark musings appear daily in the media.

My friend and I had both worked as journalists, and we’re intimately familiar with how the skeptical nature of the profession drives tough questions and astute analysis. However, it also tends to generate a worldview of gallows humor bordering on apocalypse. Has it reached the point of whistling in the cemetery?

The fourth estate has been in a depression of its own for years now, having been ravaged by ceaseless rounds of layoffs and buyouts. Indeed, the L.A. Times graphic ran the day before its parent company filed for bankruptcy. So I’m concerned – but not surprised – when I hear or read that the economy is “tanking” or “cratering” rather than sluggish or in recession. Or that loans and mortgage-backed securities are “toxic” rather than underperforming. Although the comparisons to the 1930s have moderated in recent weeks, they remain persistent enough that I’m surprised we’re not all living in jalopies, our hollowed-out eyes shaded by tattered, plaid caps.

Even relatively good news is often delivered in funereal tones. For example, Southern California real estate sales have been consistently up in recent months. That the majority of these sales are of foreclosed homes is considered grim news by its messengers, even though it means the local real estate market is self-correcting in a relatively quick fashion. It would be frightening if these homes sat empty for years, but they’re not.

Some might mutter that my head is stuck in the sand. Indeed, my head has been stuck – in the books of historian Robert S. McElvaine, author of a number of well-regarded books on the Great Depression. They contain some truly astonishing numbers, such as the fact that gross business investment in the United States plummeted 98 percent between 1929 and 1933. I looked up the most recent Fed data: Gross private investment is down about 10 percent from its 2006 peak, while government investment is up about 15 percent. Total net decline thus far: less than 1 percent. The Fed would print money on its office copiers to keep it from falling even 5 percent.

Current Fed Chairman Ben Bernanke, himself an expert on the Great Depression, recently observed that the economic conditions of 75 years ago are no comparison to what is going on today. His comments were broadcast on NPR – one of the very few news organizations whose audience has grown over the past decade. As far as I can tell, it was repeated nowhere else.

I’m the last person in the world who wants rah-rah news if it’s not justified. I just want it delivered appropriately, accompanied by solid analysis. Every time Chris Matthews turns grim and hesitant as he suggests the current economy may go “beyond a recession,” or a print story suggests that retailers became ghost towns immediately after Black Friday (they’re not as crowded as in recent years, but nor are they deserted), it dents our collective psyche. Such rhetoric makes the roughly 90 percent of the workforce whose jobs are safe put off a purchase they could afford. Or it goads talented entrepreneurs to skip what could be a crucial networking event because they didn’t think it was worth the bother. Psychology to economics is what pitching is to baseball – about 70 percent of the game.

My hopes of moderation may be overmatched by the hyperactive demands of the 24-hour news cycle. But I do know that no journalist worth his salt wants to become part of the story he’s covering. When that’s in danger of happening, the best ones step back, take a closer look at all the facts, and work even harder to put everything in perspective. More of that would be useful now.

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