And what happens to people who lose their houses? The New York Times reports that more and more foreclosure sufferers are becoming homeless. The article gives a 'typical' story. A woman loses her house. She stays with friends. She sleeps in her car. She tries to find work. Eventually, she runs out of options and checks into a homeless shelter.
What's a little odd about this story is that this woman has three grown children...six grandchildren...and even a great grandchild. Now, what's going on here? Are all those kids so heartless that they won't take in grandma? Or is grandma so insufferable that no one can stand her?
We always take the 'glass half full' approach here at The Daily Reckoning. So this reminds us of what is so nice about depression: it brings families together. It also improves manners. Grandmothers know they need to watch their behavior, or they'll be sent to a homeless shelter.
Once you knock them down it is harder than ever for grandmothers to get back on their feet. Why? They're not as flexible as they used to be. Besides, they have no way to earn money.
Mortimer Zuckerman, editor of US News & World Report, provides the figures:
Of people who are out of work, more have been jobless for longer than at any time since 1948. More exhaust their unemployment benefits before finding a new job than ever before. And if they are lucky enough to find work, they'll work the shortest workweeks since 1951.
In other words, the baby boomers have never seen times so rough...for themselves as well as for their children. One American in nine depends on the government for his daily bread. There are 6.2 million more people on food stamps than when the recession began. And there are 6 people waiting in line for each job opening, up from 1.7 when the recession started.
The baby boomers meanwhile figure they will have to keep working longer than expected. Sixty-three percent of them say they expect to delay retirement in order to build up more retirement savings.
This is bad news for younger workers, who were hoping the boomers would get out of the way to free up some jobs. Among young Americans, unemployment hasn't been so high since 1945.
If that weren't bad enough, the government has made things worse by increasing the minimum wage; that alone cost the young an estimated 300,000 jobs. In a depression, prices fall. The price of labor falls too...but not easily. That's why inflation usually helps increase employment - it lowers the real cost of labor. But people do not accept wage cuts readily. And then, along come the feds with a crackpot scheme to INCREASE wages...making the situation worse.
Naturally, Zuckerman looks at these facts and comes to the wrong conclusion. The headline:
"The free market is not up to the job of creating work."
"Only massive programs are equal to the challenge of restoring stable growth to our economy," he writes, in The Financial Times. What kind of massive projects? He mentions an "infrastructure bank." He might have said a war. WWII worked wonders for unemployment. All of sudden, anybody who wanted a job could find one.
But it's all hokum and claptrap. The Soviet Union put everyone to work. You can see where that got them. It's not the fact that people are sweating on a job site that makes a society prosper; they also have to be doing things that add to their wealth. Infrastructure, like any other capital investment, makes sense only when it pays off. The Japanese poured more concrete per square inch than anyone before or since. They proved that you can put up all the bridges and canals you want; it still won't restart the economy.
The free market is the only thing that can create worthwhile work. Because it is the only thing that knows - by sales and earnings - which projects make sense.
But we're facing a losing battle. People much prefer soothing lies.
Heck, we like them too.
Mundus vult decipi et decipiatur!
Bill Bonner
for The Daily Reckoning Australia
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- The Plight of the Baby Boomers
- Boomer Consumers Reduce Spending. Economy Exhales.
About the Author
Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Comment by Pete on 21 October 2009:
Great article. I liked the bits about pointless infrastructure spending.
"One American in nine depends on the government for his daily bread"
I bet Australia's proportion is higher.
Looking beyond official unemployment, we have a lot of people claiming Gov. benefits.
Comment by Greg Atkinson on 22 October 2009:
Perhaps DR can refrain from the using the same tired old references to infrastructure spending in Japan since Bill and others clearly have no idea what they are talking about. Yes a lot of concrete has been used in Japan but when those typhoons roll in at least the cities here don't end up like New Orleans. Anyway I have covered all this before in: http://www.shareswatch.com.au/blog/japan/bridges-to-somewhere-infrastructure-spending-in-japan/ but Americans still seem willing to pretend they know best