Reposted from January 2009—because it still applies… —Ed.
January 28, 2009
THE RECESSION AND HOW TO LIVE THROUGH IT
by Charles Potts
[Arthur editor] Jay Babcock has tempted me with the phrase, “It would be great if you wrote something on this subject,” referring to the subject line of his email, “The recession and how to live through it.”
I’ll take the bait. This is more than a recession. This is going to be a huge depression, with the “recovery” way off in the distance.
A recession, per Christopher Wood, desk chair person for The Economist in Tokyo circa 1995, is “a superabundance of inventory, and can be melted off the shelf; a depression is a superabundance of capacity” and takes much longer to get out of. Remember that it took the bean counters in Wash DC a full year to confirm the economy was in recession, and there’s a lot of over-the-counter chatter about how this recession is already longer than the one in, take your pick: 1976-1980-1991-etc. However, look around you and notice the superabundance of capacity. The industrial hind end of Europe, Japan, the US and China plus all else, can easily produce multiple times more automobiles, cell phones, TVs, computers, refrigerators, et al. than anybody with funds can buy.
This is the fourth major deflationary price collapse in the past 600 years. In the three previous price collapses, there was a long period afterward when prices did not recover their pre-fall levels for decades. Prices last collapsed hard in 1815 after Wellington’s victory over Napoleon at Waterloo; the period from 1815-1896 has been called by economists The Victorian Equilibrium. Many things contributed to this low-level stability, but it is sobering to realize there was scant inflation in the United States during the 19th century. (Inflation, by the by, is not necessarily a bad thing. Inflation simply moves assets around the game board from creditors to debtors; it doesn’t actually destroy anything except purchasing power if all you have is cash. In deflation, which we’re going through now, cash will buy a lot. During inflation it is better to have hard assets that increase in value at least at the same rate as cash.)
Will it take eight decades before the world economy is go-go again?
My reference to 1815 isn’t casual. I just re-read David Hackett Fischer’s The Great Wave: Price Revolutions and the Rhythm of History. His book is about the three previous big price collapses: in the early 14th century when the Black Death ended the so called “Middle” ages; then, circa 1492, when prices collapsed during the Renaissance, and we encircled ourselves globally; and the aforementioned 1815. What’s so crucial about 1815 is it is also the date and the event that Oswald Spengler (The Decline of the West) identifies as the moment Western culture went sideways and into “civilization,” cf. Napoleon at Waterloo. Fischer’s graphs of how the prices rose and fell, can be superimposed one over another. This collapse we’re in, the big one for the rest of our lives, started 20 years ago in Japan in 1989, has hit Argentina and most of Latin America, Russia twice now, and finally the big fish, the rest of Europe and the US. Even Doha is scaling back!
The powers that be with their printing presses will print money and throw it at the wall until enough of it sticks. Some activities will appear to return to normalcy. But you shouldn’t wait for the influx of money to turn deflation into inflation, just as you shouldn’t wait for the bailout to trickle down to you. Unemployment is going to increase and stay high for some time. Challenging moments are upon us.
My advice in hard times would be the same in good times: find something you love to do and master it, become as good as or better at it than anyone has any reason to be. Look up the people who do it really well right now. Study the masters. A musical instrument, a physical activity, painting, movies, art of all kinds, the writing of poetry or other books, whatever makes you feel better about yourself and contributes to our well being. Try enough things until you are satisfied that your fascination with the subject will lead to mastery. Six or eight hours of focused effort a day should suffice. I think this is reasonable advice, coming from an old man who has squandered most of his life by being interested in too many things to master any of them.
We don’t exist as individuals; we exist as the sum total of our relationships. You’ll need all the friends you can get, so be honest, fair and generous in your dealings with other people. Don’t be afraid to ask for help or take unseemly risks. The future does not belong to the risk aversive.
It will be difficult to get rich in the onrushing hard times, but it will be easy to get poor or poorer. Watch where your money goes. Make sure you get good value for it. Avoid buying things you don’t really need. Add value to your activities by putting forth effort. Expect others to do the same.
Spend time with children and if you have children of your own, take the time to understand the world from their point of view.
Assets are things that have to be used up creating additional assets. Almost without exception, your biggest asset is your time. I could have gotten rich teaching a seminar I created called “Seize the Day,” essentially a series of sensory exercises to stimulate your imagination to take over and live your own life. But I preferred life in a small town and didn’t want to see the inside of every airport and convention center in the country.
Maybe it’s time to skip the addictions, look up old friends, or visit long-lost relatives. Life is a gift of such presurpassing value that we sometimes hardly notice. Learn to appreciate simple things, the taste of water, the odor of flowers, the great way gravity contributes to your ability to walk and run.
Some of the things people love to do and do well don’t pay that much: poetry for example. Nobody really gives much of a fuck anymore if you can understand the world and set it to music. You have to feed yourself, and if a family, contribute to their well-being. You may find yourself bearing an overload of dissonance, earning your daily bread and wishing, as the Colorado poet and painter Joe Lothamer said, “I dream of being a janitor.”
Every changed circumstance contains opportunities, which accrue to the first people to recognize them. Since circumstances are in constant flux, there is a steady stream of opportunities. Learn to spot them and make them your own.
Keep the basics in mind. People will still be buying food even if the rest of the consumer economy blows completely up, as it so richly deserves to. Heal the sick, wake the dead, feed the hungry. Food shelter and clothing. Eat slowly and chew your cud well.
Previously in Arthur: