Benny and his friend Griffin at Ocean Beach in San Francisco.

Saturday, October 05, 2013

Meet Mr. Economy

So when I was in Seattle pitching my memoir to agents, I made all kinds of blithe promises, including “I use the economy as a character in my story.” Now that I’m preparing materials for agents, I’m all “Holy crap, I have to use the economy as a character in my story. Who the hell does that?”

That meant I actually had to think about what kind of character the economy — specifically the economy of March 2007-March 2008) would be. Would Lord Economy be like Sauron, a dark, malevolent shadow over the landscape, occasionally sending out the Nazgul of Foreclosure or the Witch-King of Mortgage Derivatives? Or would we have Miss Economy, like the Queen in Narnia, who cast a spell over our happy land, forcing up oil prices and credit card rates? I was tempted to create an Economy God, a reckless, vengeful Poseidon whipping up economic storms to prevent our hero from reaching a safe harbor. But not even I was paranoid enough to consider myself an Odysseus, unjustly persecuted with hidden bank fees.

In the end, I settled on Mr. Economy, a mighty, well-meaning, but none-too-bright giant. In March 2007, our Mr. Economy was strong and confident, almost too confident. He was reckless, shrugging off any restraint, running faster and faster. He was a gambler, hopped up on easy money, greedily gobbling up debt instruments. The sun is warm, the grass is soft and it never enters his pea-brained mind that things could ever change.

He looked so strong then, but of course that strength was illusory. Real strength comes through discipline and training and experience. Truly strong characters develop sound judgment and act purposefully, willing to practice moderation and prepared for setbacks.

In March 2007, Mr. Economy was a happy camper, with corporate earnings growing big.  He notices a small pain in the housing market (foreclosures up, home sales down) but pays it no mind.

In June, he notices another pain, the investment banks, who suddenly are worried about their sketchy, risky investments.

But in July, he still feels great. Everything’s fine, the Dow hits 14,000 for the first time.

In August, Mr. Economy starts feeling sick to his stomach. He’s been gobbling up all this shifty debt and he’s having trouble digesting it. He behaves erratically, up one day and down the next.

In September, he’s getting some headaches from housing, retail and financial industries. But he won’t listen to the Federal Reserve asking him to pretty please be responsible with the foreclosures. He’s starting to bleed jobs.

October brings a high fever, and of course, hallucinations. Everything’s rosy! Dow hits record high of 14,087! The worst is over! But infection has set in.

In November, our Mr. Economy is feeling really bad. Banks are hammered, everyone says recession is coming.

By December, Mr. Economy is breaking down before our very eyes. One million U.S. homes are in foreclosure. Our giant falls to his knees — he’s tapped out and can’t run any more.

In January 2008 he’s crawling along. Oil is at $100 a barrel, the Dow is weakening. The Fed slashes interest rates, but even with mass transfusions of money, Mr. Economy hasn’t felt this bad since 1974.

By February the vultures are circling. Credit card lenders jack up rates and fees on consumers and inflation rises.

In March, Mr. Economy is hardly moving, crushing consumers beneath him. He now has a choice: will he take his nasty-tasting medicine and get stronger faster, or will be just lie there, still crushing consumers and hoping he’ll slowly get stronger?

The answer, of course, is that the Fed doesn’t administer strong medicine, like allowing big financial institutions to fail and imposing new regulation. Instead, the Fed and the government administered massive transfusions of taxpayer dollars and a few weak restraints and called it a day. 

Which is likely why, although officially this recession ended in 2009, the recovery has been weak and why a wounded Mr. Economy continues to limp along, no matter what the stock market says. 

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