Last night, I helped my son prepare an Op-Ed piece for his high school class on Economics and Financial Literacy. He chose the Durable Goods report, and we sat down to dissect and discuss what it told us. As a neophyte, he naturally saw discussion of "Shipments rising" and "Orders increasing" and asked "this means things are getting better, right? We're in an uptrend?" Linear thinking is easy. Being human, we do it all the time.
Yes, I told him, but there's much more to the report. I pointed out that Inventories were growing rapidly, Unfilled Orders were increasing, and while Shipments were increasing, the rate of increase was slowing. None of these are particularly good signs of future activity. More importantly, Capital Goods, the building blocks of future productivity, were declining. At best, we decided, the report was neutral, showing that things may have improved somewhat, but many other signs were indicating a stall or slowdown.
Most importantly, I pointed him to the Inventory-to-Sales Ratio, which is a harbinger of true economic activity. A rapidly climbing ratio does not forebode good times, but rather difficulty with pricing and sales in the future. As consumers, we rarely pay attention to what goes on 'behind the veil' with items like inventories. We like our answers pat, easy and predictable. It's a shame they never are.
The homework discussion occurred after I'd visited my accountant to finish my 2011 taxes. Thankfully, 2011 was a very good year for me, both my wife and I had found a job, something millions of others are still hoping to do. We are, and were, very lucky. I still know many people looking for work. As I sat down to discuss the ounce of flesh I hoped to mitigate, I asked my accountant "What are you seeing out there? Are we really improving?"
He has never, ever, steered me wrong. His firm does both accountancy work, and is a capital investment firm. I only utilize them for taxes, but I know he is aware of much, much more. He raised an eyebrow, coughed and replied as calmly as possible, "I am still not seeing it."
However, he did put this in perspective. He pointed out that he usually does work for middle and upper middle class people in the New York DMA over the age of 35. However, his firm handles payrolls for many foreign firms and he works with many large international firms. He had just gotten off the phone with a foreign bank trying to conform with the new laws on account disclosure the US has instituted.
From his point of view, the problem is people over the age of 35 are undervalued and typically dismissed by employers because they are 'expensive salaries'. He used me as an example, telling how concerned he was at this time last year, prior to my finding work, and seeing how we were starting to struggle. Many of his clients passed the point of starting to struggle long ago.
It could be, as he said, that firms are hiring younger people and simply not paying attention to older, experienced folk. If so, this isn't a sign of recovery, but merely another trade-off in the world of economics. We have a group of people who are a bit more silent in their struggles, people who agonize quietly knowing they are seeking work and the effort is on their shoulders and not the responsibility of the government or society. The value proposition for firms may be youthful vigor.
On the other hand, he pointed out, tremendous lost potential and experience has been sidelined.
Many people view me as a pessimist, pointing out a cloud in every silver lining. I have nothing but good thoughts for our economy and do not wish our president any ill will in this regard. I'd be hard pressed to say "I hope your ideas fail" because I know that means telling many others, and possibly myself, jobs will be lost.
In fact, I'm an optimist. I believe, as Professor Robert Heilbroner once told his class, Joseph Schumpeter's view of The Depression is accurate. One day in the midst of The Depression, a young Heilbroner was attending class, with Schumpeter teaching, and Schumpeter opened class with the line "Gentlemen, a depression is for capitalism like a good, cold douche." Schumpeter, from Austria, was referring to a cold shower and the need to refresh when one is overheating. Clearly the language added a bit of humor to the study of the 'dismal science', but his point is accurate.
As tough as things are, and they rarely get easier, things should improve at some point. I'm convinced that over time Americans, particularly older and experienced Americans, are smart and tough enough to overcome anything, even the barriers to growth erected by the current Administration and its need to coddle citizens.
I remain an optimist because had I stayed out of work long enough, I'm certain I'd have found someone, or many others, with whom to start a business. As the saying goes, "Necessity is the mother of invention."
I remain optimistic because even the clouds I point to do have silver linings. I don't feel they are the great news the MSM paints them to be, but they are something to point to. And we all need hope. Hope may be the last refuge of those the facts have abandoned, but it's always a useful thing to have, particularly if you can cobble together enough facts to support that hope without seeming completely outlandish.
We're a great nation, we're exceptional, we're talented, we're well-educated, and we're individually motivated. That final point may be something Obama and his minions try to kill from time to time to make us more 'socially aware', but in the end, it's what undoes bad policy and undermines governments, tyrants, and fools.
Tracked: Mar 04, 02:30