At risk of joining Phil Gramm under John McCain’s campaign bus I feel compelled to take mainstream news “reporters” to task for both missing the story, and wrongly believing that Gramm was wrong. The story began when former senator Phil Gramm stated that our “recession” is “mental” and that we had become a nation of “whiners.” This prompted Senator Obama to joke “we don’t need another Dr. Phil.” Yes, Phil Gramm is Dr. Phil – a Ph.D. in economics from the University of Georgia, and former professor of economics at Texas A&M, facts never mentioned in the numerous national news stories I watched and scoured. There is a reason he was McCain’s chief economic advisor and with a McCain win likely to become Treasury Secretary.
In presidential politics you send your surrogates to speak for you in order to cover more ground and to cover ground you do not understand. These are exactly the reasons Gramm was speaking for McCain, who got a supreme pass when he told reporters “He (Gramm) doesn’t speak for me, I speak for me.” The idiocy and duplicity of McCain’s twisted “straight talk” never raised an investigative reporter’s eyebrow. So much for liberal media bias, and so much for straight talk as the truth set Gramm free from the McCain campaign.
But bigger than the political reality show is the fact that Phil Gramm was right. A recession is not like rain. It is not an act of nature that we experienced before we had a name for it. The oft used (by reporters) two consecutive quarters of decline in our GDP is a slippery definition, not taking into account the dating problems of when it all began. In other words, when was day one of the recession so we can assuredly account for two quarters?
In even less agreement is what we were in before the “recession.” We had to leave something to recess. The word “expansion” is used by some economists, but seldom by opposing politicians not wanting to admit that the half-year recession is following years of expansion under the stewardship of their opponents.
All of the above circles around and comes back to the point that a “recession” is actually a normal and routine business cycle of temporary buying and investing decline caused by a pessimistic state of mind in consumer and investor confidence. Just as stock value is the value of confidence in a company not the physical value, so it is with our economy.
Interestingly just days after Gramm’s statement the Pew Research Center released a study depicting Baby Boomers as, ahem, “whiners”. This is the generation that wants it all and wants it to be perfect. Not surprisingly this is the “Prozac Generation,” a generation infected with “clinical depression,” which unlike medically diagnosable afflictions like Diabetes, clinical depression is a theory determined by symptoms defined by us…sort of like a recession – Gramm’s point, precisely.
Assuredly our economic system is no simple thing, but it responds to optimism and pessimism. Losing our optimistic mojo due to a drawn-out unpopular war and rising gas prices is enough to stall our years of expansion and push us into a “recession.”
Yet just as an airplane gains altitude by increasing its “attitude” toward the horizon so can we push back into an expansion with our attitude of mind. And just as an airplane responds poorly to whining, so does our economy. Gramm may be under the bus but he was right.
15 Comments
So, if I'm understanding this correctly, to "get it right" the media is supposed to agree that we're all a bunch of whiners and, I guess, tell us to shut the hell up and get to work and stop complaining so much because things are really fine.
Oh, and recessions are basically attitude and psychologically based.
Please explain to me how, in this context, Gramm's comments are helpful?
If a demmicrat said what Gramm said the right would be howling with indignation. We would hear how the demmicrats don't care that gas costs $4.10 a gallon or care about your pocketbook. We would, no doubt, have to listen to plenty who would say the demmicrats hate America.
Having said all this, I find myself in moderate agreement with Gramm. Many of us are whiners, on both the right and left. Those of us who made the decision to live 30 miles from where we work and own gas guzzling vehicles are in full whine mode. They are now whining that we need to drill offshore and drill in ANWR, even though our own government tells us that doing that won't make a difference in oil prices for years and, even when it does, will lower the price of a barrel of oil by about $1.45. We whine about gas prices as if we have the God given right to cheap gas, in spite of continuing development in places like India and China and increasing demand for oil.
This is a country that has lived beyond its means for years now. Our banking and financial institutions have provided easy credit, often to people who don't need it and, in saner times, wouldn't even qualify for credit. Lenders and borrowers bear largely equal responsibility for the mess we find ourselves in. We are entitled to certain things, I guess, and if we have to use credit to get them, we will.
I strongly disagree that the current recession/economic downturn or whatever you want to call it is simply the result of losing our "mojo." It is the result of poor decision making in our financial sector, our continued overreliance on fossil fuels, and refusal over the last 15 or so years to dramatically increase fuel efficiency.
The economy is about far more than just attitude.
Comment By Mr. Insightful Friday, July 18, 2008 @ 11:16 AM
You're kidding, right?
Is your next comment going to be "it depends on what you mean by 'is'"?
Prozac works because it changes brain chemistry in people who have an imbalance from otherwise ordinary brain chemistry -- it isn't a condition made up by symptoms but, because sticking needles in the brain can have bad side effects, those are how we test for it.
The definition of "recession" is objective. It isn't easy to measure, and careful study says we typically see the start date in retrospect, but it isn't made up either.
You are right that consumer confidence drives a lot of the economy, which is why economists at the University of Michigan have been studying it for decades, but that has very little to do with what Gramm said. Gramm's point, if you read the context, was that the economy is in pretty good shape and that the whiners make it sound worse than it is -- which isn't what you say at all.
Gramm is under the bus because he belongs there -- a candidate's representative should not be criticizing voters, and his recent history at UBS suggests that under the bus is where he should stay.
Comment By Cuhulin Friday, July 18, 2008 @ 11:34 AM
As I understand it, we are not in a recession. Yes, the economy isn't great and there has been very little growth, but by definition, we are not in a recession.
At the risk of getting stones thrown at me, I choose not to participate in recessions. Gramm is correct in his statement, but he's guilty of putting his mouth in gear before thinking about what he was about to say.
What he should have said was that the state of the economy was largely psychological and that people's perception of it is driven by the media and what they choose to believe. If you want to believe there is no hope, fine. While you do that I'll adjust accordingly and weather the storm.
Comment By Justin Beller Friday, July 18, 2008 @ 12:28 PM
John McCain wasn't that hot to begin with for this conservative, and having Gramm and Fiorina as your wingmen is not exactly helping.
People who bought a 600K house on a janitor's salary and want Jesse Jackson to march on Countrywide to keep it are whiners. People who watch their coworkers get whacked on Federal Way and wonder when the Turk comes for them have a legitimate reason to be uneasy.
If McCain does not get with it and acknowledge the angst, he will suffer a 40 state rout to a no-resume community organizer cum Senator.
Comment By Joe Blow Friday, July 18, 2008 @ 12:58 PM
Kudos Justin for leaving your name. It's easy to bash anonymously.
Let's look at a baseline of finance for a moment - this will be a back of the napkin thought as I do not have a finance degree, but bear with me.
When one financial vehicle goes down another goes up. Money is lost, and money made.
Does anyone reading this think for a moment that all of those "ride the great wave" real estate agents out there have just curled up in the corner and died? No, they are reaching and stretching to find new ways to make an income. At a micro level this reflects our nation's financial position.
As we stretch and grow and invest in different ways it will require a pause to align the machine in an operational way. An example would be farmers. I'll reach out now to the agricultural industry, are ou making money? How about those oil wells that were rusting towers of steel only a few years back, are you making money?
The innovative person dreaming and developing ways to capitalize on the high fuel costs in simple ways, are you making money?
My point is simple. Walmart makes sense right now because we can't afford Albertsons, but Walmart will make money. They will continually drive inefficiency out of the system and come out of this "realignment" in a powerful way. That is where the story is if the media would get on it and reach for the fruit that isn't simply rotting on the ground.
By the way, I am an entrepreneur and I see only opportunity in today's business climate.
Comment By George Seybold Friday, July 18, 2008 @ 1:27 PM
I hold my self personally responsible for the current economic mess... it was my bad negative thoughts that got us here. I promise to thing nothing but happy positive thoughts from here on out. You should see an immediate improvement; perhaps as soon as tomorrow.
Definition of recession per Merrium-Webster: a period of reduced economic activity.
Isn't that what's going on now?
Comment By Kent Friday, July 18, 2008 @ 2:26 PM
Tomlin, this is your analysis, (a) "routine business cycle of temporary buying and investing decline caused by a pessimistic state of mind in consumer and investor confidence."? Once again, it begs the question: what planet are you living on?
Ain't nothing 'routine' about what we're in...it's a Class 5 hurricane (I've been in 3) and right now, we're only seeing the outer storm bands.
Comment By Bill Friday, July 18, 2008 @ 4:40 PM
Bill: it's funny how the last time we went through something like this (thinking early 90's and shortly after 9/11) the same rhetoric was being trumpeted.
I'm siding with George on this one. The media doesn't give the average citizen much credit when it comes to their intelligence and their ingenuity. Yes, I paid $77 to fill up an SUV for the family vacation I'm on, but instead of complaining about it and fearing the worst, I'm enjoying myself now with my family and adjusting my lifestyle accordingly. We budgeted for this. I'm not Nero by any means as I watch Rome go up in flames, but I know just like the weather the economy comes in cycles.
I see this "storm" as a good thing because like George said, this is a chance for the entrepreneurial spirit to shine and create new economies where prosperity will reign.
Folks: it's your choice. Curl up into a fetal position and suck your thumb or think of new ways to adapt and create opportunity. Also, QUIT LOOKING TO THE GOVERNMENT TO SOLVE OUR PROBLEMS. THEY ARE THE ONES WHO CREATED THIS MESS. IT'S UP TO US TO SOLVE IT!
Comment By Justin Beller Friday, July 18, 2008 @ 6:10 PM
I agree with Justin; choosing not to participate in recessions is a constructive outlook. Gramm makes an interesting point, problem is most people don't know anything about economics, or pay attention to business cycles, so the comments end up getting an emotional response. Its unfortunate that we don't educate people in this country about basic financial issues because those people can end up getting hurt. As a result we get people who buy into bubbles or trust a mortgage company (or bank) to tell them how much house to buy.
Comment By Flavian Friday, July 18, 2008 @ 10:06 PM
OK everyone - Phil Gramm just quit his advisory role on the McCain campaign for his "whiners" remark. Happy? Just goes to show you that nobody can speak their mind anymore and give an honest opinion out of fear of hurting someone's feelings. Too bad. I thought McCain and his campaign was all about "Straight Talk". Guess it's just the "Telling You What You Want to Hear" campaign.
Yeah, that's something we can ALL get behind.
Comment By Justin Beller Saturday, July 19, 2008 @ 11:32 AM
Justin,
Gramm's quiting just shows that someone running for office should not criticize the American public. No one said he couldn't talk straight, but if what he says gets Obama elected, he's talking straight in the wrong place.
Comment By Cuhulin Saturday, July 19, 2008 @ 4:23 PM
Well, Cuhulin, I guess we're all headed for an Obamanation since the public can't take criticism anymore and doesn't want to hear the truth. That's at least two things Obama's counting on this November. His entire campaign is built on a platform of blaming the other guy for your problems and not taking any personal accountability. I'm disappointed that this has become the sorry state our nation today. In the end we'll all get what we deserve.
Comment By Justin Beller Sunday, July 20, 2008 @ 12:14 AM
Gramm is a fool and a charlatan who authored the Enron loophole, that allowed Enron to bilk the energy markets, and commit fraud. Gramm slid the Glass-Stegall amendments into a general appropriations bill at the last minute, masking a change of biblical proprortion, he dissolved the rule that investment banks could not deal in home mortgages. I think the results of his economic handiwork are evident for all to see, if this economic recession could be laid at any ones feet, it would have to be Phil Gramm, and Alan Greenspan.
If the thought of having Gramm who is currently a vice-president at UBS, a Swiss bank under investigation by FBI and IRS for hiding American account holders assets in Swiss bank accounts for tax fraud purposes, as the next Secretary of the Treasury doesn't scare the bejesus out of you, then you are either a fool or extremely wealthy or both.
American media seems to be of the school, that if we pretend it didn't happen, it didn't happen. This recession is fundamentally different than any we've seen since 1929, because so much fraud was tolerated for so long, the true conditions of the credit market cannot be evaluated, thus risk cannot be calculate, causing lenders to shirk from offering credit. Additionally we have an overbuilt/oversold housing market, where so much surplus housing exists that all demand for the next 2 and a half years could be filled without building a single new home. This will cause much unemployment, at the same time we have consumers with the highest debt levels ever seen. These consumers often have crap loans that reset to a higher interest rate, but which channot be refinanced without paying a substantial penalty, leaving the consumer to default and be foreclosed on. The weak dollar forces the FED to raise interest rates to try to attract foreign capital, which drives up the price of loans, which causes more foreclosures, creating a cycle of foreclosures which we have not even begun to work through. We have people trying to evaluate the economy based on false assumptions provided by falsified statistics, the unemployment number for instances is so tweaked or manipulated, that it only indicates people looking for work who are currently collecting unemployment benefits. Unemployment benefits only last 6 months, so the unemployment rate doesn't even indicate people who have been looking for a job for 7 months, as well as those who don't qualify for unemployment. What is the real unemployment number? No one know and apparently no one cares.
Inflation is calculated much the same, the magic formula deducts fuel and food, to show that inflation is infintesimal, and yet we all need food and fuel to live and work. What is this magic world where there is no inflation and unemployment is only 5%? This is not the world I live in, and I live in a pretty good neighborhood.
Many factors have managed to come to a head at the same time, leaving one to wonder who was in charge of oversight and regulation, and where were they? Were all agencies populated with "great job Brownie -Fema" types? or was there a deliberate policy of lax regulation to ensure the looting of the markets by the upper echelon of our classless society?
McCain offers us more of the same, and says so at every opportunity, Obama is a neophyte and either choice leaves us doomed. Our economy is the canary in the proverbial coal mine telling us that our country is very sick and will die if we don't begin massive changes at all levels. Bridges are falling, cranes are falling, industries are collapsing, infrastructure is rotting, and no one cares, and nothing is being done. Investment banks are collapsing, Feddie Mac and Fannie Mae are teetering and no one sees the precipice that we are about to drive over.
Yeah its all a hallucination, a myth, a whining by the public that is causing our misery, all the structural deficts of our economy are illusions, we are just a bunch of out of work whiners.
We maybe whiners but we aren't fools, we know whats going on and are tired of pretending the streets are paved with gold.
Comment By Frank Sagevsal Sunday, July 20, 2008 @ 12:53 PM
Well done Frank. I can see you've done your homework. So instead of the public whining about how bad things are how about we get angry and do something about it? Whether you vote the current crop of jabronis out of office at all levels of government or vote with your pocketbook, do something! Far too many of us feel we have no control over the situation at hand, but if you stop and think for a moment you'll soon realize you have more control than you think you do.
Comment By Justin Beller Sunday, July 20, 2008 @ 3:19 PM
Sorry to be late to the party, but Justin is right. But Bill's right too about the negatives, and we're nuts not to take those into account, but, but..
Isn't the entrepreneurial alchemy that ability to see opportunity in the damnedest circumstances?
Robb H asked me about the "entrepreneurial spirit" - and it's seeing opportunities to create something that matters, that can grow and make a difference.
So what ARE the opportunities that our dire circumstances offer? (Selling tar & feathers for overly-optimistic realtors... or for, well, I promised folks I'd be positive, LOL)
Seriously - Robb & Rick, maybe this would be a great IBR event.. what ARE the great opportunities that Idahoans can seize? People would show up, that's for sure. (Maybe do it as a visioning session maybe appreciate inquiry would be ideal?)
For all the hue & cry about energy costs - what about the ways to make some serious coin helping with energy efficiency? In training people for green collar jobs? We've already got the horses in state to get started -- and attract more.
Last week's EDA webcast ( [self-serving font/on] http://entrepreneurshipidaho.blogspot.com [font/off]) illustrated a few important directions, but that's just the tip of the iceberg... Why can't WE do something like: www.sosummit.org ??
Thanks, Justin (& Frank & Bill)
Comment By Norris Krueger Monday, July 21, 2008 @ 2:51 PM
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