Surviving the great pandemic winter

The weather forecast sends chills down my spine.  The cold weather cometh.

Cold.
Dark.
Damp. 
And Covid.

Makes for a miserable combination.

There is only one way out--through!

What can one do?

"Shift your focus outward ... focus on something outside yourself."

Despite the fact that a selfish and narcissistic approach has worked out well for tRump, exceptions to the rule are not what we are talking about.  The more self-absorbed one is, the more it becomes possible to end up in a rut, with the negative feelings greatly amplified in that echo chamber.  “A lot of life’s problems are caused by too much self-focus and self-absorption, and we often focus too much on the negatives about ourselves.”

Do whatever it takes, in your own ways, to understand that you’re part of the larger world around you.  Maybe it is nature walks. Or, volunteering more hours at the food pantry. Or working with groups that want to get rid of tRumpism.  Whatever floats your boat, as they say, in getting you out of the self-absorbed state.

Finally, some practices are about cultivating a sense of inspiration — which can take the form of gratitude, curiosity, or awe.

Regularly feeling gratitude helps protect us from stress and depression.

I suspect that gratitude has been my vitamin, though I had no idea that it serves as a vitamin.  Gratitude is not the same as a momentary "thanks."  It is not the same as good manners, though you should have good manners.  We are not talking about the superficial thanks and the emoji when referring to gratitude.  

If I had thought about it more, before I read the article, I would have said pretty much the same thing as this: “When you feel grateful, your mind turns its attention to what is perhaps the greatest source of resilience for most humans: other humans.”

That's what I have blogged about in plenty.  Like the quote in this post:

You can thank your grandma for making delicious pie, but who do you thank for the circumstances of your life? 

Gratitude is the truest approach to life. We did not create or fashion ourselves. We did not birth ourselves. Life is about giving, receiving, and repaying. We are receptive beings, dependent on the help of others, on their gifts and their kindness.

So, the bottom line to surviving the great pandemic winter ahead?

When the world between your two ears is as bleak as the howling winter outside, shifting your attention outward can be powerfully beneficial for your mental health. And hey, even in the dead of winter, a 15-minute awe walk outdoors is probably something you can do. 

When all hope is gone

"Happy families are all alike; every unhappy family is unhappy in its own way."  With that opener, Leo Tolstoy set us on Anna Karenina's unhappy life. (Spoiler alert: She commits suicide.)

Students and colleagues who do not know me might think that I am unhappy camper. A curmudgeon.  But, General Malaise is by and large a happy fella.  I have been extraordinarily lucky that other than a few down phases in life, I have not known what unhappiness is.  The older I get, the more I understand and appreciate what an awesome lottery prize this is!

When talking with a student, I asked about her parents.  Her father is a veterinarian. "I bet he has quite some stories, like ..."  I blanked out on the author's name.  "The British guy who wrote those series of books ... like All Creatures Great And Small."  I couldn't recall the name. Old age :(

After she left, I googled.. James Herriot.  Of course!

Google also told me more about him. He (James Alfred Wight, in real life) suffered from depression. "Melancholy," is how he described it, and once had a complete nervous breakdown.  I would never have guessed that even as a possibility from his cheerful and upbeat books.  It turns out that depression and suicide are way above average when it comes to vets.  I had no idea that animal doctors are an unhappy  family, and unhappy  in their own way :(

It was a day of reading about unhappiness, it seemed. A review of Johann Hari's book popped up in my newsfeed.

Johann Hari took his first antidepressants at age 18, and the experience, he says, was like a “chemical kiss.” The burden was lifted immediately from his whirring brain. He kept on taking the pills for 13 years, at higher and higher doses–until, at one point, the drugs didn’t work anymore. He was still depressed.
In his early 30s, Hari, a journalist, started to question the prevailing wisdom about depression. Was his desperation and anxiety really connected, as he had been told by a succession of doctors, to a chemical imbalance in the brain? Was it genetic, as other scientists claimed? Or were the reasons why so many people are depressed these days really more social? Is the depression epidemic connected to how we’ve chosen to construct the world around us?

What the hell is going on?  

No wonder that the most popular course in Yale's long history is about happines, taught by Laurie Santos.  There are too many stressed out and unhappy young people.

Dr. Santos speculated that Yale students are interested in the class because, in high school, they had to deprioritize their happiness to gain admission to the school, adopting harmful life habits that have led to what she called “the mental health crises we’re seeing at places like Yale.” A 2013 report by the Yale College Council found that more than half of undergraduates sought mental health care from the university during their time there.
“In reality, a lot of us are anxious, stressed, unhappy, numb,” said Alannah Maynez, 19, a freshman taking the course. “The fact that a class like this has such large interest speaks to how tired students are of numbing their emotions — both positive and negative — so they can focus on their work, the next step, the next accomplishment.”

Seriously, is it worth getting into that kind of a stress when one is sixteen or seventeen, and be unhappy to an extent that it becomes a mental health crisis?  There is incredibly more to life than an Ivy diploma!

In addition to the randomness in the universe that messes up our lives, we too do whatever we can to add to our miseries.  I wish we would take up Bhutan's idea of indexing happiness and working towards maximizing that, instead of worshiping the Dow Jones and other indices as a measure of how great we are again!

Stagflation cometh? Already here?

The next reading of the CPI comes out in mid-July. A negative number will mark the third straight decline and will surely inflate the volume of talk about deflation. (As the historical data show, we haven't seen four straight monthly declines in the CPI since the 1930s.) But when considering the risks of deflation, we shouldn't look at the CPI in isolation. The phenomenon of prices falling modestly at a time when the economy as a whole is growing at a 3 percent click, as it is today, isn't much to worry about. "The combination of slow growth or stagnation and deflation is the thing that's scary," says Michael Bordo. In other words, look out for stagflation.

That is enough to get me worried all the more about a disastrous combination of employment stagnation and deflation, about which I have blogged enough ... Here is a post from back in October 2008 where I quoted extensively from Dr. Doom himself!

Speaking of him, here is Roubini's comical response to Financial Times' quick survey of summer vacation plans:

Where are you going on holiday this year?Recently I have lived like the George Clooney character in Up in the Air (a film I watched on a plane). If I get a vacation this summer it would possibly be a tour of crisis-hit countries – if I am still allowed in them: Spain, Ireland, Iceland, Latvia, Greece and, maybe, the oil spill-ridden US Gulf Coast.

The Krugman Blues

Requiem

It came to me the other day:
Were I to die, no one would say,
"Oh, what a shame! So young, so full
Of promise — depths unplumbable!"

Instead, a shrug and tearless eyes
Will greet my overdue demise;
The wide response will be, I know,
"I thought he died a while ago."

For life's a shabby subterfuge,
And death is real, and dark, and huge.
The shock of it will register
Nowhere but where it will occur.

John Updike

Understanding the Great Recession

A special session at the annual meeting of the AAG was devoted to Paul Krugman's Nobel, and what that meant for economic geography. There one of the panelists recalled his encounter with Krugman years ago. The panelist finished his talk at a seminar when he was a visiting professor somewhere in Europe (I forget the name exact location.) It turned out that Krugman was also there at the same time. When it opened up for Q/A, apparently Krugman mocked that the research that the panelist presented was nothing but simple anecdotes for the edification of undergraduates.
That reminded me of the time when I was in graduate school--I came across an essay where the economist Robert Solow had written a damning critique of my adviser's essay. True to my nature, I brought this up with my adviser, who said something like, "oh, where he knocked me on my head?"

I suppose it is rare for a super-genious to be gracious to others. Many others, like Larry Summers, are also notorious for such behaviors. But then, hey, it takes all types of people to make up this planet :-)

In the NYRB, Solow has a critique of Richard Posner's latest book, A Failure of Capitalism: The Crisis of '08 and the Descent into Depression. An interesting review for many reasons. In wrapping up the essay, Solow writes:

The problem is rather that Panglossian ideas about "free markets" encouraged, on one hand, lax regulation, or no regulation, of a potentially unstable financial apparatus and, on the other, the elaboration of compensation mechanisms that positively encouraged risk-taking and short-term opportunism. When the environment was right, as it eventually would be, the disaster hit.

Like I am going to disagree with Solow and get knocked on my head! :-) Seriously, there is nothing to disagree here. In reaching this ending, Solow has lots of wonderful explanations for the crisis, and dissects Posner for sloppiness. It was interesting to note how Solow threaded in Posner's book on Public Intellectuals: A Study of Decline.

In his book on public intellectuals, Posner blames the decline of the species on the universities and their encouragement of specialization. I may be acting out that conflict. Remember that even hairsplitting is not so bad if what is inside the hair turns out to be important.

Ouch! That is the Solow knock on Posner's bald head! Oh, the sentence just before that quote? "his grasp of economic ideas is precarious" . Hilllaaarious .... :-)

The worst is yet to come?

So, Circuit City is officially liquidating.  Bloomberg reports that

 Circuit City Stores Inc., the bankrupt consumer-electronics retailer, hired four liquidators to sell all the remaining merchandise in 567 stores before it goes out of business, the company said today.

Circuit City signed an agreement with retail liquidators Great American Group WF LLC; Hudson Capital Partners LLC; SB Capital Group LLC; and Tiger Capital Group LLC, the company said.

The announcement comes a day after the company held an auction it billed in court papers as its last chance to survive bankruptcy as an intact, though smaller, chain.

“We are extremely disappointed by this outcome,” said James A. Marcum, acting chief executive officer, in a statement. “The company had been in continuous negotiations regarding a going-concern transaction. Regrettably for the more than 30,000 employees of Circuit City and our loyal customers, we were unable to reach an agreement with our creditors and lenders.”

I shudder to think that this blood-letting will continue on throughout 2009, and maybe even into 2010.  

The latest issue of Foreign Policy has commentaries from five "doomsayers" whose bottom line is that it ain't over yet.  Looks like they want us to understand that this is a lull before the second and final storm blows through and levels out some of the structures made unsteady the first time around.

Excerpts from a couple:

Dean Baker:

once the financial situation begins to return to normal (which might not be in 2009), investors will be unhappy with the extremely low returns available from dollar assets. Their exodus will cause the dollar to resume the fall it began in 2002, but this time, its decline might be far more rapid. Other countries, most notably China, will be much less dependent on the U.S. market for their exports and will have less interest in propping up the dollar.

For Americans, the effect of a sharp decline in the dollar will be considerably higher import prices and a reduced standard of living. If the U.S. Federal Reserve becomes concerned about the inflation resulting from higher import prices, it might raise interest rates, which could lead to another severe hit to the economy.

Nouriel "Dr. Doom" Roubini:

The global financial pandemic that I and others had warned about is now upon us. But we are still only in the early stages of this crisis. My predictions for the coming year, unfortunately, are even more dire: The bubbles, and there were many, have only begun to burst.

The prevailing conventional wisdom holds that prices of many risky financial assets have fallen so much that we are at the bottom. Although it’s true that these assets have fallen sharply from their peaks of late 2007, they will likely fall further still. In the next few months, the macroeconomic news in the United States and around the world will be much worse than most expect. Corporate earnings reports will shock any equity analysts who are still deluding themselves that the economic contraction will be mild and short.

Nasdaq: same value as 11 years ago. OMG!

James Surowiecki

Here’s a fairly amazing market statistic for you: right now, the Nasdaq is below where it was on July 15, 1997. Eleven and a half years of incredibly volatile stagnation

View the full COMP chart at Wikinvest

Recession and unemployment

When your neighbor loses his job, it is a downturn in the economy. It is a recession when you lose your job, and a depression when an economist loses his job. That is a standard joke in economics on how these terms are used. It is a joke that quickly highlights the rather arbitrariness when it comes to how these terms are used.

It certainly is looking and feeling more and more like a nasty recession. Of course, economists are yet to lose their jobs in huge numbers, which means the current economic situation is far from being a depression.

From the Economist:

America’s jobless rate hit 6.1% in August, up from 4.7% a year earlier, and within spitting distance of its peak of 6.3% during the previous recession after the dotcom bust. ..... A rise in unemployment is a good signal that growth has fallen below potential. Better still, it matches the definition of recession that ordinary people use. During the past half-century, whenever America’s unemployment rate has risen by half a percentage point or more the NBER has later (often much later) declared it a recession. ...

Nouriel Roubini says we are not done yet :-(

The NY Times magazine has a lengthy piece on Nouriel Roubini and his bearish forecasts. Despite Roubini's continued pessimism, I am not going to change my mind that the worst of the crisis here in America is over (my earlier post). The essay also ends with some ideas that are similar to the sentiments I expressed in an oped in Planetizen: The United States of Gordon Gekkos.

The concluding paragraphs in the NY Times article:
“Reckless people have deluded themselves that this was a subprime crisis,” he told me. “But we have problems with credit-card debt, student-loan debt, auto loans, commercial real estate loans, home-equity loans, corporate debt and loans that financed leveraged buyouts.” All of these forms of debt, he argues, suffer from some or all of the same traits that first surfaced in the housing market: shoddy underwriting, securitization, negligence on the part of the credit-rating agencies and lax government oversight. “We have a subprime financial system,” he said, “not a subprime mortgage market.”

Roubini argues that most of the losses from this bad debt have yet to be written off, and the toll from bad commercial real estate loans alone may help send hundreds of local banks into the arms of the Federal Deposit Insurance Corporation. “A good third of the regional banks won’t make it,” he predicted. In turn, these bailouts will add hundreds of billions of dollars to an already gargantuan federal debt, and someone, somewhere, is going to have to finance that debt, along with all the other debt accumulated by consumers and corporations. “Our biggest financiers are China, Russia and the gulf states,” Roubini noted. “These are rivals, not allies.”

The United States, Roubini went on, will likely muddle through the crisis but will emerge from it a different nation, with a different place in the world. “Once you run current-account deficits, you depend on the kindness of strangers,” he said, pausing to let out a resigned sigh. “This might be the beginning of the end of the American empire.”

America too big to fail?

A neat summary of the issues in the NY Times:

One fundamental reality continues to offer assurances that foreigners will still buy American debt:
In the global economy of the moment, the United States itself is too big to fail.

The logic for that assurance goes like this:

The American consumer has for decades served as the engine of world commerce, using borrowed cash to snap up the accoutrements of modern living — clothes and computers and cars now manufactured, in whole or in part, in factories from Asia to Latin America. Eliminate the American wherewithal to shop, and the pain would ripple out to multiple shores.

Globalization, in other words, allowed China and Japan to amass the fortunes they have been lending to the United States.

But globalization also emboldened American capitalists to take huge risks they might have otherwise avoided — like borrowing to erect forests of unsold homes from California to Florida, delivering the speculative disaster of the day. They were operating with bedrock confidence that money would never run out. Someone would always buy American debt, delivering more cash for the next go.

And this same interconnectedness appears to have reassured regulators in Washington about the health of the American financial system, as they declined to intervene against highly speculative lending during the real estate boom. Mortgages were being distributed to investors around the globe, and so were the risks, the regulators reasoned. Anyone who bought into that risk would have a strong interest in seeing that the American financial system stayed upright.

In other words, in the estimation of people in control of money, the United States cannot be allowed to collapse, just as Fannie and Freddie cannot be allowed to fail. Too much is riding on their survival.

The central truth of that logic still seems to be apparent as the Treasury keeps finding takers for American debt.

So the government offers its rescue of the mortgage companies, and foreigners keep stocking the government’s coffers. “They don’t want the U.S. to go into the worst downturn since the Depression,” Mr. Tilton says.

But all the while, the debt mounts along with the costs of an ultimate day of reckoning. Debate grows about the wisdom of leaning on foreign credit, and about how much longer Americans will retain the privilege of spending and investing money that isn’t really theirs.

Bailouts amount to mortgaging the future to stave off the wolf howling at the door. The likelihood of a painful reckoning is diminished, while the costs of a reckoning — should one come — are increased.

The costs are getting big.

Report from Nouriel Roubini: OMG, we are in deep shit!

The email (you too can sign up at his blog) says that this will be the worst ever since the Great Depression. Read for yourself:
This is by far the worst financial crisis since the Great Depression

Hundreds of small banks with massive exposure to real estate (the average small bank has 67% of its assets in real estate) will go bust

Dozens of large regional/national banks (a’ la IndyMac) are also bankrupt given their extreme exposure to real estate and will also go bust

Some major money center banks are also semi-insolvent and while they are deemed too big to fail their rescue with FDIC money will be extremely costly.

In a few years time there will be no major independent broker dealers as their business model (securitization, slice & dice and transfer of toxic credit risk and piling fees upon fees rather than earning income from holding credit risk) is bust and the risk of a bank-like run on their very short term liquid liabilities is a fundamental flaw in their structure (i.e. the four remaining U.S. big brokers dealers will either go bust or will have to be merged with traditional commercial banks). Firms that borrow liquid and short, highly leverage themselves and lend in longer term and illiquid ways (i.e. most of the shadow banking system) cannot survive without formal deposit insurance and formal permanent lender of last resort support from the central bank.

The FDIC that has already depleted 10% of its funds in the rescue of IndyMac alone will run out of funds and will have to be recapitalized by Congress as its insurance premia were woefully insufficient to cover the hole from the biggest banking crisis since the Great Depression

Fannie and Freddie are insolvent and the Treasury bailout plan (the mother of all moral hazard bailout) is socialism for the rich, the well connected and Wall Street; it is the continuation of a corrupt system where profits are privatized and losses are socialized. Instead of wiping out shareholders of the two GSEs, replacing corrupt and incompetent managers and forcing a haircut on the claims of the creditors/bondholders such a plan bails out shareholders, managers and creditors at a massive cost to U.S. taxpayers.

This financial crisis will imply credit losses of at least $1 trillion and more likely $2 trillion.

This is not just a subprime mortgage crisis; this is the crisis of an entire subprime financial system: losses are spreading from subprime to near prime and prime mortgages; to commercial real estate; to unsecured consumer credit (credit cards, student loans, auto loans); to leveraged loans that financed reckless debt-laden LBOs; to muni bonds that will go bust as hundred of municipalities will go bust; to industrial and commercial loans; to corporate bonds whose default rate will jump from close to 0% to over 10%; to CDSs where $62 trillion of nominal protection sits on top an outstanding stock of only $6 trillion of bonds and where counterparty risk – and the collapse of many counterparties – will lead to a systemic collapse of this market.

This will be the most severe U.S. recession in decades with the U.S. consumer being on the ropes and faltering big time as soon as the temporary effect of the tax rebates will fade out by mid-summer (July). This U.S. consumer is shopped out, saving less, debt burdened and being hammered by falling home prices, falling equity prices, falling jobs and incomes, rising inflation and rising oil and energy prices. This will be a long, ugly and nasty U-shaped recession lasting 12 to 18 months, not the mild 6 month V-shaped recession that the delusional consensus expects.

Equity prices in the US and abroad will go much deeper in bear territory. In a typical US recession equity prices fall by an average of 28% relative to the peak. But this is not a typical US recession; it is rather a severe one associated with a severe financial crisis. Thus, equity prices will fall by about 40% relative to their peak. So, we are only barely mid-way in the meltdown of stock markets.

The rest of the world will not decouple from the US recession and from the US financial meltdown; it will re-couple big time. Already 12 major economies are on the way to a recessionary hard landing; while the rest of the world will experience a severe growth slowdown only one step removed from a global recession. Given this sharp global economic slowdown oil, energy and commodity prices will fall 20 to 30% from their recent bubbly peaks.

The current U.S recession and sharp global economic slowdown is combining the worst of the oil shocks of the 1970s with the worst of the asset/credit bust shocks (and ensuing credit crunch and investment busts) of 1990-91 and 2001: like in 1973 and 1979 we are facing a stagflationary shock to oil, energy and other commodity prices that by itself may tip many oil importing countries into a sharp slowdown or an outright recession. Also, like 1990-91 and 2001 we are now facing another asset bubble and credit bubble gone bust big time: the housing and overall household credit boom of the last seven years has now gone bust in the same way as the 1980s housing bubble and 1990s tech bubble went bust in 1990 and in 2000 triggering recessions. And a similar housing/asset/credit bubble is going bust in other countries – U.K., Spain, Ireland, Italy, Portugal, etc. – leading to a risk of a hard landing in these economies.

But over time inflation will be the last problem that the Fed will have to face as a severe US recession and global slowdown will lead to a sharp reduction in inflationary pressures in the U.S.: slack in goods markets with demand falling below supply will reduce pricing power of firms; slack in labor markets with unemployment rising will reduce wage pressures and labor costs pressures; a fall in commodity prices of the order of 20-30% will further reduce inflationary pressure. The Fed will have to cut the Fed Funds rate much more – as severe downside risks to growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end of this financial disaster and severe recession cycle.

The Bretton Woods 2 regime of fixed exchange rates to the US dollar and/or heavily managed exchange will unravel – as the first Bretton Woods regimes did in the early 1970s – as US twin deficits, recession, financial crisis and rising commodity and goods inflation in emerging market economies will destroy the basis for it existence.

Thus, the scenario of 12 steps to a financial disaster that I outlined in my February 2008 paper is unfolding as predicted. If anything financial conditions are now much worse than they were at the previous peak of this financial crisis, i.e. in mid-march of 2008

$200 oil and $7 gas ... oh my!

So, this WSJ blog, refers to "the latest gloomy forecast from Jeff Rubin at Canadian brokerage CIBC World Markets .... $200 oil in 2010, with gasoline at $7 a gallon. And that is going to turn Americans into car-shunning Europeans once and for all—poor Americans, at least"
The poor will be screwed, once again!
A comment, by a Joe Ballard, is pretty interesting, and ariculates a hypothesis that I too have been postulating for a while:
So let’s play it all out according to these assumptions. $7 a barrel translates to 10 million fewer cars on the road which leads to more people taking mass transit and moving to urban areas, where transit makes sense. I see the affect of this migration being extremely contractionary for consumer spending and therefore the overall US economy.
Today it’s easy to fill your car up with unneeded consumer products when out running errands. What will happen when people start taking the bus and train? I would think pure logistics of carrying your typical Costco load onto a bus will limit daily spending to pure necessities. Even the smaller urban space you would now be forced to live in will constrict what you fill it with, right? What about diminished tourism as a result of high oil? Won’t that decrease overall consumption?
My point is that higher oil can only shrink our consumption and therefore our GDP…at least for the near term. This contraction WILL have a ripple affect on the rest of the world. Unlike Europe (which he tries to draw parallels with) we are the world’s consumers.