Tuesday, September 06, 2011

Three Persepctives On Jobs

There's some great stuff out there today in the blogosphere related to jobs. First, an employer lets us know why companies aren't hiring.
(W)ith a national debt of more than $14 trillion and unfunded, future “off the books” debt of Social Security and Medicare combined at $104 trillion in present value ... Uncle Sam ain’t the man he used to be. This in turn makes American businesses that are sitting on a pile of cash focus on deleveraging. The American consumer is doing the same. In fact, from where I sit, it appears as though everyone except Uncle Sam is working like mad to strengthen his balance sheets. The legitimate fear across the country is that Washington’s refusal to join our common-sense parade will result in higher taxes, more regulations, more inflation and Japanese-style stagflation. In other words, Washington’s attempts at stimulus through spending are having the opposite effect. Businesses and consumers stay hunkered down.
That's exactly where I'm at. Europe is done. Greece is now paying 50% on 2-year bonds. They will default leading to failed banks or wild spasms of money printing. Portugal, Italy and Spain are all on the way. My focus at home is to ensure that I can pay my bills as far off into the future as possible if things get really bad. If I possibly could, I'd be completely debt-free. That's a bridge too far, but I'm still deleveraging as fast as possible.

In California, regulations have created the income inequality so disparaged by the progressives. We have met the enemy and he is us.
California's pain is not restricted to farming towns. The state's regulatory vigilantes have erected a labyrinth of rules that increasingly makes doing almost anything that might contribute to increased carbon emissions—manufacturing, conventional energy, home construction—extraordinarily onerous. Not surprisingly, the state has not gained middle-skilled jobs...

There is little chance that the jobs lost in these fields will ever be recovered under the current regime. As decent blue-collar and midlevel jobs disappear, California has gone from a rate of inequality about the national average in 1970, to among the most unequal in terms of income.
Finally, the Atlantic has published a bunch of angry letters from Millenials about their employment blues. Here's the best of the lot.
Much of my rage is reserved for a predatory system of higher education and the failures of a generation that came before...(M)any, if not most of the students who attend, treat the experience like a 4-year version of MTV's Spring Break. Massive grade inflation means one less standard deviation between myself and those who don't try...

But most of my anger is reserved for myself. I pursued a "Liberal Arts Degree" in communications rather than a B.S. in engineering or computer science. I spent all four years at a state university rather than the first two at a community college. I worked in the summer instead of getting an internship. I worked harder at my classes than making contacts and networking with professionals. Not everyone is suffering in this economy, and if I were going to college for the first time this fall I'd know how to prepare. But I didn't at the time and now I'm left to face the consequences. I want to blame the universities and "grown-ups" who I feel should have known better.
At our house, our kids are going to college without student loans and we've refused to pay for degrees that won't lead to careers.

At the risk of looking like a self-quoting blowhard, I'll end with this: All over the world, childhood is ending.
(S)ociety became infantile and possessed a childish view of the world. They looked to someone else to give them treats so they could do what they liked. The editorial is the words of someone who is waking up to what they've done.


tim eisele said...

While Mike Whalen makes some good points in his Washington Post article that you linked to, I am not so sure about how well he really understands things. For example, he talks about "Japanese-Style Stagflation" - "Stagflation" is when you have a significant inflation rate without economic growth.

Japan's inflation rate currently is 0.8%, and it looks like it hasn't cracked 1% since 2008 (and on average it has been about zero since 1993!). They have big problems, but it isn't "stagflation".

Which brings me to another question: If one is really, truly expecting high inflation in the future, what is the right thing to do with your money? It seems to me that you actually *want* to be leveraged going into an inflationary period, at least so long as you have a fixed interest rate. Paying off today's loans with tomorrow's devalued currency is to your benefit, isn't it? Failing that, you want to have your money tied up in real property (capital equipment, land, maybe raw materials). Isn't holding cash the absolute worst position to have going into an inflationary period?

Which makes me think that if he's serious about thinking that deleveraging is a good idea, then what he's really expecting is either a non-inflationary stagnation, or a deflation.

K T Cat said...

Tim, great comment.

There are some really strange imbalances building up right now, driven by historic fears. German and US bonds are at rock-bottom interest rates right now as investors flee risk. Combine that with central banks printing vast piles of unbacked Euros and Dollars and you would seem to be building up pressure for a monster wave of inflation. Since the inflation would come, not from demand, but from money printing, stagnation would go along with it.

It hasn't happened yet, but there doesn't seem an easy way to avoid it in the future.

As for inflation when it hits, it builds up slowly, so when it comes, I think you'll be able to recognize it and deal with it then. For right now, I'm more concerned with near- and medium-term cash flow, hence the buildup of big cash reserves, which is exactly what he is suggesting that others are doing. His analysis and reaction fits mine to a T.

K T Cat said...

Addendum: Why I'm concerned about cash flow is job stability. Who knows what employment cuts are coming should more debt crises hit or banks go under. How long can I survive on reduced or eliminated income? I think that's the personal version of the corporate fear he describes.

The Sanity Inspector said...

Andrew Ferguson's book Crazy U. has some great observations about college life nowadays: "part summer camp, part group therapy, part booze cruise."

It's sad to think of debt-saddled young people with worthless degrees paying off zillions in debt by spending their working lives staffing the cellphone kiosk in the mall. But let's face it: many of these people & their parents have an unspoken yet ironclad aversion to actual labor, as a living. I rather like the image of a first-rate trim carpenter getting the nice house, car, boat, swell family, & etc., while the Identity Politics major ends up as the twice-divorced, over-forty, hipster in residence at the retro vinyl record store.

BTW, nice to catch up with you, been a while.