Deck The Halls With Boughs of Fear
12/9/2008
Source: Neil MacDonald, CBCNews.ca

I'm not getting any chestnuts-on-an-open-fire vibe from Washington's shopping streets this season. It's the psychology of fear. The Christmas lights and decorations hung out by desperate merchants' associations feel more like fresh lipstick on an exhausted tart.

I mean no disrespect to tarts. We all have to work and we all want to show our best face. Bella figura, the Italians call it. But the long, wild spending party is clearly over and there comes a time when there's not much point in pretending otherwise.

Sales staff, clearly frightened, plaster on smiles and offer the few shoppers in their aisles discounts that amount to madness, at least for this time of year - 50, 60, 70 per cent.

There is no profit, no livelihood in those numbers and the clerks know it. What are they going to do after Christmas?

Businesses - entire chains of businesses, in fact - are slipping under the waves here. What seem like well-run little companies abruptly turn off their lights or send shills in sandwich boards out into traffic to advertise liquidation sales.

It's cold here these days but the shills seem grateful for the work.

The Brakes Aren't Working

The U.S. lost 533,000 jobs last month and nearly two million in the past year.

"Almost indescribably terrible," wrote economist Ian Shepherdson of High Frequency Economics when the statistics came out last week.

"God-awful numbers," said Sung Won Sohn, of the Smith School of Business and Economics at the University of Maryland. "The economy is headed downhill and the brakes are not working."

"Wholesale capitulation," adds his colleague, the well-regarded economist Peter Morici. "The threat of a widespread depression is now real and present."

Depression. Now, there's a word that stops a dinner conversation.

A depression, Morici tells me, cannot correct itself the way a recession eventually does.

A depression is ugly and stubborn, cascading and spiraling, resisting efforts to reverse it, which is exactly what's been happening.

The U.S. government is trying to impose a fix by spending and committing unimaginable amounts of money. But Morici says that is just a patch. "A palliative," he calls it.

The problem, he argues, is this country's manic over-consumption and all the borrowing necessary to sustain it.

Put It On the Tab

In fact, the U.S. is already borrowing the hundreds of billions that it is using to bail out the banks and the credit companies and the Big Three automakers. And Barack Obama, who promises a stimulus plan to rival Roosevelt's New Deal, clearly intends to borrow hundreds of billions, maybe even trillions, more once he takes office next month.

That requires foreigners - the Chinese in particular - who are willing to keep lending the U.S. money.

But as Morici says, if this turns into a depression and the government lurches from one stimulus plan to another, even the Chinese won't be able, or willing, to keep investing in U.S. dollars.

"Americans won't be able to borrow any more and the economy will crash and we'll have the mother of all housing market collapses. Stock market collapses. The kind of asset collapse we had during the Great Depression. We're pretty close to that now, if you haven't looked outside lately."

I point out that there aren't any bread lines out there. Morici replies there weren't any in 1928, either.

Too Big To Fail, Too Small for Help

But there is misery and injustice. In Chicago, for example, workers at Republic Windows and Doors are holed up in their company's shuttered factory, refusing to accept their layoff notices and go home.

They're angry, not just at Republic's management for sneaking heavy equipment out in the middle of the night and then lying about it, but at the Bank of America, one of the company's biggest creditors, which they say is calling the shots and withholding their severance pay.

That would be the same Bank of America that just accepted a $15-billion taxpayer bailout.

The truth is self-evident. The banks and the Big Three are too big to fail. Republic Windows and Doors is too small to matter.

Washington is picking winners and losers based on size and political clout, rather than competence and good management, and the inherent ugliness of that game only deepens the national funk.

The Chicago occupation feels like a metaphor of some sort. For a while, everybody turns and pays attention. It's all over the cable news. Even Obama pronounces himself on the side of the workers.

That might eventually win them their severance pay. But Obama isn't offering to bail them out, either.

Buy Stuff

I know a man here in Washington who predicted this whole nightmare. His name is Ira Rheingold and he runs a consumer advocacy group. When the most important people in the country were saying everything was fine, Ira nailed what was actually happening with uncanny accuracy.

Back in 2005, he predicted the subprime meltdown. A year later, he foretold the current credit crisis. Years ago, he warned that American households were carrying $8000-plus in credit card debt and correctly predicted they'd hit a wall.

So I asked Ira what he thinks is coming next.

He e-mailed back immediately. He pointed out that one of the government's latest bailout efforts is actually aimed at making it easier for consumers to rack up even more credit card debt.

That's the plan, he said. Get people to buy more stuff they don't need.

"The absurdity in this is so obvious, I'm embarrassed to go on," he wrote. But he went on anyway.

Ira thinks it will get worse. Seriously worse. He thinks government can help, but says Americans must learn to live within their means. And he predicts the banks will fight ferociously to prevent any new laws meant to protect consumers.

Ira is a master of understatement.

In the department store, Bing Crosby's mellow, reassuring notes fill the speaker system: Sleigh bells ring, are you listenin'? In the lane, snow is glistenin'.

The salesman, an overly affable sixty-something, pulls an overcoat off the rack. Pay no attention to the price tag, he says.

"I'd have to check. Really. They're marking them down so fast I don't even know what the right price is."

He is being helpful. But the tension in his face is hard to look at. He's looking for a bailout, too, and I don't have it.