My original 10 Reasons posts looked at the recession of 2008 and used 10 variables as benchmarks for assessing whether things were getting better with the economy.
To view the previous posts you can visit the following links:
In my sixth update I basically said that it would be my final post on the topic. Yet, so much is going on in the world that I figured I'd do one last "last" installment. And while this isn't actually a PR topic, in my view the state of the world is perhaps the most dominant variable in determining PR strategies. You can't pick message properly if you aren't aware of what is actually going on out there.
So without further ado, let's jump right into it.
1. Crashes hurt for a long time - both worse and better -
This variable has changed pretty radically since my last update. The stock market has gone WAY up, so things are better right? Yes and no. For investors in stocks they are pretty happy (and odds are, if you are investing in stocks you have enough surplus cash that you've been doing pretty well during the economic downturn).
Here's the problem. The reason stocks are going up is because you can't make anything off bonds. The Fed has essentially crashed the bond market. Bonds are traditionally the "safe" investments. You know, the ones people on fixed incomes (ie. senior citizens) should be in. You use to be able to get five-per-cent a year off bonds, but today you'll get one-per-cent (so you're actually losing money if you factor in inflation).
So basically everyone has been forced to invest in the stock market, which is why it's been going up.
In addition, and what is truly scary, is that central banks around the world have been propping up the stock market by buying stocks.
That's NOT the job of central banks. Central banks are essentially meant to heat up or cool down the economy by managing interest rates. Their job is not to be purchasing assets to increase or decrease their prices... asset valuation is meant to be left to the free market.
Think of it like this, imagine you lived on a street with 4 houses, each valued at $200k. Now, imagine 3 of those 4 houses were vacant and there was no demand in the market for them. If you wanted to sell your house you'd have to list it for below what you bought it for (say $150k) because the market demand for it would not be $200k.
Now imagine the government came in and bought up those houses for $250k each. Sure, you can now tell yourself that your house is worth $250k, but really it's not... the government has merely created the illusion that it is. The moment the government sells those houses back into the market the value of the houses will reflect market demand again (ie. $150k).
It's not a perfect analogy, but that's what the government seems to be doing with the stock market. They are pumping up the stock prices to create the illusion that the free market values the market at a certain level (when in reality the market is only at that level because of policies by the fed and central banks actually buying up stocks).
So yes, if you've been in the markets for the past year you've done well, but in a very similar fashion to how Bernie Madoffs clients did very well also (until it all came crashing down).
The reality is if the stock market was stable and authentically growing the fed would not have to destroy the bond market and central banks would not be buying up stock (remember, that's NOT the job of a central bank).
So while things are "better" they are also "worse" because the market is now in the hands of the government and bankers instead of the free market.
2. Until Debt Do Us Part - worse -
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| Debt in 2004 (I wish there was update of this graph, because many countries would now be "in the red") |
The US alone is now carrying $17.6 Trillion of national debt; $151,000 PER tax payer.
To give you a sense of how insane that is, the ONLY time it has ever been this high was directly after World War 2 when it was 121 per cent. In 2001 it was under 60 percent. In 1990 it was around 35%. And for those wondering, when the great "Hope and Change" president came into office it was around 76%.
Generally speaking anything over 80 percent is a 'red zone' of sorts where you are in such a weakened and vulnerable state that it doesn't take much for everything to start unravelling fairly quickly under the right conditions.
Now many people will say debt-to-GDP doesn't really matter as all that matters is whether you can pay off the interest owing on the debt every year (or if you can continue to sell new debt into the market, and use the proceeds from that to pay off your existing debt).
That's like saying the amount on your credit card doesn't matter, only your ability to pay the interest on your credit card. Or the debt on one credit card doesn't matter if you can simply get another one and pay off the first one with the new one. I won't argue with those who think that way, but I don't share their view.
3. Eroded Trust - worse -
Thirteen percent of Americans say the government can be trusted to do the right thing.
It just doesn't get any worse than this (well I suppose it could be zero). But think about these poll findings...87 percent of American's feel the government can't be trusted.
Obama, who once enjoyed a 76 percent approval rating, currently has a 40 per cent approval rating.
Congress' approval rating, which was 84 per cent before the Iraq war, is currently 13 per cent.
4. Anxiety - unchanged -
The world doesn't seem any more or less anxious than it did a few years ago.
5. Growth versus Replacement Cycle - dangerously worse -
In this category we look at whether companies are innovating. Are they bringing new products to market or simply selling the same old goods with a different look.
From what I can tell there continues to be little-to-no innovation. The only company breaking new ground seems to be Google with their Google Chromecast. I suppose this is 'innovative' for the baby boomer generation, but younger generations have been extending the internet to their televisions for a while now using existing technologies.
On the flip side Microsoft recently laid of 18,000 (supposedly the largest job cuts ever) and HP laid off 16,000.
And let's not even get into the Time Warner / Comcast merger which will create a monopoly and destroy all competition and innovation in their market places.
We are now delving deep into a "too big to compete" market place, where the great white sharks gobble up all the other fish around them, eventually leading to a barren ecosystem with no food left even for the great whites.
6. Shareholder model breakdown - better and worse -
As discussed in our first point, the markets are up, but not for the right reasons. Make of that what you will. If you use cocaine and heroin you'll feel great... does it mean you are actually great? Well, as long as you can keep using I guess you are. But one day that use will demand a price and you'll realize you were never great, it was just the illusion of feeling of feeling great.
7. Lowest Common Denominator Thinking - unchanged -
This category basically reflects globalization... do you pay folks based on a living wage or based on what the lowest wage someone is willing to take is? If someone is willing to work for a dollar a day, do you pay them that or use it to negotiate others lower? Do you bust up the unions or strengthen them?
We still are in a kind of limbo on this front. Corporations are still laying people off, they are still shipping jobs over seas, they are still using offshore tax shelters to avoid taxes... but on the positive front they haven't started enslaving people or anything :)
We still are in a kind of limbo on this front. Corporations are still laying people off, they are still shipping jobs over seas, they are still using offshore tax shelters to avoid taxes... but on the positive front they haven't started enslaving people or anything :)
8. Globalization - dangerously worse -
People think the Ukraine situation is about people wanting freedom and the US supporting them and Russia opposing them. It's not (not really). It's an economic situation, Ukraine was broke. They had a choice, either get bailed out by Russia or by the IMF (ie. the US/EU). They picked Russia, which then lead to chaos. Now they have picked the IMF, which is leading to chaos as well.
I mean, you'd think from Europe and the West's perspective they wouldn't care about a little country like Ukraine. But that's how global globalization has become. What happens in all these little countries scattered around the world is now everybody's business.
And the big boys are swooping in to steal the loot. With Ukraine, Russia seized Crimea and by association essentially stole oil rights in the black sea worth trillions. You've got the US still mucking about in the middle east, which is really all about oil and controlling the petro-dollar. Then you've got the US attacking Russia with economic sanctions, and Russia attacking Europe with sanctions.
All of this is the result of globalization and a new era of fighting over the world's resources. It use to be that nations' resources were essentially owned by the nation and refined and sold by companies in that country. Now though, through globalization, any company can go into any country and grab those resources for the right price (it's much easier for them to do though if the country is in chaos and governments willingly sell off their resources at a discount so they can pay their bills).
The consequences of globalization now have Russia, China, US and EU all posturing over the world's resources. Countries no longer really matter, what matters is who will control those countries (or more importantly the resources in those countries). Essentially we've entered into one big game of Risk.
9. Baby Boomer Costs - unchanged -
So far boomers are still working towards retirement with faith that their pension fund will be there when they need it.
10. Extremism - dangerously worse -
The world is going a bit bat-shit crazy it would seem.
We've had:
* The Islamic State has now sent Iraq back into chaos and the group is threatening to attack America
* Just the other day the IS beheaded an American reporter and have killed thousands, often killing 500-1,500 people at one time in mass executions.
* Ferguson is a mess, with protesters clashing with police and the military (national guard) being called in.
The one positive thing since the past post I made is that we have had no more school shootings.
And while that is great, the fact that we've got commercial airlines getting shot out of the sky and that the group the US was arming (the Islamic State) in the fight against Syrian have now turned against the US is insane.
It seems like the world still has a lot more madness to release before the powers that be spend any effort on creating a calmer more peaceful world.
11. Bonus : Inflation -unchanged -
Generally speaking deflationary forces continue to butt heads with inflationary forces and ultimately remain at a stand still.
I have noticed the trend though of food products increasing in price, but the moment they do people seem to stop buying them. So then within a few weeks (or a couple months in some cases) the price comes back down.
There is inflationary pressures out there, but the problem is businesses aren't able to pass them on to consumers because the consumers simply stop buying the products.
So there you have it. I hate saying I was right when I initially began this post topic, with my theory being that the crash of 2008 and associated recession was never going to truly end, but sitting in the year 2014 and looking at the above variables, it's pretty clear that not only are we still in a recessionary environment but that its effects on the world around us are getting worse, not better.
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