copyright © 2008 Betsy L. Angert. BeThink.org
He is ninety years young. Born in 1918, Alexander recalls the Great Depression. He understands why some thought the Bush Forty-One years were worse than the days after the crash in 1929, although no one ever admitted to that. Now, near two decades later, denial of economic despair remains intact. Alex wonders if only history paints a truer picture. Possibly, when he was but a boy, people did not accept that the crash was the big one. In retrospect do we realize . . . Alex wonders aloud; in recent months, each evening he dreams of realities that were during what was defined as the most dramatic, worldwide economic downturn.
As an adult, perchance, life looks different. Alex remembers back in the day of George Herbert Walker Bush the economy crawled. Records showed an annual growth rate of a mere one percent (1%). Unemployment steadily rose. Homelessness was prevalent. While Americans experienced an economic crisis, former President Bush remained resolute. He promised to be fiscally prudent Miser Bush's commitment to caution served colossal corporations and affluent stockholders well Alexander, was among the latter. He appreciated the cautious demeanor of a President dedicated to business. For Alex and others invested in the market economy under Bush 41, life was good.
Today, however, with Bush 43 in the White House, Alex worries. He reads the newspaper, and realizes how unsettled he feels. The current President declares the State of the Union is strong, The stimulus package has helped to fuel fiscal stability. Americans need not fret. Yet, Alexander does. Words printed on a page in a noted periodical do not reassure this long time investor. As a citizen, Alexander is not confident that all is well. He believes a crisis is imminent. In truth, Alex thinks America, is already immersed in a financial free fall.
This life-long investor sees the price of stocks plummet, The Dow Jones Industrial Average slips daily. Alex muses of how the current President tells him the economy is strong. Alexander is no longer elated by a bump in returns. Nor is he reassured when the President or his people tell the nation there is no inflation. A quick glance at the front page of any day's newspapers tells Alex we are already in a recession, or worse.
Woes Afflicting Mortgage Giants Raise Loan Rates, Losses Mount, and Airlines Plan Steeper Spending Cuts. Mortgage Crisis Reverses Tide of Urban Renewal. Yet, none disturbed Alex, or perhaps made more sense to him than the article that appeared on July 23, 2008, Bank Investors Redefine Bad News.
Can the bad news for banks get any worse?
After the last week brought another round of woeful quarterly results from the industry, capped by news on Tuesday of multibillion-dollar losses at the Wachovia Corporation and Washington Mutual, that question is nagging banking executives and their investors.
Kenneth D. Lewis, the chief executive of Bank of America, insisted this week that the industry was turning the corner, after his company reported a mere 41 percent drop in profit. Many investors seem to see signs of hope in red ink that once would have shocked them.
Alexander sighed. He thought of how, terms are given new meaning, Money lost can be considered a gain. Alex marveled. As a shareholder, the frequent depositor is well aware of how psychology moves a market. He also comprehends the role of reverse psychology. Nonetheless, when a deficit, huge, and unprecedented becomes a expansion, the way financial institutions use words seems ridiculous.
But it has now been a year since the credit crisis erupted, and, so far, the optimists have been proven wrong time and again. Skeptics say it could take years for banks to recover from the worst financial crisis since the Depression. And even when things do improve, the pessimists maintain, banks’ profits will be a fraction of what they were before.
There are many reasons for caution. Home prices continue to decline, and defaults are accelerating on a wide range of loans. As lenders struggle, loans are becoming even more scarce for hard-pressed consumers and companies. That, in turn, could slow any recovery in the broader economy.
For now, at least, some investors seem to have become so inured to the bad news that results that would have once been viewed as disastrous are now seen as good, or even great. The sober phrase often used on Wall Street to describe solid corporate results — “better than expected” — has been replaced by “not as bad as feared.”
Not as bad or indeed worse. As Alex pondered the news in the paper, as he assessed his own portfolio, the reveries flowed as a quickly as water in a river might. Thoughts of his youth flash through his mind. Alexander could not forget the bank crashes, the limited amounts of cash on hand, the confusion, and all the troubles a lack of currency caused. One phrase from today's paper rolled around in his head.
“We are resetting expectations for bank profitability, and we are re-exploring what our expectations should be going forward,” said Christopher Whalen, managing partner of Institutional Risk Analytics. “We are redefining bad.”
Still and reflective, Alexander contemplated what he thought awful as a child. Once prominent professionals, are now beggars on the street. Factory doors bolted shut. Suicides, or talk of hopelessness, and helplessness, in a society once gleeful have become normal. Alex reflected on the realization he had in his youth. He understood the more things change the more they stay the same.
When Alex was a young man, people believed, in America, the avenues were paved in gold. They were not. Filth filled each boulevard. Today, in the land of milk, honey, and opportunity, the same is true. Roads are riddled with words that paint a picture of prosperity. Yet, on Wall Street and Main Street, in 2008, people suffer. The public is economically and perhaps emotionally down in the dumps and dejected. Financially people are low on funds; feelings are lower. Citizens in this "affluent" country have few real resources. Indeed, recent reports state, Most Americans will outlive savings. Alexander knows this to be true. He has watched as many of his friends turned from prosperous to paupers. This ninety-year young man, with his pulse on the market muses. The people are as the economy and still no one is willing to say we are beyond a Recession; we are in a Depression.
Sources for Documentation on Dollars and No Sense . . .
- George H.W. Bush. The Presidents. American Experience.
- Dow Jones up 50 pts; Nasdaq down 30 pts. Business Standard. July 19, 2008, 10:54 IST
- Woes Afflicting Mortgage Giants Raise Loan Rates, By Vikas Bajaj. The New York Times. July 23, 2008
- Losses Mount, and Airlines Plan Steeper Spending Cuts, By Micheline Maynard. The New York Times. July 23, 2008
- Mortgage Crisis Reverses Tide of Urban Renewal. By Lori Montgomery. Washington Post. Tuesday, July 22, 2008; Page D01
- Bank Investors Redefine Bad News, By Eric Dash. The New York times. July 23, 2008
- Most Americans will outlive savings. Marketplace. July 14, 2008
- Echo of First Bush: Good Economy Turns Sour, By Sheryl Gay Stolberg. The New York Times. January 28, 2008