I’ve never really given TED much thought until this year. Maybe it’s just me, but I feel like TED-hype is everywhere. Virginia Postrel was there of course, and notes:
On the last day, curator Chris Anderson addressed critics* who complained that the conference was ignoring the global economic crisis. His main point was to maintain long-term perspective, arguing–with a Keynes quote–that TED engages the ideas that create a better future once the gyrations of the moment are over.
Postrel has a pretty good comeback on that. But I bring this up because I wonder if, critics aside, the optimism isn’t exactly the reason that there’s so much TED-mania, online at least. Enough with the grim economic numbers! Let’s groove on some cockeyed optimism about creativity and technlogy! Let’s get inspired!
That kind of thing.
[*Update: Here's what he said.]
I guess this WSJ “Outlook” column is available only to subscribers, but it’s pretty interesting. Writer Justin Lahart compares the current economic moment to 1980. Back then, Fed actions radically tightened credit in attempt to snap brutal inflation, and that medicine entailed a huge blow to consumer spending:
The credit controls had an immediate effect on behavior. Sales fell sharply and companies shed workers at an alarming rate, with the economy losing a million jobs between April and June. Final sales, a measure of overall economic demand, fell by an inflation-adjusted 7.5% in the second quarter — a drop even steeper than the 5.2% decline final sales registered in the fourth quarter last year.
The interesting part is that that when the Fed ligthened up a few months later, “economists had little hope that a recovery would happen anytime soon. The Fed agreed, forecasting that the economy would contract for the rest of the year.” But they were wrong. Almost immediately, pent-up demand spilled into spending: “With the credit crunch over, consumers and companies raced to buy what they had held off on. Final sales rose 5.4% in the third quarter, and a further 3.6% in the fourth.”
Such rebounds are actually the norm. Of the 10 largest quarterly drops in final sales over the past 50 years, nine were followed by rebounds the following quarter, with an average gain of 5.4%. The chance of any rebound in the current quarter seems far-fetched after last week’s dismal reports on January manufacturing activity, chain-store sales and jobs. Still, if the government’s coming stimulus package and bank plan are able to restore a modicum of confidence in the economy, recovery could come surprisingly quickly.
Is that an overly optimistic scenario? Perhaps. Savings rates were a lot higher going into that 1980 period than they were going into the fourth quarter of 2008. And there seem to be so many interwoven factors now, it’s just hard to believe in a quick rebound of any kind. Then again, people were pretty pessimistic back in 1980s, too.
Anyway, the truth is that Lahart’s comparison to the early 1980s isn’t really that optimistic.
The economic expansion that followed the 1980 recession was one of the briefest on record. Rampant inflation and overdependence on a manufacturing sector facing stiff foreign competition were still problems, and by mid-1981 the economy was careening into the longest downturn since the Great Depression. After years of heavy dependence on credit-fueled spending, a quick recovery for today’s economy could also prove fleeting.
Okay, so that’s not very cheery. But it’s nice to have some historical perspective just the same.
So if you’ll allow me one moment of shameless patriotism, I’d like take a moment to declare that I am a proud American.
I’ve been thinking about this because of Joe The Plumber. Forget all the foolishness about his book deal or potential endorsement contracts or whether he’ll run for congress. There’s an argument, or an idea, that always hovers around Joe and his ilk — and his ilk’s intellectual defenders in the intellectual and pundit classes — that’s always puzzled me:
Why are these people so cynical about Americans?
Let me explain what I mean. Read more
Well, after last week’s posts here on optimism, and pessimism, and optimism vs. pessimism — it’s looking pretty grim out there! As I type, the Dow has fallen 600 points below the 10,000 mark. Other lousy economic news abounds, and the presidential race is disintegrating into bitterness and tomfoolery.
The NYT’s story on how consumers are faring is not exactly shocking: “Full of Doubts, U.S. Shoppers Cut Spending.” Looks like consumer spending for the third quarter will be down 3 percent, per projections, “the first quarterly decline in nearly two decades.”
“The last few days have devastated the American consumer,” said Walter Loeb, president of Loeb Associates, a consultancy, who said he worried that the constant drumbeat of negative news about the economy was becoming a self-fulfilling prophecy. “They all feel poor.”
No surprise, then, that the post here last week that got the most response was the pessimism one, which also happened to ask: “Is Main Street a bunch of spoiled overspending babies?” More specifically, I brought up some comments from a Sunday chat show in which some observers contended that one of the issues America is going to have to work through is that many Americans have been living well beyond their means for years, and in denial about it.
The comments were mixed, to say the least. However, I wanted to follow up in a general way to make a broad point that’s not aimed at any of those comments specifically. Read more
Back in the 1990s I worked as an editor at various personal finance and business publications, and one of the very smartest people I ever crossed paths with was Jason Zweig. So I was very interested in his WSJ column today, not least because of this point countering those who might think we’re headed toward another Great Depression:
When you spend time studying the Crash of 1929 and the depression that followed, what stands out the most is the dearth of doomsayers. Even Roger Babson, the economist known to posterity as “the man who called the crash,” did no such thing; he forecast only a 15% to 20% drop, not the apocalypse that actually occurred. Depressions start not when lots of people are worried about them, as we have today, but when no one is worried about them, as in 1929.
Interesting! Also this:
Furthermore, U.S. nonfinancial companies have just under $1 trillion in cash on their books. Even though Wall Street is dead, innovation is not: In the months to come, clever new financial go-betweens will spring up and find a way to get that cash flowing again. It’s hard to see how a depression could get under way when so much capital is waiting in the wings.
As a counterpoint to the anonymous J, mentioned yesterday, there was an unbelievably gloomy roundtable on This Week Sunday, most interesting to me because in addition to the usual beatdowns to government and Wall Street, the participants went after Main Street consumers.
Here’s a link to the video, but I’ll give you the highlights, or lowlights (with selected bolding to underscore the most interesting stuff). The first 10 minutes or so is boilerplate hemming and hawing about the bailout and craven politicians and all that. Then about halfway through, Washington Post writer Steven Pearlstein said: Read more
I do not pretend to know whether the House should have voted down the bailout today. I do know I’m surprised. And, perhaps, a bit freaked out.
Also, I’m thinking about an absolutely fascinating conversation I had a few days ago, and about the nature of optimism.
The conversation was with a guy I’ll call J. Clearly a very smart guy, J is actually connected to the investing business. I met him on a day when the markets had been pretty nuts a week solid. I was curious what he made of it. The bailout idea had already been floated and the markets seemed to like it. I told him that I understood the basic concept but I didn’t get the details — notably how the government would value these exotic securities it was proposing to buy up. I thought maybe J would have some insight on this and certain other structural issues I find confusing.
Instead, he shrugged. He was almost supernaturally calm, particularly for somebody in his line of work. I wasn’t taking notes but here’s a paraphrase of what he had to say, as I remember it:
I don’t know the details either. Haven’t looked into it. But I’m sure it will be fine. I trust them to come up with the right solution. I trust that they are the right people to do it, and that they understand the details and will do the best things, and that everything will work out.
The truth is, I don’t even vote, because I trust other people to decide which politicians are the best ones to handle whatever problems might come up. And I’m sure that’s happened, and there’s nothing to worry about. Things will work out.
Needless to say, this wasn’t the answer I was expecting. And probably needless to say, this point of view is rather at odds with the way I tend to look at the world.
It gave me pause. Like I said, this guy seemed smart, and he seemed reasonable. I talked to him about a number topics, and he was certainly not an ignorant man, in fact he probably had more facts in his head than I do. (That’s why I’d introduced the topic in the first place.) And he wasn’t being provocative. He was calm, and matter of fact.
Honestly, it kind of made me wish I could see the world the way he does.