THE HAMMER OF THOR… AND LIZ AND BARBRA AND GEORGE AND KAMALA
Lately, I’ve returned to my roots in investigative journalism. I’m trying to get to the bottom to a recurrent episode of collective madness where every four years a marauding posse of celebrities, media figures, and supreme court justices go rampaging through the political landscape w...
How to Reconcile July’s Rising Markets with July’s Dismal Economic News
Thursday July 29, 2010
-Eugene Linden
The question has been posed many times recently: Why are the markets rising when the economy seems to be heading back into the tank. Simple, the markets have been going up in part because the economy is going back into the tank. One major factor that has stalled the recovery – job losses – earlier provided a temporary boon for companies. Unit labor costs have been falling rapidly, roughly 5% since the fourth quarter of 2009. This has boosted productivity and earnings, but what is a cost for employers is livelihood for households. Yes, over 80% of reporting companies are beating earnings estimates, only 68% have been beating top-line estimates, which, notes David Rosenberg of Gluskin Sheff, is less than when the economy was free-falling in 2008. Companies have been making their numbers by cutting costs, not increasing sales. Martin Feldstein, President Emeritus of the National Bureau of Economic Research, the organization that officially calls recessions, pointed out during a Bloomberg interview that the group has not called the end of the recession in part because final sales have been lame at best: if first quarter GDP had been based on final sales, it would have risen 1.2% not the revised 3.7% (and Feldstein points out that the 1.2% is an annualized figure so that the final sales contribution to GDP in the quarter was negligible).
This is not good news either for future S&P earnings or the future of the economy. Those laid off employees are going to be consuming less in the coming years. Jacob Hacker of Yale made news recently with a study sponsored by the Rockefeller Foundation and Yale University on economic security that argued that in the past year, one in five American households suffered income losses greater than 25%. After suffering this type of shock, it usually takes several years to get back to even, and during those years a household’s budget will be stretched to the breaking point, particularly since the typical American household has very little savings and diminishing access to credit.
So while the market, or at least the infernal robots that now seem to constitute the market, embraced the earnings, these nice results are coming to some degree at the cost of future consumption which constitutes more than 70% of GDP. Question: how many times can that card be played?
The American Meteorological Society names Fire and Flood its book of the year for 2023, awarding it the Louis J Batton Author's Award.
"Eugene Linden wrote his first story on climate change, for Time magazine, in 1988; it was just the beginning of his investigative work, exploring all ramifications of this impending disaster. Fire and Flood represents his definitive case for the prosecution as to how and why we have arrived at our current dire pass, closing with his argument that the same forces that have confused the public’s mind and slowed the policy response are poised to pivot with astonishing speed, as long-term risks have become present-day realities and the cliff’s edge is now within view.
Starting with the 1980s, Linden tells the story, decade by decade, by looking at four clocks that move at different speeds: the reality of climate change itself; the scientific consensus about it, which always lags reality; public opinion and political will, which lag farther still; and, arguably, most importantly, business and finance. Reality marches on at its own pace, but the public will and even the science are downstream from the money, and Fire and Flood shows how devilishly effective monied climate-change deniers have been at slowing and even reversing the progress of our collective awakening. When a threat means certain but future disaster, but addressing it means losing present-tense profit, capitalism's response has been sadly predictable.
Now, however, the seasons of fire and flood have crossed the threshold into plain view. Linden focuses on the insurance industry as one loud canary in the coal mine: fire and flood zones in Florida and California, among other regions, are now seeing what many call climate redlining. The whole system is teetering on the brink, and the odds of another housing collapse, for starters, are much higher than most people understand. There is a path back from the cliff, but we must pick up the pace. Fire and Flood shows us why, and how." From Catalog Copy
