I’m not an economist and the life of writing about it, trying to join the chorus of voices screaming about Fed psychosis hoping to help affect change, and being a Sumnerian cheerleader is a bit difficult being in this predicament as I have almost nothing to offer that hasn’t already be said. But I have been able to collect some good material for writing a history of the Great Recession since I’ve been following Sumner from 2009, almost when he started blogging, and have latched on to others such as Marcus Nunes, Lars Christensen and David Glasner. It will be my first book, so I have quite a task before me.
One thing that I am unsure about regarding the recession and I hope that perhaps a reader might be able to help me with, is that I don’t understand where it all started; and I need to have a pretty good understanding of it to start my book with. I have some graphs that I played around with that show some interesting details, like the Fed started tightening NGDP growth in the early part of 2007. It looks like it was slowing down in 2006, but started the steep decline in 2007. The confusing part is that the focus regarding discussions among economists seems to be on 2008 and it doesn’t seem right to me according to the graph. Obviously, the Fed could have stepped in any time to stop the madness, and perhaps early to mid-2008 was its last opportunity to do so.
But I still have a problem getting to the brass tacks of causation because I don’t believe that people buy things they can’t make the payments for as a general rule. Of course there are always some people who do that, there have always been, but I think that something has to happen to the average person that prevents them from following through on their obligations. So I have a problem buying into the popular narrative, which is similar to the kinds of narratives that radiate from governmental institutions so often – the people are bad instead of public policies, or in this case, monetary policy. Gas prices are high so buy an Obama-green-mobile instead of driving around in the SUV if you can’t take it.
I suspect that the oil shock played a larger role in the mortgage crisis than I have seen discussed so far. When I look at my graph that compares PCE to hiring, they hug each other nicely prior to where I think the oil shock started, and if they are correlated, the correlation is broken starting in 2005 when energy prices started to skyrocket, and hiring never recovers after that until 2010. My guess is that perhaps the unemployment number for the period 2005-07 might be understated, or at least the cool down in hiring isn’t captured within. I haven’t looked at the job search time statistics, maybe it shows there.
There are other things I deal with too, that I worry about constantly, and those are personal things that give me a bit of a unique perspective on the issue with employment prior to 2008. I didn’t used to have time for my real passion which is US history. I did have a day job as an information technology strategist at The Xerox Corporation until 4Q2006 when my entire technology group was let go and I have not been employed since. Some of the reason I haven’t been employed since is because of family issues that prevent relocation. But I think the rest of it has to do with the huge slowdown in hiring. I found myself among some pretty stiff competition, getting to 2nd and 3rd interviews, and then not making the final cut. It was quite a source of frustration for me, and I had to make my own job which is touch and go most of the time.
I also don’t have to look very far for case studies of the social aspect of the history of the Great Recession, at least informal ones. A friend of mine, a lady I met when we were both in kindergarten, got caught up in this monster recession also. She lost her job shortly before I lost mine. Although she was able to find clerical jobs, she was laid off from both of the ones she found after only a few months at each, and then she was able to get a job taking care of the animals at the Disneyland petting zoo, all within a period of 4 years. During that time, however, the loss of income had a devastating effect on her personal life. Her marriage wasn’t able to withstand the financial stress and she lost her home to foreclosure while being responsible for her teenage daughter from a previous marriage and her elderly mother. She told me about not being able to afford food and at one point she had gone for 2 weeks without being able to eat. I still worry about her. I haven’t heard from her in months and I don’t know where she is.
Thinking about all the things this lady has gone through, knowing that she isn’t alone, stirs in me a sense of outrage that is beyond description. I have trouble reconciling the stories with what’s going on at the Federal Reserve and the way in which the politicians question the Federal Reserve Chairman, as if he truly is doing everything possible to resolve the crisis of self-sufficiency. I‘ve been kept awake some nights thinking about it, wondering where this entire mess came from and if it will ever be resolved. I may never know why the Fed has done what it did or why it is so far off tack and plays blind. I will need more than anecdotes to put in a book, however. Maybe it isn’t worth the time it would take to explore the possibilities, although I suspect it has a lot to do with international ‘group think’ from being just a bit too cooperative – the Fed lost sight of what’s important and has forgotten to put America first.
The only thing I can do about it is what I have been doing so far, blogging and working on the book. I need to get the book done as fast as I can, but since it is the first time I’ve written more than essays and pamphlet-length material, there’s a learning curve there that needs to be overcome.