The Canadian government spent $1 billion on security for the G-20 summit in Toronto, but still wasn’t able to keep a few black-bloc protestors from smashing store windows and burning two police cars. Or perhaps I should say “and” instead of “but,” because it was clear that the police were not concerned about property damage. If anything, the sacrifice of two police cars was a small price to pay in order to justify the hundreds of millions spent on new equipment and overtime for 20,000 police, soldiers, and intelligence officers.
Wait a minute—what do they mean by “intelligence officers”? Go to YouTube and search for “g-20 protests” and you’ll find a video of plainclothes police that shows exactly where Canadian tax dollars went: to pay dozens of cops in t-shirts and jeans wielding sticks and beating protestors. One was even dressed as a black-bloc protestor, leading to the question: did the police infiltrate protest groups in order to cause violence and justify the crackdown on peaceful protestors? The answer appears to be “yes.”
Meanwhile, on the other side of the barriers, the heads of state for the 20 most developed nations were fussing about what to do to appease their restive populations and save the global economy. Their economists cast the problem as a simple either/or choice: either governments continue to go deeper into debt by spending money on economic stimulus plans to save the global economy, or governments can cut spending on social programs to pay down their debts and avoid bankruptcy (but this might further hurt the economy). The Obama administration’s official policy is that the US government can do both at the same time, without giving any convincing details about how they will accomplish this impossible feat.
No one mentions the third way—the only sane option in the face of the worst economic downtown since the 1930’s—that governments do what nearly every household in the world has been forced to do over the last two years: cut spending on nonessential items and use the savings to pay down debts and buy necessities.
In other words, to save the global economy and government balance sheets, governments must do the following: stop financing wars and military appropriations and do away with corporate give-aways. In the case of the US government, which finances both sides of the war in Afghanistan, ending two wars in the Middle East would save enormous amounts of money. Ending the inefficient and ineffective efforts to prop up the housing market (hundreds of millions of dollars poured into Fannie Mae and Freddie Mac, plus billions of dollars in no-interest loans to big banks, plus tax credits for homebuyers and mortgage holders) would free up plenty of money to pay down the deficit.
And there would be lots of money left over to finance necessities that create jobs in the US economy: healthcare, education, infrastructure (telecom systems, transit systems, water and sewer systems, etc.) and social services.
History shows that this third way is the only one that works; it’s what saved us in the 1930’s and 1940’s. But it’s “politically impossible” to discuss, much less implement, because it is, in fact, Socialism.
And we need to try it again.
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Saturday, July 3, 2010
Tuesday, October 6, 2009
Sheila Bair's Big Gamble
Last week the FDIC shut down another three banks, bringing total bank failures in the US so far this year to 98. Last year there were 25, and in 2007, there were only 3.
The Federal Deposit Insurance Corp. is not just the government entity that insures your cash deposits in the bank; the FDIC also has the unenviable task of unwinding banks that have run up massive debts and have no cash on hand to pay them off or cover their customer’s needs. When too many customers (depositors) learn of the rickety state of their bank and line up to demand their money, it’s called a run on the bank. Runs can drain a bank down to nothing, and the FDIC has to make the call when it’s time to close the doors and sell off the remaining deposits and assets to another, healthier bank, thus avoiding a situation where the FDIC has to make good on all the remaining cash demands of the depositors and creditors of the bank long after all the cash has been drained away.
Unfortunately for the FDIC, the pool of healthy banks willing (and able) to buy up the assets of ailing banks has dwindled, leaving the FDIC with a lot of assets on its hands that may in the long-term be worth money, but right now can’t be sold for even pennies on the dollar. The FDIC’s own cash pool, which comes from annual fees paid by banks (about 12 to 16 cents for every $100 of deposits) has dwindled.
In 2008, the FDIC spent $20 billion of its cash reserves on 25 bank failures; this year, that figure is more than $30 billion. Last week, the FDIC’s cash reserves went into the red—meaning that they need to raise cash fast to cover more expected bank failures. The FDIC estimated earlier this year that they would spend approximately $70 billion total by the end of next year, but raised that estimate recently to $100 billion, so the need for cash is hanging over FDIC Chair Sheila Bair like the sword of Damocles.
Big investment banks, like Goldman Sachs and JP Morgan, have been keeping an eye on the situation and trying to figure out how to make money from it all. Last month they proposed loaning money to the FDIC so Sheila Bair, who’s been a major critic of how Fed Chief Ben Bernanke and Treasury Secretary Timothy Geithner have run the financial industry bailout (without strengthening regulation in the process), can avoid going to her enemies for a loan.
The FDIC has two ways to raise more money. It can borrow money from the US Treasury (with Timothy Geithner’s approval) or it can levy a special assessment on banks. But the FDIC had already issued a special assessment last May, and Bair’s critics wailed that another special assessment would only drive more ailing banks into the ground. Bair didn’t much like the prospect of borrowing money from Goldman or JP Morgan at usurious rates or, heaven forbid, at adjustable rates (a type of loan that should be illegal, after all the damage it’s done to the economy and to people’s personal balance sheets, but of course it’s not—that would stifle business). So Bair came up with a compromise.
The FDIC will ask banks to pre-pay their annual assessments through 2012. In other words, Bair is taking an interest-free loan from banks. In order to avoid harming the banks that are still struggling, she gave them the okay to not report the prepayments on their financial statements, so their cash reserves will look better than they really are.
How is this different from the accounting tricks that banks have been using to hide their debts and overvalue their risky investments to make their cash reserves look good? According to Bair, the difference is in degree. The few pennies that make up the FDIC assessment will be small change compared to the other expenses on banks’ financial statements. But those assessments will add up to $45 billion to replenish the FDIC fund.
The other, more important question is this: will this $45 billion be enough? By the FDIC’s own estimate, they’ll need at least $50 billion to get through the end of 2010. By asking banks to pay their assessments through 2012 right now, that leaves a gap of two years when the FDIC can expect zero income from its main source but will still have to close down troubled banks. A taxpayer bailout will be inevitable.
The fact that Sheila Bair—the only top regulator in this country who’s been outspoken about the causes of the crash—can’t turn to either the Obama administration or to Congress to replenish the FDIC’s fund is a symptom of just how sick our system is. She’s betting that things will get better between now and next year, that new financial regulation will be in place, that the economy will turn a corner, and that Congress and the American people won’t view a request from her to replenish the FDIC’s fund with taxpayer money as a taxpayer bailout that marks her as the same kind of leach as Kenneth Lewis of Bank of America or Franklin Raines of Fannie Mae.
I hope she’s right.
The Federal Deposit Insurance Corp. is not just the government entity that insures your cash deposits in the bank; the FDIC also has the unenviable task of unwinding banks that have run up massive debts and have no cash on hand to pay them off or cover their customer’s needs. When too many customers (depositors) learn of the rickety state of their bank and line up to demand their money, it’s called a run on the bank. Runs can drain a bank down to nothing, and the FDIC has to make the call when it’s time to close the doors and sell off the remaining deposits and assets to another, healthier bank, thus avoiding a situation where the FDIC has to make good on all the remaining cash demands of the depositors and creditors of the bank long after all the cash has been drained away.
Unfortunately for the FDIC, the pool of healthy banks willing (and able) to buy up the assets of ailing banks has dwindled, leaving the FDIC with a lot of assets on its hands that may in the long-term be worth money, but right now can’t be sold for even pennies on the dollar. The FDIC’s own cash pool, which comes from annual fees paid by banks (about 12 to 16 cents for every $100 of deposits) has dwindled.
In 2008, the FDIC spent $20 billion of its cash reserves on 25 bank failures; this year, that figure is more than $30 billion. Last week, the FDIC’s cash reserves went into the red—meaning that they need to raise cash fast to cover more expected bank failures. The FDIC estimated earlier this year that they would spend approximately $70 billion total by the end of next year, but raised that estimate recently to $100 billion, so the need for cash is hanging over FDIC Chair Sheila Bair like the sword of Damocles.
Big investment banks, like Goldman Sachs and JP Morgan, have been keeping an eye on the situation and trying to figure out how to make money from it all. Last month they proposed loaning money to the FDIC so Sheila Bair, who’s been a major critic of how Fed Chief Ben Bernanke and Treasury Secretary Timothy Geithner have run the financial industry bailout (without strengthening regulation in the process), can avoid going to her enemies for a loan.
The FDIC has two ways to raise more money. It can borrow money from the US Treasury (with Timothy Geithner’s approval) or it can levy a special assessment on banks. But the FDIC had already issued a special assessment last May, and Bair’s critics wailed that another special assessment would only drive more ailing banks into the ground. Bair didn’t much like the prospect of borrowing money from Goldman or JP Morgan at usurious rates or, heaven forbid, at adjustable rates (a type of loan that should be illegal, after all the damage it’s done to the economy and to people’s personal balance sheets, but of course it’s not—that would stifle business). So Bair came up with a compromise.
The FDIC will ask banks to pre-pay their annual assessments through 2012. In other words, Bair is taking an interest-free loan from banks. In order to avoid harming the banks that are still struggling, she gave them the okay to not report the prepayments on their financial statements, so their cash reserves will look better than they really are.
How is this different from the accounting tricks that banks have been using to hide their debts and overvalue their risky investments to make their cash reserves look good? According to Bair, the difference is in degree. The few pennies that make up the FDIC assessment will be small change compared to the other expenses on banks’ financial statements. But those assessments will add up to $45 billion to replenish the FDIC fund.
The other, more important question is this: will this $45 billion be enough? By the FDIC’s own estimate, they’ll need at least $50 billion to get through the end of 2010. By asking banks to pay their assessments through 2012 right now, that leaves a gap of two years when the FDIC can expect zero income from its main source but will still have to close down troubled banks. A taxpayer bailout will be inevitable.
The fact that Sheila Bair—the only top regulator in this country who’s been outspoken about the causes of the crash—can’t turn to either the Obama administration or to Congress to replenish the FDIC’s fund is a symptom of just how sick our system is. She’s betting that things will get better between now and next year, that new financial regulation will be in place, that the economy will turn a corner, and that Congress and the American people won’t view a request from her to replenish the FDIC’s fund with taxpayer money as a taxpayer bailout that marks her as the same kind of leach as Kenneth Lewis of Bank of America or Franklin Raines of Fannie Mae.
I hope she’s right.
Sunday, October 4, 2009
Don't Break Out the Champagne Yet
Economists have been spewing happy talk lately like it’s going out of style. I thought they would have learned something from the last two stock market bubbles fueled by irrational optimism. Apparently not, because the consensus now is that the recession is over and that the US economy has entered a “slow” or “Jobless” recovery.
At least they’re being somewhat cautious about their excess exuberance. I can’t say the same thing about investors, who’ve driven the stock market over 10,000 again without any sign that these stock prices are justified. We might blame the Fed for this, with Ben Bernanke’s insistence that a summertime bump in housing sales means the recession is over; never mind that sales are mostly in the low-end of the market, and overall housing prices are still falling in most parts of the country. No one knows what will happen once the First Time Homebuyer Credit expires later this year.
The phenomenon of a “jobless recovery” is an interesting one, worth more discussion than it usually gets in the media. Economists toss out the term as if we all should understand intuitively what it means, leading to a widespread suspicion that it is, in fact, a meaningless term. But it does have a meaning—just one that, for political reasons, economists and politicians would like to keep secret from the average American.
In US economic history, recessions (including the Great Depression) were followed by periods of economic recovery during which business activity expanded. This meant that employment increased, too, since businesses had to hire more workers. But a curious thing has developed over the last twenty years: recessions have been followed by long periods of high unemployment. We’ve had three opportunities to witness this: first, in the early 1990’s (coinciding with the first Gulf War and high oil prices), in the late 1990’s (the bursting of the tech stock bubble), and the current mess we’re in right now. In all three situations, businesses have reported upticks in their economic activity or improvements in their balance sheets, but they’re not hiring people, and most are laying people off.
Some of that is related to “increased worker productivity,” a term that means bosses are laying off people and expecting the remaining staff to pick up the extra work. But there’s only so much slack in that rope before employers have to go looking for new employees. Unfortunately, many of them are looking overseas, where labor is cheaper. Outsourcing is a phenomenon that started in the 1980’s with US manufacturers relocating their production plants overseas. US government foreign aid programs (with the help of the World Bank and the IMF) provided money to developing countries to build “infrastructure” to attract business investment—in other words: factory buildings, roads, and port facilities for US companies that wanted to relocate abroad to take advantage of a cheap labor force. And cheap oil made it even easier to produce everything overseas and ship it all back to the US for consumption. In the 1990’s, even the US service industry got on the bandwagon by setting up call centers and customer service centers in India to save money.
Much of the “jobless” aspect of the last two recoveries can be accounted for by outsourcing. But there’s no indication that outsourcing is playing the dominant role in the current “recovery” (if you believe that we’re really in one, which I don’t). The most recent unemployment figures show that the US lost 263,000 jobs in September. More important are the revised figures for the first quarter of this year. The rule of thumb has been that we lost about half a million jobs each month at the beginning of this year. In fact, the figures are much, much worse, culminating in a revised total for March 2009 of 824,000 jobs lost in that month alone. Currently, the official number of people looking for work is 15 million, or about 35.6% of the unemployed. This doesn’t count the underemployed (those working part-time or as temps who are searching for full-time, permanent employment). Some economists put the real unemployment figure (which counts everyone who’s out of work, including the “discouraged” who no longer looking for work) at close to 20% of the US adult population—one in every five people.
So what is accounting for the profits on the balance sheets of US corporations? Well, for one thing, most of them are paring down by selling off pieces of their businesses. The business press has been full of headlines announcing mergers and sales, many of which are being financed by US taxpayers through the federal government’s bailout plan, one aspect of which is to provide low or no interest loans to businesses, ostensibly to help them fund operations. (The US government is doing this because banks won’t—that’s what they mean when they say “credit has dried up.”) But once the money goes into the bank accounts of American businesses, the Treasury and the Fed have no means to ensure that the money is being spent on day-to-day operations and not being used to buy up other distressed companies. In fact, Fed Chief Ben Bernanke and Treasury Secretary Timothy Geithner are satisfied that funding mergers is a legitimate use of taxpayer money, because that’s what the US government did with the Bank of America/Merrill Lynch bailout in 2008 (which was engineered by Bernanke and former Treasury Secretary Henry Paulson, but Geithner was on the board of the New York Federal Reserve at the time, and he pushed for these kinds of bailouts).
Your taxes and mine are paying for the “jobless” recovery and sparking a run-up in stock prices, which is keeping the rich happy, and naturally leading to lots of happy talk. But there’s another, more sinister reason why US businesses have healthy balance sheets.
There’s been a lot of talk about increasing financial regulation, but not much action. For example, it’s still legal, eight years after the Enron and Worldcom collapses, for businesses to hide their debts in off-balance-sheet entities. In other words, they set up special “holding companies” that only hold debts or worthless “assets,” like mortgage-backed securities. And in March, the Financial Accounting Standards Board extended another benefit to US businesses by repealing the mark-to-market rule that forced companies to value mortgage-backed securities and similar derivatives at current market rates (the prices they’d get if they tried to sell the securities today—for many of those securities that price would be $0.00).
These accounting tricks, which contributed to the last stock market bubble, are still be used by businesses today to hide the true state of their finances. So, no, I don’t believe that we’re in a recovery. In fact, I think we’re heading into yet another bubble…with another implosion headed our way.
At least they’re being somewhat cautious about their excess exuberance. I can’t say the same thing about investors, who’ve driven the stock market over 10,000 again without any sign that these stock prices are justified. We might blame the Fed for this, with Ben Bernanke’s insistence that a summertime bump in housing sales means the recession is over; never mind that sales are mostly in the low-end of the market, and overall housing prices are still falling in most parts of the country. No one knows what will happen once the First Time Homebuyer Credit expires later this year.
The phenomenon of a “jobless recovery” is an interesting one, worth more discussion than it usually gets in the media. Economists toss out the term as if we all should understand intuitively what it means, leading to a widespread suspicion that it is, in fact, a meaningless term. But it does have a meaning—just one that, for political reasons, economists and politicians would like to keep secret from the average American.
In US economic history, recessions (including the Great Depression) were followed by periods of economic recovery during which business activity expanded. This meant that employment increased, too, since businesses had to hire more workers. But a curious thing has developed over the last twenty years: recessions have been followed by long periods of high unemployment. We’ve had three opportunities to witness this: first, in the early 1990’s (coinciding with the first Gulf War and high oil prices), in the late 1990’s (the bursting of the tech stock bubble), and the current mess we’re in right now. In all three situations, businesses have reported upticks in their economic activity or improvements in their balance sheets, but they’re not hiring people, and most are laying people off.
Some of that is related to “increased worker productivity,” a term that means bosses are laying off people and expecting the remaining staff to pick up the extra work. But there’s only so much slack in that rope before employers have to go looking for new employees. Unfortunately, many of them are looking overseas, where labor is cheaper. Outsourcing is a phenomenon that started in the 1980’s with US manufacturers relocating their production plants overseas. US government foreign aid programs (with the help of the World Bank and the IMF) provided money to developing countries to build “infrastructure” to attract business investment—in other words: factory buildings, roads, and port facilities for US companies that wanted to relocate abroad to take advantage of a cheap labor force. And cheap oil made it even easier to produce everything overseas and ship it all back to the US for consumption. In the 1990’s, even the US service industry got on the bandwagon by setting up call centers and customer service centers in India to save money.
Much of the “jobless” aspect of the last two recoveries can be accounted for by outsourcing. But there’s no indication that outsourcing is playing the dominant role in the current “recovery” (if you believe that we’re really in one, which I don’t). The most recent unemployment figures show that the US lost 263,000 jobs in September. More important are the revised figures for the first quarter of this year. The rule of thumb has been that we lost about half a million jobs each month at the beginning of this year. In fact, the figures are much, much worse, culminating in a revised total for March 2009 of 824,000 jobs lost in that month alone. Currently, the official number of people looking for work is 15 million, or about 35.6% of the unemployed. This doesn’t count the underemployed (those working part-time or as temps who are searching for full-time, permanent employment). Some economists put the real unemployment figure (which counts everyone who’s out of work, including the “discouraged” who no longer looking for work) at close to 20% of the US adult population—one in every five people.
So what is accounting for the profits on the balance sheets of US corporations? Well, for one thing, most of them are paring down by selling off pieces of their businesses. The business press has been full of headlines announcing mergers and sales, many of which are being financed by US taxpayers through the federal government’s bailout plan, one aspect of which is to provide low or no interest loans to businesses, ostensibly to help them fund operations. (The US government is doing this because banks won’t—that’s what they mean when they say “credit has dried up.”) But once the money goes into the bank accounts of American businesses, the Treasury and the Fed have no means to ensure that the money is being spent on day-to-day operations and not being used to buy up other distressed companies. In fact, Fed Chief Ben Bernanke and Treasury Secretary Timothy Geithner are satisfied that funding mergers is a legitimate use of taxpayer money, because that’s what the US government did with the Bank of America/Merrill Lynch bailout in 2008 (which was engineered by Bernanke and former Treasury Secretary Henry Paulson, but Geithner was on the board of the New York Federal Reserve at the time, and he pushed for these kinds of bailouts).
Your taxes and mine are paying for the “jobless” recovery and sparking a run-up in stock prices, which is keeping the rich happy, and naturally leading to lots of happy talk. But there’s another, more sinister reason why US businesses have healthy balance sheets.
There’s been a lot of talk about increasing financial regulation, but not much action. For example, it’s still legal, eight years after the Enron and Worldcom collapses, for businesses to hide their debts in off-balance-sheet entities. In other words, they set up special “holding companies” that only hold debts or worthless “assets,” like mortgage-backed securities. And in March, the Financial Accounting Standards Board extended another benefit to US businesses by repealing the mark-to-market rule that forced companies to value mortgage-backed securities and similar derivatives at current market rates (the prices they’d get if they tried to sell the securities today—for many of those securities that price would be $0.00).
These accounting tricks, which contributed to the last stock market bubble, are still be used by businesses today to hide the true state of their finances. So, no, I don’t believe that we’re in a recovery. In fact, I think we’re heading into yet another bubble…with another implosion headed our way.
Sunday, August 30, 2009
A Visit to the Grungy City
Vancouver BC is an authentically grungy city. It looks the way a city is supposed to look and feel.
Seattle, on the other hand, ceased being a grungy city sometime in the late-90’s, after Mayors Rice and Schell, and their cohorts on the City Council, succeeded in shoveling public money to developers. Add the tech stock boom, easy credit, and sky-rocketing housing prices, and we got a city that has swept all its poor people right out of the city limits. And that was the plan, as Mayor Schell would have told you back then. Poor people don’t belong in our city, so they were forced to leave.
Which explains the city’s attitude today, with Mayor Nickels endorsing sweeps of homeless encampments and his refusal to deal with the Nickelsville tent city. No wonder he didn’t make it through the primary.
Unfortunately, when the poor left Seattle, most of Seattle’s character left with them.
Vancouver has several neighborhoods that have cleaned out the drug dealers and prostitutes, but have nevertheless maintained their unique, hole-in-the-wall stores, cheap ethnic restaurants, tiny artsy boutiques with handmade clothing, and a proliferation of affordable family housing. Of course, politicians and big businessmen in Vancouver would like their city to look like Seattle, but the majority of Vancouverites are pushing back and trying to hold on to what makes Vancouver so great.
Not so, in Seattle. Even the Fremont neighborhood has been sanitized and turned into an outdoor shopping mall. It’s a sad day when Vancouver can boast more vegetarian restaurants per square mile than Seattle has in its entire city limits.
It all boils down to two things: first, the price of rent. In Seattle, local coffee shops, used bookstores, and even the little storefront martial arts studios have all closed down because they can’t make the rent. (I feel compelled to point out that Vancouver has a Starbucks on almost every corner, just like we have here, but Vancouver still has great, small coffee shops, too. Seattle has maybe three or four left in the whole city.)
The second problem is attitude. Everyone in America wants to get rich right now, and that’s reflected not only in our borrowing and spending habits (we want to live like the rich but don’t really have the means for it), but also in our inability to use patience and hard work to achieve a vision of something unique.
For example, in Vancouver, a young clothing designer might decide to open her own storefront in a tiny neighborhood shop with cheap rent and make clothing that students can afford to buy. She would find it important and empowering to see lots of hip, young people wearing her clothes, and be happy to build business that way. But in Seattle, that same designer would choose instead to make a few items, place them in an expensive consignment shop, and price them well out of the reach of almost everyone but the wealthy. Then she’d try to build her “brand” through an idiotic Internet campaign, and try to get on a reality TV show for fashion designers, eventually learning how to fit in with the fashion industry’s standards. This is a route that ensures sterility, stifles creativity, isolates artists from the people who’d appreciate their work the most (most of whom are not rich), and in the process destroys a city’s cultural life and its streetscapes.
Maybe the economic downturn, which is based on unsustainable rents and housing prices, will change all that. Americans are already voting on the quality of merchandise in chain stores by becoming more choosy. We are literally waking up, smelling the coffee, and deciding that Starbucks isn’t any better than the stuff we make at home.
Maybe most American artists and entrepreneurs will give up on their “get rich quick” fantasies and search instead for fulfillment in their work. Falling rents just might make it possible for them to realize this new dream.
I hope so, for Seattle’s sake.
Seattle, on the other hand, ceased being a grungy city sometime in the late-90’s, after Mayors Rice and Schell, and their cohorts on the City Council, succeeded in shoveling public money to developers. Add the tech stock boom, easy credit, and sky-rocketing housing prices, and we got a city that has swept all its poor people right out of the city limits. And that was the plan, as Mayor Schell would have told you back then. Poor people don’t belong in our city, so they were forced to leave.
Which explains the city’s attitude today, with Mayor Nickels endorsing sweeps of homeless encampments and his refusal to deal with the Nickelsville tent city. No wonder he didn’t make it through the primary.
Unfortunately, when the poor left Seattle, most of Seattle’s character left with them.
Vancouver has several neighborhoods that have cleaned out the drug dealers and prostitutes, but have nevertheless maintained their unique, hole-in-the-wall stores, cheap ethnic restaurants, tiny artsy boutiques with handmade clothing, and a proliferation of affordable family housing. Of course, politicians and big businessmen in Vancouver would like their city to look like Seattle, but the majority of Vancouverites are pushing back and trying to hold on to what makes Vancouver so great.
Not so, in Seattle. Even the Fremont neighborhood has been sanitized and turned into an outdoor shopping mall. It’s a sad day when Vancouver can boast more vegetarian restaurants per square mile than Seattle has in its entire city limits.
It all boils down to two things: first, the price of rent. In Seattle, local coffee shops, used bookstores, and even the little storefront martial arts studios have all closed down because they can’t make the rent. (I feel compelled to point out that Vancouver has a Starbucks on almost every corner, just like we have here, but Vancouver still has great, small coffee shops, too. Seattle has maybe three or four left in the whole city.)
The second problem is attitude. Everyone in America wants to get rich right now, and that’s reflected not only in our borrowing and spending habits (we want to live like the rich but don’t really have the means for it), but also in our inability to use patience and hard work to achieve a vision of something unique.
For example, in Vancouver, a young clothing designer might decide to open her own storefront in a tiny neighborhood shop with cheap rent and make clothing that students can afford to buy. She would find it important and empowering to see lots of hip, young people wearing her clothes, and be happy to build business that way. But in Seattle, that same designer would choose instead to make a few items, place them in an expensive consignment shop, and price them well out of the reach of almost everyone but the wealthy. Then she’d try to build her “brand” through an idiotic Internet campaign, and try to get on a reality TV show for fashion designers, eventually learning how to fit in with the fashion industry’s standards. This is a route that ensures sterility, stifles creativity, isolates artists from the people who’d appreciate their work the most (most of whom are not rich), and in the process destroys a city’s cultural life and its streetscapes.
Maybe the economic downturn, which is based on unsustainable rents and housing prices, will change all that. Americans are already voting on the quality of merchandise in chain stores by becoming more choosy. We are literally waking up, smelling the coffee, and deciding that Starbucks isn’t any better than the stuff we make at home.
Maybe most American artists and entrepreneurs will give up on their “get rich quick” fantasies and search instead for fulfillment in their work. Falling rents just might make it possible for them to realize this new dream.
I hope so, for Seattle’s sake.
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