Tuesday, June 7, 2011

After The Good Comes... The Bad

I have not been able to sleep at all last night. A dull migraine never progressed to the unbearable stage but my stomach churned and I was physically ill all night. Each time I went to bed and tried to make myself fall asleep my mind wondered back to my home and barn, panic set in, and within minutes I was back up again being physically ill.
I am just so tired of this, I feel spent, finished. So terribly scared of being left permanently homeless and vulnerable in a sinking economy.

I have to go to the Lazy J this morning and perhaps when I return I can take the day off work and go to bed. I truly need to sleep.

The woes of the economy is compounding everything.

Decline and fall of the American Empire
The economic powerhouse of the 20th century emerged stronger from the Depression. But faced with cultural decay, structural weaknesses and reliance on finance, can the US do it again?
America clocked up a record last week. The latest drop in house prices meant that the cost of real estate has fallen by 33% since the peak – even bigger than the 31% slide seen when John Steinbeck was writing The Grapes of Wrath.
Unemployment has not returned to Great Depression levels but at 9.1% of the workforce it is still at levels that will have nerves jangling in the White House. The last president to be re-elected with unemployment above 7.2% was Franklin Delano Roosevelt.
The US is a country with serious problems. Getting on for one in six depend on government food stamps to ensure they have enough to eat. The budget, which was in surplus little more than a decade ago, now has a deficit of Greek-style proportions. There is policy paralysis in Washington.
The assumption is that the problems can be easily solved because the US is the biggest economy on the planet, the only country with global military reach, the lucky possessor of the world's reserve currency, and a nation with a proud record of re-inventing itself once in every generation or so.
All this is true and more. US universities are superb, attracting the best brains from around the world. It is a country that pushes the frontiers of technology. So, it may be that the US is about to emerge stronger than ever from the long nightmare of the sub-prime mortgage crisis. The strong financial position of American companies could unleash a wave of new investment over the next couple of years.
Let me put an alternative hypothesis. America in 2011 is Rome in 200AD or Britain on the eve of the first world war: an empire at the zenith of its power but with cracks beginning to show.
The experience of both Rome and Britain suggests that it is hard to stop the rot once it has set in, so here are the a few of the warning signs of trouble ahead: military overstretch, a widening gulf between rich and poor, a hollowed-out economy, citizens using debt to live beyond their means, and once-effective policies no longer working. The high levels of violent crime, epidemic of obesity, addiction to pornography and excessive use of energy may be telling us something: the US is in an advanced state of cultural decadence.
Empires decline for many different reasons but certain factors recur. There is an initial reluctance to admit that there is much to fret about, and there is the arrival of a challenger (or several challengers) to the settled international order. In Spain's case, the rival was Britain. In Britain's case, it was America. In America's case, the threat comes from China.
Britain's decline was extremely rapid after 1914. By 1945, the UK was a bit player in the bipolar world dominated by the US and the Soviet Union, and sterling – the heart of the 19th-century gold standard – was rapidly losing its lustre as a reserve currency. There had been concerns, voiced as far back as the 1851 Great Exhibition, that the hungrier, more efficient producers in Germany and the US threatened Britain's industrial hegemony. But no serious policy action was taken. In the second half of the 19th century there was a subtle shift in the economy, from the north of England to the south, from manufacturing to finance, from making things to living off investment income. By 1914, the writing was on the wall.
In two important respects, the US today differs from Britain a century ago. It is much bigger, which means that it benefits from continent-wide economies of scale, and it has a presence in the industries that will be strategically important in the first half of the 21st century. Britain in 1914 was over-reliant on coal and shipbuilding, industries that struggled between the world wars, and had failed to grasp early enough the importance of emerging new technologies.
Even so, there are parallels. There has been a long-term shift of emphasis in the US economy away from manufacturing and towards finance. There is a growing challenge from producers in other parts of the world.
Now consider the stark contrast between this economic recovery and the pattern of previous cycles. Traditionally, a US economic recovery sees unemployment coming down smartly as lower interest rates encourage consumers to spend and the construction industry to build more homes. This time, it has been different. There was a building frenzy during the bubble years, which left an overhang of supply even before plunging prices and rising unemployment led to a blitz of foreclosures.
America has more homes than it knows what to do with, and that state of affairs is not going to change for years.
Over the past couple of months, there has been a steady drip-feed of poor economic news that has dented hopes of a sustained recovery. Optimism has now been replaced by concern that the United States could be heading for the dreaded double-dip recession.
In the real estate market, which is the symptom of America's deep-seated economic malaise, the double dip has already arrived. Tax breaks to homeowners provided only a temporary respite for a falling market and millions of Americans are living in homes worth less than they paid for them. The latest figures show that more than 28% of homes with a mortgage are in negative equity. Unsurprisingly, that has made Americans far more cautious about spending money. Rising commodity prices exacerbate the problem, since they push up inflation and reduce the spending power of wages and salaries.
Macro-economic policy has proved less effective than normal. That's not for want of trying, though. The US has had zero short-term interest rates for well over two years. It has had two big doses of quantitative easing, the second of which is now ending. Its budget deficit is so big it has led to warnings from the credit-rating agencies, in spite of the dollar's reserve currency status. And Washington has adopted a policy of benign neglect towards the currency, despite the strong-dollar rhetoric, in the hope that cheaper exports will make up for the squeeze on consumer spending.
Policy, as ever, is geared towards growth because the great existential fear of the Fed, the Treasury and whoever occupies the White House is a return to the 1930s. Back then, the economic malaise could be largely attributed to deflationary economic policies that deepened the recession caused by the popping of the 1920s stock market bubble. The feeble response to today's growth medicine suggests that the US is structurally far weaker than it was in the 1930s. Tackling these weaknesses will require breaking finance's stranglehold over the economy and measures to boost ordinary families' spending power and so cut their reliance on debt. It will require an amnesty for the housing market. Above all, America must rediscover the qualities that originally made it great. That will not be easy.
And now we have a wildfire burning to our west that is becoming more than worrisome for the state of Arizona and ourselves. Today much larger than when this article was published, extending to well over 300,000 acres, zero contained, and less than a mile from the NM border. Communities in New Mexico are getting ready to evacuate.

Eastern Arizona Fire Burns Nearly 350 Square Miles

PHOENIX (Reuters) - A wildfire that has charred more than 350 square miles in eastern Arizona raged out of control for a ninth day on Monday as it forced the evacuation of a third town and crept near populated areas along the New Mexico border.

Dogged by fierce winds and low humidity, some 2,300 firefighters battled flames in and around the Apache Sitgreaves National Forest that sent smoke billowing across several states, as far east as Iowa.

Arizona Governor Jan Brewer declared a state of emergency on Monday in two counties -- Apache and Greenlee -- in the rugged White Mountains region.

Fire information spokesman Deryl Jevons said gale-force wind gusts were making conditions especially difficult.

"That's going to create some significant fire activity this afternoon," he told Reuters.

The so-called Wallow Fire, burning about 250 miles northeast of Phoenix and stretching to near the Arizona-New Mexico border, ranks as the third-largest fire on record in Arizona.

As of Monday, containment of the blaze remained at zero, but fire officials were hoping to make some gains by Thursday or Friday, said Matt Benson, a spokesman for the governor, after she was briefed on the situation.

"It's entirely dependent on weather conditions in that part of the state right now," he said.

Casting an orange glow in the sky that could be seen for miles, the blaze has blackened nearly 234,000 acres, or 364 square miles, of forest land since erupting on May 29, according to state fire authorities.

On Monday afternoon, authorities ordered the evacuation of Greer, Arizona, a popular summer retreat in the region that is home to about 200 permanent residents, said Sergeant Richard Guinn, a spokesman for the Apache County Sheriff's Office.

"The fire has continued to progress to a trigger point, so deputies are evacuating Greer as we speak," he told Reuters.

Several hundred residents of the nearby towns of Alpine and Nutrioso were ordered from their homes on Thursday, with no estimate given for when they would be permitted to return. Four smaller housing developments were evacuated on Sunday.

Residents in the town of Luna, just over the New Mexico line, were told to standby for possible evacuation orders should the blaze get too close, authorities said.

Brewer visited the fire scene on Saturday, telling reporters at a news conference it was a "frightening sight" as she viewed it from a plane.

Meanwhile, nearly 1,000 firefighters continued to make gains on Monday against a separate large wildfire burning in the southeastern part of the state.

Officials said the Horseshoe 2 Fire had consumed more than 100,000 acres and prompted the evacuation of two small communities there. That fire was listed as 55 percent contained.

However, one cannot put a quart in a pint cup. ~ Charlotte Perkins Gilman