Return of the Living Dead-End Economy

September 21, 2001
The New Economy Is Hardly Dead

But don't sell short the New Economy.

The S&P 500 closed that day at 965.80. Over seven years later the S&P 500 now stands at 909.73. That being said, the best time to sell the New Economy short (using hindsight of course) was way back in 2000, when the S&P 500 stood at over 1,500.

For one thing, the term largely captured a remarkable evolution in a very old economic system: Capitalism.

With trillion dollar deficits and the American taxpayer flooding the failing banking system with good tidings, it has been a most remarkable evolution indeed. It is almost like we're transforming one very old economic system into another very old economic system. What comes after Socialism? I don't know about you, but I'm looking forward to a really good dictator and some martial law.

Yes, the downturn is getting vicious. Boeing plans on firing as many as 30,000 employees, or some 15% of its workforce. The airlines have laid off tens of thousands of workers. Revenues at many software and hardware companies will evaporate over the next several months, the time of year when, traditionally, about 25% of all sales are recorded. But economists have long recognized that downturns also force management to burn the midnight oil figuring out ways to gain new efficiencies.

There's nothing quite like a vicious downturn to create all sorts of new financial innovation efficiencies. NINJA (no income, no job, and no assets) loans and the impressive growth in structured investment vehicles really went a long way towards making our recovery so impressive on paper. I wonder what they've got planned for an encore this time around? I hope it involves building a lot more roads. If there is one thing we need, it is a way to enjoy the long commute from the city to the suburbs once oil eventually goes up in price again.

Laid-off workers will find new jobs faster than they did during previous downturns, and companies are adjusting quickly to shifts in demand. "It's the New Economy that will help us pull out of the downturn faster," says Arthur J. Rolnick, director of research at the Federal Reserve Bank of Minneapolis.

We're hemorrhaging over 500,000 jobs a month these days as unemployment continues to rise. I suppose laid-off workers will continue to find new jobs faster than ever though, as we've had seven more years of New Economy advancements (outsourcing, automation, and other related productivity miracles).

The economy will be hit hard over the next few months. But the seeds of a recovery are being planted as the Federal Reserve floods the system with money while the federal government cuts taxes and increases spending.

Well, the government does have a technology that can print as many dollars as they want at essentially no cost. If trillions of freshly printed dollars exported to China to buy their goods doesn't eventually make us more competitive with China, then I don't know what will. No really. I don't know what will. They'll work for so much less than us. I guess that comes from having a billion people competing for our jobs.

When the revival finally occurs, the New Economy will reemerge with a vengeance.

I'm not sure how much more economic vengeance we can take. I'm growing weary of economic injury, harm, humiliation, and the like. The New Economy really needs to get over it. What's done is done.

Vengeance

1. infliction of injury, harm, humiliation, or the like, on a person by another who has been harmed by that person; violent revenge: But have you the right to vengeance?

Return of the Living Dead


Hey, these things don't leak do they?
Leak? Hell, no. These things were made by the U.S. Army Corp of Engineers.