Several disjoint pieces of information have been intruding on my consciousness for some while. At last year’s NBA finals, a courtside seat at Staples Center went for more than $27,000. That was for a single game. At about the same time, I noticed an ad informing readers that the 99cent store also had a bridal registry. These nuggets nicely encapsulate the two economic realms that coexist in our nation, particularly in our cities. The pattern is replicated abroad. In the world at large, there are enough cell phones for two-thirds of the world’s population, while the remaining one-third lives on less than $2 per day. When it comes to meeting basic survival needs, the amounts required are modest indeed, even in our society.
There are several implications. First of all, the economy we have is largely discretionary. Secondly, if the people at the bottom lose their livelihood, this can get lost in the economic aggregates. We cannot look to the aggregate economic pulse as an index to suffering. We have to look for it directly. The signposts are everywhere. A car’s windshield is smashed to yield an old iPod that is worth perhaps $30 on the street. A man slashes all the tires in a parking lot–no doubt the signature of seething resentments. A father kills himself and his family because of a $6,000 debt that he cannot cover.
The Fed is projecting on the order of 1.2% decline in economic aggregates for the year. Of course Fed projections are really lagging indicators. It does not want to be harbinger of bad news. But even if things turn out to be even three to six times worse, somehow that does not seem sufficient to put our society into crisis. The real crisis in fact lies elsewhere. At the bottom end, we have people falling out of the cash economy into penury. At the top end, we have the collapse of asset valuations. And in the middle we have a lot of stress and angst.
Continue reading “A Timely Observation on Our Economic Status”