On Wednesday we drove out to San Bernardino to meet with a client. It was warm, gray, and gloomy. Nothing like the blue sunny skies and cool breezes we left behind us at the beach. Nonetheless, it wasn’t the dreary weather producing the melancholy aura as we entered the city…it was the economy. For we’d passed into what has been called the Detroit of southern California.
If you’ve never been to San Bernardino, you can count it a blessing. In statistical terms, the place falls two standard deviations left of mean on a normal bell curve distribution of the range between heaven and hell. In common terms, the place is a hell hole.
Had there been an economic recovery, San Bernardino would’ve been the last place to know it. Thus, any sign of recovery over the last two years had not graced the empty storefronts and blighted street corners of the downtown business area. Still, hear at the Economic Prism we have a helpful heart and a soft spot for the down and out, so we made the trek out to the depths of the Inland Empire to offer our time and our talents…at market price.
Even though we were honoring a commitment to a project we wish we’d have passed on, we went about our business with curiosity. What is it we can learn from the place? What instruction is it providing us?
For one, we discovered what a place looks like that has an unemployment rate of 13.4 percent – a full 4.3 percent higher than the nation as a whole. Perhaps, with the way things are going, it’s a sight many more will discover before the rot’s been purged from the economy.
But if the President isn’t worried about it you shouldn’t be worried about it either…right?
What Could Possibly Go Wrong?
“President Barack Obama expressed concern about the sudden slowdown in the economy,” reported AP on Tuesday, “but said he is not worried about a second recession and the nation should ‘not panic.’”
Of course, when someone tells us “don’t worry” or “don’t panic” we know there’s a good chance something really bad is about to happen. When the President says this, we know it is virtually certain. So just what is it that could possibly go wrong?
To start, Syria, Libya, or Iran look like they could blow up at a moment’s notice. Oil prices remain stubbornly high. There are no new jobs. State governments are dead broke and a municipal bond crisis is likely to follow. Greece, Ireland, Portugal, Spain and Italy are broke and Germany and France can’t bail them all out. But that’s not the half of it…
Housing’s in the cellar…indefinitely. The U.S. Dollar is slowly being inflated to confetti by the Federal Reserve. The U.S. Government will default on its debt by August 2 if Congress can’t come to an agreement to raise the debt limit and reduce spending. And, if that’s not enough, the winter wheat crop yielded a dismal harvest – a major food crisis could hit before the end of the year. On top of that, there’s always the possibility for what Donald Rumsfeld once called ‘unknown unknowns’ to occur.
How to Accumulate Wealth
Other than that, things are going just swimmingly. The birds are still singing. The flowers are still blooming. And our coffee is just as bold and bitter as ever.
On the brighter side of things, the stock market finally reversed its slide yesterday. The S&P500 bounced 9.44 points. The big news for the day was that U.S. exports hit a record in April. One economist for JPMorgan Private Wealth said Thursday’s export number could add half a percentage point or more to second quarter GDP.
Yet while the U.S. exports were $175.6 billion in April, its imports were $219.2 billion. The difference, no doubt, was made up with debt. In other words, when you count up the beans, the U.S. transferred $43.7 billion dollars of its wealth offshores.
Obviously, when you spend more than you make, you eventually go broke. There’s no way around it. To accumulate wealth, nations, like individuals, must do the opposite. They must spend less than they make. They must make more than they spend. But, alas, that requires hard work, persistence, and time.
Anyone who tells you any different is either a fool or a liar…or perhaps, a Congressman.
for Economic Prism