| The economic crisis is real, folks, and it's not going to go away anytime soon. There is no viable pony plan. We aren't going to save the day by cutting "something else." All available data point to a profound halting of economic activity. And the folks in Albany need to get moving if we are going to be able to weather the worst of it.
Yes, the stock market crashed again today, but many people rightly point out that the Dow is not the economy. It isn't. This is:
The Baltic Dry Index is one of the oldest economic indexes in the world. It's been kept since the middle of the 18th century and it essentially is a gauge of the cost of shipping raw materials across the globe. It has dropped 98% since May of this year. Back then, a Capesize cargo ship would cost you about $235,000 a day to ship your iron or corn or bananas. Today, that same ship - one with at least 170,000 tons of capacity - will set you back around $5,600 a day. Yes, you read that correctly.
Put simply, the cost of shipping has dropped through the floor. Sending a tonne of iron ore from Brazil to China in early June would have set you back more than $100 (£62) per tonne, or around $15m per voyage. But freight rates have now dropped to only slightly over $10 per tonne, or just $1.5m for the 70-90 day journey.
Add to that this news from the Times:
Gleaming new Mercedes cars roll one by one out of a huge container ship here and onto a pier. Ordinarily the cars would be loaded on trucks within hours, destined for dealerships around the country. But these are not ordinary times.
For now, the port itself is the destination. Unwelcome by dealers and buyers, thousands of cars worth tens of millions of dollars are being warehoused on increasingly crowded port property.
And for the first time, Mercedes-Benz, Toyota, and Nissan have each asked to lease space from the port for these orphan vehicles. They are turning dozens of acres of the nation's second-largest container port into a parking lot, creating a vivid picture of a paralyzed auto business and an economy in peril.
"This is one way to look at the economy," Art Wong, a spokesman for the port, said of the cars. "And it scares you to death."
That's not the port's only problem either. The loads of cardboard that are usually sent back to China so that they can repackage all those consumer goods they normally ship to us are piling up all around them because no one in China wants it anymore.
But the inventory glut in Long Beach is not limited to imported cars. There has also been a sharp drop in demand for the port's single largest export: recycled cardboard and paper products.
This material typically goes to China, where it is used to make boxes for new electronics and other products that are sent back to the United States. But Chinese factories reacting to sharply falling demand are slowing production, so they need less cardboard. Tons of paper are piling up recycling businesses around the port, the detritus of economies on hold.
That, friends, should give you a chill. Global economic activity fell off a rather steep cliff about 6 weeks ago and the signs that it will rebound shortly are awfully scarce. This recession could quite easily become another Depression and it will definitely get worse before it gets better.
That's what makes the situation in DC - where we are essentially rudderless with a numskull ideologue at the wheel - and in Albany, where one could make a compelling case for aggravated legislative malpractice and dereliction of duty, all the worse. In Washington, we are forced to wait for real leadership at east until January 20th. Not much we can do about that, though the fact that we are for all intents and purposes in a holding pattern during the most acute economic crisis of most of our lifetimes has certainly got me worried. The time for big, bold action is right now.
But the folks we send to Albany to do the People's business have no such excuse. The absolute abdication we witnessed this week should be impeachable. This crisis is real and the state's budget needs to be adjusted to reflect that. Yeah, there are many hard choices to be made, but that's no excuse for throwing their hands in the air and punting.
And this is bigger than budget cuts versus revenue increases. I personally think that the Governor's plan is flawed by it's reliance solely on cuts on the backs of the poor and middle class. I think a modest increase in taxes on those who can most afford them is perfectly reasonable if not prudent given the nature of the challenges we face. That said, I believe now is the time to take a much more comprehensive look at the way we finance state government here in New York.
Wall St is taking a vicious beating right now, but it will eventually come back. It will never be the Wall St of the last 15 years or so again though. New York was able to avoid hard choices (or even wise ones) for so long because we were able to milk the Wall St cow for so long. Those days are over and most likely are gone forever.
We need to seriously restructure how we pay for government and what it is we pay for. It's time to put all options on the table and to get serious about how we pay for what we want going forward long term - not just over the next fiscal year.
I'd suggest a radical overhaul of the public authorities to start. But, then again, I don't make $90K a year to do the People's work part time. We already elected a bunch of folks to do that for us.
They had damn sure get busy because the wolf is at the door. |
