Paging Mr. Scrooge


Here's a Christmas thought: Americans aren't just spendthrifts--they're wasteful, which is even worse. It's one thing for an entire nation to have a negative savings rate--spending more than its income--and quite another to have wasted much of that money on junk which is thrown away.

We share refuse and recycling facilities with college students attending one of the premiere public universities in the world. Many are from overseas, many are U.S.-born. If I didn't know better, I would assume such bright, well-educated young idealistic souls would be avid recyclers and careful with their money (or their parents' money).

Au contraire. The volume of complete, utterly shameless waste has staggered us. Just to recount recent throwaways which could have been given away with extremely modest effort: three unopened bags of Halloween candy; new untouched box of expensive Tazo tea; apparently new shoes; barely used or new T-shirts. The list goes on and on.

Over the years, we have noted that Europeans, Asians and first-generation students tend to waste less, while young American-born students (2nd generation and up) of all ethnicities, races and religions are in aggregate stupendously wasteful: of food, and everything else.

Yes, students are busy, especially those who hold jobs, too; but would it have been any extra work to carry the new candy to campus and drop it off at the department office, where it could have been placed in a bowl? Or how about walking an extra block to drop it off at the food bank? As for the new shoes and shirts, there is a Salvation Army store three blocks from campus. There's even an easier way to give stuff away in college towns: just place the shoes, etc. on the curb instead of in the trash.

Clearly, throwing stuff away is ingrained in Americans as the default setting of life. It simply doesn't occur to many Americans to recycle or make an effort to give away perfectly good items. Why? Because disposing of stuff in the trash apparently makes economic sense: Everything is just too cheap to bother with.

Many people in the U.S. spend perhaps 5% or 10% of their income on food; even with flour doubling in price, it's still ridiculously cheap. In countries where 50% or more of the family income is spent on food, you can be sure little is wasted.

Ditto for shoes, clothing, electronics, Ikea furniture, gasoline, and on and on: it's so cheap, it makes no sense to conserve it. And so we waste it, freely and easily and without a second thought. Even though there's a recycling bin a few feet away, plastic bottles, aluminum cans and glass containers are placed in the trash bin. You'd think recycling was some extraordinary effort, or something so new that college students hadn't yet grasped the concept. Yet the concept has been around for 37 years--and the concept of it being shameful to waste has been around much, much longer.

To return to the difference between spending money you don't have and wasting money you don't have: If every American family which spent beyond its means had purchased, say, solid oak furniture instead of a big-screen TV and Ikea particle-board garbage "furniture", then in 50 or even 100 years, that solid oak furniture would still be serving someone somewhere.

But alas, the TV will be in the dump in a few years, as will the rusty BBQ grill, the rusty cheap bicycle, the collapsed Ikea particle board, and virtually everything else Americans have borrowed to buy in the past debt-fueled decade of "prosperity," including entire shoddily-constructed houses.

It almost goes without saying that the food you will find tossed in the trash in the U.S. is never the chips or snacks or frozen convenience food: it's always the fresh food which is tossed out, untouched and uneaten.

Last night I made a pretty decent ratatouille (feeds four) for a few dollars. The beautiful zucchini was from our garden, the beautiful eggplant from a bag of five on sale for a dollar or so, and the onion and garlic were purchased at an ethnic market (we shop at Mexican, Indian, Asian and Halal markets) for what amounts to a few dimes each. The French feta cheese generously sprinkled on top at serving cost another few dimes. The whole wheat bread, a dime or so per slice.

The total cost of this meal was a few dollars, even if you bought the zucchini. And yet the media is filled with stories about how expensive real food is now, and how fast food is cheaper than real food. Are we truly this insane? Last time I checked, a "value meal" at a fast food outlet costs about $4. Four meals adds up to $16--a far cry from $2-$3 for a delicious and healthy ratatouille which would set you back $12+ per serving in a restaurant.

What really troubles me is the value of "waste not want not" has been largely lost in our culture. (The Japanese phrase is "motainai.") The sentiment that it is wrong or even sinful to waste, especially food, is not unique to any one culture; it arose from a life of scarcity. Now that everything is so cheap, we can throw away and waste resources at a prodigious rate because it still makes "economic sense" not to bother with conservation or careful use of resources.

If trash was hauled off and paid for by the pound, would people start recycling more? Perhaps. When gasoline is $5/gallon, will people start conserving it? Perhaps. But perhaps not. Perhaps profligacy is so deeply embedded in American culture that we as a people will only whine about the "high cost" of things as we struggle to pull our overloaded trash bins to the curb, alongside the dead TVs and broken shelving awaiting delivery to the landfill. As we hurry off to buy a "cheap" fast-food meal, having left a binful of fruit and vegetables rotting in the garbage, we'll focus our most strident complaints on the high cost of food, not on what we have wasted so needlessly and recklessly.


Holiday gift bonanza:

Recommended Books and Films, many of which have been recommended by readers. (Here is the URL: http://www.oftwominds.com/books.html )There are over 250 titles and films organized into topics ranging from finance to Hapas/mixed-race Americans to World War II to world history to China to Italian cooking to gardening to novels to ideas to you-name-it, plus a number of wonderful films, many recommended by fellow readers.


Thank you, Steve J., ($20), for your very generous contribution to this humble site. I am greatly honored by your readership and support. All contributors are listed below in acknowledgement of my gratitude.

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Bailout: Could Government Actually Be Part of the Solution?

Thoughtful reader Robert Roth sent in some cogent comments in response to Saturday's entry on renegotiating mortgages. He raises many important issues about the mortgage crisis which tend to get brushed aside by blanket condemnations of any bailout.

I am not predisposed to any bailout, but intellectual honesty requires me to recall that the much-maligned "bailout" of Chrysler in the early 1980s saved the company and tens of thousands of jobs at modest (or according to Lee Iacocca, zero) government funds.

Though it was obvious the Savings and Loan collapse in the 80s was caused largely by Reagan-era deregulation of an industry which simply requires some regulation--that is, the crisis was predictable and easily avoidable--the horrendously expensive bailout did resolve a financial crisis which could have festered for years. Though the government covered depositor's money, the primary tool used to clean up the mess was auctioning of/ liquidating all the impaired properties--thousands of buildings around the country.

So all the bailout ideas require an honest analysis. Let's start with Robert Roth's commentary:


"L.S. recommends that people under threat of foreclosure try to work it out with their lenders. I have read in several places that that approach is problematic because in many (most?) cases, the people who collect the payments don't even know who holds the mortgage -- that precisely the complexity and opacity of the securities backed by these mortgages makes impractical the old-fashioned way of addressing the problem that L.S. suggests. If I'm wrong about that, I'd love to hear it, and wish someone would say so and why.

And while I agree folks in trouble shouldn't wait for a government bailout, I also think that to save everything from the homes of a great many unfortunate (even if some profligate) people to the global financial system and real economy, we should demand a government bailout commensurate with the size of the problem.

Today (12/15-16)'s WSJ cites the proposal of "Center for American Progress, a liberal think tank ... that the government buy some mortgage-backed securities and create a new agency, the Family Foreclosure Rescue Corp. [to] issue new, more affordable fixed-rate mortgages for those facing foreclosure whose homes are worth less than what they owe," and that of Alex Pollock, a resident fellow at the American Enterprise Institute, who says take a look at the history of Home Owners' Loan Corp, a now-defuncy federal agency created in 1933 that "acquired distressed mortgages from banks at a discount and refinanced them on easier terms."

Both ideas sound promising to me. So do preemptive tax cuts implemented by reducing payroll taxes immediately so as to put some cash into the hands of consumers, who carry two-thirds of the economy and seem to be sagging under its weight and quite likely about to drop it.

Perhaps it would be worth adding another point: I recall reading in the WSJ years ago that the French government, to combat an economic slowdown, was offering interest-free mortgages to first-time homebuyers. I suspect there are many more potential solutions if we were able to transcend the democracy deficit as a result of which relief is targeted to the Big Boyz (as I believe Jim Kunstler calls them) rather than the rest of us.

Paul Krugman's December 10, 2007 piece entitled Henry Paulson's Priorities argues that the Paulson proposal is intended only to create the appearance of action -- while helping some investors, but not families losing their homes -- "thereby undercutting political support for actual attempts to help families in trouble," in particular, probably, "legislation sponsored by Barney Frank that would give judges in bankruptcy cases the ability to rewrite mortgage loan terms. ... 'Bankers Hope Bush Subprime Plan Will Scuttle House Bill,' as a headline in CongressDaily put it."

Properly empowered, by the way, the bankruptcy courts may have considerable potential to examine transactions in more detail than would otherwise be possible. Then there's your own blog entry The Unintended Consequences of the Housing Bubble Bursting citing the December 10th SF Chronicle article which suggested the Paulson proposal is intended to shield Wall Street firms from lawsuits by foreign investors challenging the basis of the interests they'd been sold in CDOs, etc. as fraudulent in origination."

Any bailout is a complex thicket, so let's start with what we can safely surmise:

1. The political process will be slanted toward major contributors, i.e. the banking, real estate and lending industries. This should not surprise us in the least. Nonetheless, history suggests (i.e. the Depression-era Home Owners Loan Corp. mentioned above) that occasionally some political "interference" may have some value beyond helping the Big Boyz preserve their capital and profits--though of course any bailout must accomplish this first.

2. There will be political action of some sort because "we have to do something." Former Fed Chairman Greenspan has come out in favor of tax cuts for the imperiled borrowers, a proposal which is essentially meaningless because most of those borrowers probably wouldn't save enough in any such proposal to make a dent in their mortgage payments.

In this sense, the proposal will be largely ineffective but also relatively harmless.

3. We can safely assume about 25% of distressed buyers were speculators who never occupied the house, i.e. "flippers." A recent San Francisco Chronicle study found Investors own about one-fifth of Bay Area homes in foreclosure but the methodology was extremely conservative and so 25% seems fair. but the methodology was extremely conservative and so 25% seems fair.

Let's guesstimate that another 50% of distressed properties were purchased by buyers with little or no "skin in the game," i.e. down payment. The S.F. Chronicle study found that about 70% opf subprime buyers in 2005-2006 put no money down. Thus, these people will lose virtually nothing in foreclosure because they brought nothing to the party in the first place.

So when the mess is settled by market forces, i.e. auctions etc., the primary losers will be speculators (whom no one expresses interest in saving) and the lenders and buyers of CDOs, SIVs, mortgage-backed securities, etc. (ditto).

4. The primary lesson of the 1980s S&L bailout is: move quickly to liquidate bad debt via market auctions of distressed properties. In extremely overbuilt, investor-fueled markets like California's Central Valley and Las Vegas (to name but two of many), there may be no buyers at lender-run auctions; but the market solution is simple: lower the price until buyers emerge, even if the price is $1.

In extremely depressed areas such as certain neighborhoods in Detroit, houses don't sell even for $1. In these cases, Nature takes over the neighborhood and/or the city bulldozes the vacant, decrepit homes. This is sad, but you can't force people to live somewhere, or artifically inflate prices or economic vitality.

If we set aside these outliers, most distressed property in economically viable areas can be sold, albeit at huge discounts. Thanks to a steady flow of "on the ground" intelligence from readers all over the country, I can report that buyers--not just professional investors, but wage-earners looking for investments/places to live--will come out when the price is right.

Within the last few days I have heard from readers who are planning to bid on properties which are being auctioned off (foreclosure/REO auctions) or considering buying a home in areas which never experienced the bubble rise and therefore aren't experiencing the bubble popping.

Since readers of this site are a priori fiscally conservative and savvy, :-) I think these potential buyers are evidence that not everybody is an underwater owner of a negative-equity home. One reader is considering paying the 10% penalty to extract some 401K money which is limited to stock market mutual funds in order to purchase property. If the stock market tanks as severely as many of us expect in 2008-2011, this will be seen in retrospect as a very savvy move.

5. As Mr. Roth suggests, the courts could step in and make a substantial contribution to rapid resolutions of bad debt and distressed properties. The courts are a wild-card because the Supreme Court could always step in and protect lenders and investors (domestic and foreign alike) from losses, but the bankruptcy laws have quite a bit of case history and may yet serve as a "clearing house" of sorts.

6. From one view, it can be argued that since government enabled the entire bubble via lack of lending/investment banking oversight (once again), it should be part of the solution. Again, I am not talking about using tax money to bail out hopeless mortgages, I am talking about a government-sponored auction of debt and properties along the lines of the Resolution Trust Corporation which cleared up the S&L mess in the late 80s/early 90s.

It's certainly something to consider, especially when we recall what happens when the government colaborates with lenders to cover up the losses, as the Japanese government has done for the past 17 years: you get 17 years of stagnation and deflation, and ballooning government deficits.


Holiday gift suggestion:

If Amazon.com gift certificates work for you, go for it through this link.

If you think it might be of interest to the recipient, you could also forward my list of Recommended Books and Films, many of which have been recommended by readers. (Here is the URL: http://www.oftwominds.com/books.html )There are over 250 titles and films organized into topics ranging from finance to Hapas/mixed-race Americans to World War II to history to Italian cooking to gardening to novels to ideas to you-name-it, plus a number of wonderful films, many recommended by fellow readers.


Thank you, John H., ($50), for your very generous contribution to this humble site. I am greatly honored by your readership and support. All contributors are listed below in acknowledgement of my gratitude.

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Stock Market Santa Claus: Rally or Lump of Coal?


Santa seems to be wavering about delivering his annual stock market rally to Wall Street. Little wonder, given the tapped-out consumer and the resulting inevitability of a consumer-real-estate-bust-global-overcapacity recession. But before we write Santa off completely, let's look at some charts: (see below)

The VIX (Volatility Index) moves inversely to the markets; when volatility spikes up to a peak, that usually marks a market bottom. When it drops to a low, that corresponds to a market top.

And just to confirm the wedge/pennant formation, here is the Nasdaq:

These wedges or pennants are rather obvious formations, and they typically break up or down in a big way. There are certainly may fundamental reasons to believe the market will break down--recessions usually bring declines in corporate earnings, etc.--but there are technical reasons to believe Santa gave the market a head-fake last week and is loading the sled with a rally.

You can see the market wavered in a very similar wedge in September, and even offered up a similar head-fake, i.e. MACD appeared poised to roll over into a "sell" signal. Yet the stochastic is oversold, suggesting the down move of last week has run its course. MACD is neutral, suggesting the market could move up or down.

One factor which is occasionally worth considering is how the options market is reflecting the overall market's sentiments. The cliche is that 80-90% of all options expire worthless; many options are purchased as hedges, and their expiration was expected.

With that said, the market rarely rewards bets held by 80% of the players. Right now there is a huge imbalance between puts and calls in the financial stocks like Citicorp (C), Washington Mutual (WM) and Countrywide (CFC). There are 3 or 4 puts (bets the stock will decline) for every call (bet the stock will rise). This tremendous imbalance suggests to me--and please note this is merely a wild opinion-- that the financials are poised to explode upward, rendering all those puts worthless.

Why? No reason; just that's the way it usually works. When four punters line up to bet that "these wretched financials are doomed to huge declines" for every punter gambling that the financials' demise is somewhat premature, the market typically takes the four punters' money and rewards the sole punter.

Since wedges generally break big up or down, it should be an interesting week.



The VIX (Volatility Index) moves inversely to the markets; when volatility spikes up to
a peak, that usually marks a market bottom. When it drops to a low, that corresponds to
a market top.



And just to confirm the wedge/pennant formation, here is the Nasdaq:




Holiday gift suggestion:

If Amazon.com gift certificates work for you, go for it through this link.

If you think it might be of interest to the recipient, you could also forward my list of Recommended Books and Films, many of which have been recommended by readers. (Here is the URL: http://www.oftwominds.com/books.html )There are over 250 titles and films organized into topics ranging from finance to Hapas/mixed-race Americans to World War II to history to Italian cooking to gardening to novels to ideas to you-name-it, plus a number of wonderful films, many recommended by fellow readers.


Thank you, Eugenio M., ($20), for your second generous contribution to this humble site. I am greatly honored by your readership and support. All contributors are listed below in acknowledgement of my gratitude.

Read more...

Reader Commentaries and Christmas Gift 'Hail Mary'


We have some great reader commentaries on this week's topics, but first let's get through a hopefully-only-slightly-annoying Christmas gift pitch.

If you're a wonderful gift-giver and enjoy shopping, please skip this section. If you're a lame gift-giver who loathes shopping like myself, read on. Dear fellow lame gift-givers: yes, this is the season we dread: what to give people we care about? Ugh, yikes, horrors, etc. My solution is candy, books and gift certificates, but with people's health so poor nowadays I can only give chocolates to a few people without feeling like I'm undermining their resolve/health. But books are always a joy; and if we guess wrong, the recipient can pass it on to another reader. Better yet, give them a gift certificate and let them pick their own books.

Here's the usual disclosure found elsewhere on this site: if you buy anything from amazon.com via this site, I receive a small sliver from amazon. You pay nothing more than if you went to amazon.com through a new browser window.

So if Amazon.com gift certificates work for you, go for it through this link. The gift certificate is what I call a "Hail Mary" gift, for as in the fourth-down and seconds-left-to-win football play of the same name, it is a desperation toss which occasionally works despite the odds.

If you think it might be of interest to the recipient, you could also forward my list of Recommended Books and Films, many of which have been recommended by readers. (Here is the URL: http://www.oftwominds.com/books.html )There are over 200 titles and films organized into topics ranging from finance to Hapas/mixed-race Americans to World War II to history to Italian cooking to gardening to novels to ideas to you-name-it, plus a number of wonderful films, many recommended by fellow readers.

Here are a few titles recommended by readers that I recently read with pleasure--among dozens of other excellent suggestions:
Here are a few titles recommended by readers that I recently read with pleasure--among dozens of other excellent suggestions:

The Year the Music Died, 1964-1972: A Commentary on the Best Era of Pop Music, and an Irreverent Look at the Musicians and Social Movements of the Time (recommended by reader Charlie R.)

Goodbye to All That (a classic memoir of World war I recommended by reader Lloyd L.)

Manias, Panics, and Crashes: A History of Financial Crises (recommended by reader U. Doran)

The Shock Doctrine: The Rise of Disaster Capitalism (recommended and donated by Faith A.)

Other books I have recently read and have added to the recommended list:

The Sense of Being Stared At: And Other Aspects of the Extended Mind

The Contractor (fiction)

Walk On, Bright Boy (fiction)

The Hero and the Outlaw: Building Extraordinary Brands Through the Power of Archetypes

The Oxford Companion to Ships and the Sea
(this isn't a book you read straight through but browse through at your leisure)

We now return you to our regularly scheduled programming.

Here are two very thoughtful commentaries on the 12/14/07 entry entry The Politics of Atomization:

J.D.:
The "politics" of atomization is an interesting way of framing this topic.

This frenzied lifestyle reminds me of "on the beach" - a cold war era short story about a sub commander that takes a post-apocalyptic trip down under to be with the last humans alive. The towns people he ultimately encounters all react differently to the sands draining out of the hour glass. Some retreat, some freak out.

I think the befuddled masses are going to be "shocked and awed". They are going to go through the stages of grief and get stuck on anger, and I am afraid, become suseptible to demagogery and authoritarianism. Ursula Hegi in Stones from the River depicts in fine detail the short slide the German people took the very instant they struck the bargain that "we" will be OK, because they are only after the communists, gypsies, Jews, etc. Hegi's point is that once you accept the incarceration of one among you, you yourself have already surrendered.

And here I am writing to you, because you can't bring this up at the proverbial water cooler without being chastised for being either a downer, or a crackpot. In the land of the blind, the one eyed man is not king, he is noise interfering with the signal of cognitive dissonance, No?


L.S.:
Charles – another excellent, albeit sadly true essay.

"Self-reliance is a major American value, as is "the buck stops here" acceptance of responsibility. Great stuff, these values."

I’ve always been on board with this sentiment – maybe even to the point of being a bit of a scold. But this time I have to admit things got beyond the limits of simple self restraint. My analogy has been that lenders have simply thrown money into the air and encouraged people to bid up the price of housing, perhaps even with the tacit understanding that large scale fraud was being committed.

So what’s the result? Young families with kids see themselves forever priced out of the market unless they make a deal with the devil. My heart aches to think of the spiral of destruction that lays ahead for these families. I can already picture the angry exchanges, the divorces – children not only losing their home, but their family as well. It always gives my heart a twinge when I see a swingset or sandbox in the yard of a foreclosure. What did that family go through before they were forced to move?

So what to do? Well I think the 80/20 rule applies here. The lenders are culpable for at least 80 percent of the mess, so they deserve to clean up after the elephants in this parade. But these are just words - how about some action? Here’s what I’m doing.

I’m assisting someone fairly typical: a multi-hour commute between a job and a stucco box on a postage stamp lot some distance away. They bought at the peak of the market, their loan is due to reset in January, and short sales are popping up around them for half their loan balance. These folks didn’t buy flatscreens and Hummers – they’re being eating alive by childcare expenses so both parents can work, gas, food, and onerous property taxes and mortgage payments so their kids can have a home.

Well into the last downturn (1994), I was astounded at the willingness of lenders to modify the terms of their loans. I’m not talking about tinkering with the interest rate. They wrote down the balance by hundreds of thousands of dollars and basically said "OK this is what you now owe us, here’s your new payment". They absolutely did not want anymore property back. I don’t know if the lenders are quite at that point yet, but unless they are in complete denial of the firestorm that is about to hit them, they will be soon.

Virtually all the articles and posts I’ve seen assumes the only options are foreclosure or wait for a government bailout. No - pick up the phone, call the loan servicer and tell them to get a loan modification package in the mail - NOW. Make them bear some of the cost of the obscene profits they made over the last few years, just as though they strip-mined the land and now must clean it up.

If it might be useful to your readers, I found this contact list for the Loss Mitigation departments of various lenders. I don’t know about the accuracy of it, but here is:

brokeroutpost.com

----

It’s a strange coincidence that I woke up at 4:30 this morning and told my wife I as having reservations about how I’m spending my time (continuing education) because of the time it takes away from my quickly growing kids. She reminded me I took them to soccer games, but I pointed out that standing on the sidelines is not really spending time, and how long it’s been since we’ve used the bikes. And I’ve said for the last 3 years I plan to take a marital arts class with my daughter. Then one of the first things I read this morning is your essay.

Thanks again for your efforts and insights."

And in response to the 12/13/07 entry Feedback Loops of Doom III: Retail, Downtowns and Cash-Strapped Cities:

Lloyd L.

You have raised a number of valid points in Feedback Loops of Doom III: Retail, Downtowns and Cash-Strapped Cities. However, I suggest that:

--- Try to "reform" our ingrained institutions of local government control to become more cooperative is on the whole a futile task. To expect government to welcome private investment and for-profit operations without continuous suspicious scrutiny is unwise. There are serious philosophical differences at work here.

--- Sad as it may be, the caliber of our millions of public employees is not always up to the challenge. With limited analytical skills, limited time to resolve issues and with political pressures to face, being negative or less innovative regarding growth is generally far easier than taking a positive approach. Permit processing for almost any activity will remain a painful experience in most communities.

There is, however, a potential, partial fix that goes to the online retailing picture and local attitudes. I suggest that ALL online retailing be taxed at a uniform national rate (thus preventing wholesale border disputes and chaos about receipts). The proceeds should be then distributed on a zip code basis to the various state governments, and thence back to local jurisdictions via typical programs in effect. Proceeds would be allocated on the basis of "origination" -- that is, based on the BUYER'S zip code (not where the vendors are located !!!!).

This would prevent inequitable distributions to a large extent (such as per capita allocation), and reward those areas that produce more online sales tax collections for whatever reasons. In essence, one would electronically "buy locally".

The quid pro quo for this system would be the nationwide ELIMINATION of almost all sales tax or similar collections from brick-and-mortar stores. Perhaps the typical "local share" (about 1% of 7-8% in California) could remain. At one stroke, this would (1) even the ongoing retailing playing field between real stores and electronic vendors, (2) encourage those outlets that sell immediate need and other not-suitable-for online goods to continue to invest in the local communities, and (3) reduce the pressures of some communities to add inappropriate types of commercial development simply in the hunger for sales tax proceeds (destroying downtown merchants to get a new mega-store is the image).

Hopefully in the process, local control of commerce would become more friendly, and less obstructive, as the local share of taxes would still be worth outreach to the private sector. (And yes, I am smiling as I write this)

Any "tax sharing" concept is vigorously fought by interests who view it as yet another wealth transfer from have to have-nots. In 1971, I participated in a pioneer fashioning of the nation's only major such continuing program -- the Twin Cities regional sharing setup, where about half of all revenue from new commercial/industrial activity is pooled and shared on the basis of "need" mutually agreed upon. This sharing includes property taxes (which in California, we already share -- imperfectly-- at the county and state levels).

The fact that such programs have not multiplied could be partially dealt with by a general reform of the sales tax system -- which in the process of facing the challenges of online retailing, might also improve the general patterns of commercial activity we have at present. "


Michael Goodfellow

I think the internet retailers are just a continuation of a trend. The "downtown department stores" you were talking about were Phase 1. They concentrated the equivalent of many small shops and eliminated a lot of labor. The Macys and Sears also had economies of scale when purchasing. I'm sure local merchants complained about it too, back when they first appeared.

Phase 2 were the malls, which again concentrated shopping even more, at the expense of old downtown retail districts. Their big advantage wasn't reduced labor costs. Instead, it was free parking and a nicer shopping environment (esp. in places with bad weather.) The malls could have been developed downtown, where there was easier access, but as you point out, many cities have been snowing merchants under with taxes and regulations for a long time. The suburbs just were easier, cheaper places to build.

Phase 3 were the "big box" retailers, also known as "category killers." The idea was that if you wanted office products, you would find absolutely anything you needed at an Office Depot. The selection was far better than at any small retailer. The same was true of lots of other categories, from hardware to bedroom and bath. Even books were not immune. Before small bookstores were complaining about the internet, they were complaining about super-sized chain bookstores like Borders or Barnes and Noble.

The internet is another step towards more efficient retailing. As you point out yourself, it's more convenient, frequently cheaper, and with unbeatable selection. Amazon.com is not going away. Unless you want to buy some recent bestseller (and pay more), there's absolutely no reason to go to a bookstore anymore. With sample pages and recommendation software, you can browse pretty effectively online too.

As for your recommendations, I think fewer regulations would be good all around, especially for big cities. It should never be easier and cheaper to build in the sticks, starting from scratch, than build in a city. But unless there's some revolution in urban planning departments all over the country, that's not going to change. Look at Santa Cruz, which is steadily driving business away, continues to moan about tax shortages (even during the boom), and has no intention of changing.

I doubt that taxing the online consumers is the way to go. If communities are taking in the same tax from online transactions as they do from local retail, it will hurt retail, not help it. The local government won't have to pay for any fire or police or roads for the online business, so financially, they should prefer online to local retail. Just keep a few touristy shops and some local farmer's markets, and let the bookstores, etc. go. This is what you see more and more in the little coastal communities like Santa Cruz or Carmel.

As for street vendors, I doubt it matters enough economically to sway any local city planners. They get complaints from retailers with buildings about vendors who they think are free-riding. And the local health department probably does feel liable if someone gets food poisoning from a vendor. Plus I think city planners have a bias against anything so mobile and independent. If you can't come in and shake them down over the height of their fire extinguishers or something, how can you control them?

You may feel that it's not a "real" community without a thriving retail sector, but a lot of suburbs already have concentrated their retail into a few strip malls. Residents don't want businesses anywhere near their houses. If they can get along with less retail, that's the direction they'll go in. A park or a small strip mall with a coffee shop will do just fine as a "community center". After all, being in close contact with your neighbors is not really what suburbs are all about.

P.S. According to the Census Bureau, the number of books sold continues to grow. And anyone who is an internet addict like me reads many, many pages of material a day. More than I ever read from a print newspaper.

Thank you, readers, for such thoughtful contributions to these topics.


Thank you, Kent M., ($25), for your generous contribution to this humble site. I am greatly honored by your readership and support. All contributors are listed below in acknowledgement of my gratitude.

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The Politics of Atomization


When the individual assumes everything that's crumbling in his/her life is solely his/her own doing, then the political powers that be have already secured an enduring victory.

Self-reliance is a major American value, as is "the buck stops here" acceptance of responsibility. Great stuff, these values. But on the other hand, when the bartender hands every social drinker in the place a free bottle of their favorite liquor, don't the bartender and bar share some responsiblity for the ensuing orgy of bad judgment?

In a strict accounting, the answer is "no." Every drinker had the option of refusing the free booze. But "something for nothing" remains a pretty compelling deal, and so it is rather predictable that a certain number of patrons would accept the deal and slide down an "irresponsible path" of partying.

The Powers That Be oversaw and profited immensely from just such an offering of "free money" via cheap, easy credit and home equity extraction. Common sense rules were relaxed, set aside or ignored as the "booze"/free money flowed freely.

In a fully atomized society such as the U.S., the blame is now being heaped on the individuals whose judgment was overcome by the easy money and partying going on around them. By partying, I mean your neighbor/colleague just flipped two more houses and made $100,000 on each one in less than a year, using no-down no-document financing.

Was the lender taking a responsible path in not collecting any documentation other than the tax map key of the property and the borrower's signature? How far would the bubble have expanded if every speculator had been required to put down 20%-30% cash, and had his/her tax returns, credit reports and payroll records pored over, as was standard practice just a few years ago?

"The ideal is to create a completely fragmented atomized society where everybody is totally alone, doing nothing but trying to pursue created wants, and the wants are created."

Here is a fully atomized life, in my view: a worker who commutes a long distance from a stressful job he/she doesn't find fulfilling to a suburban cluster of houses with no town or social center nearby. A supermarket/superstore and a strip mall or two provide groceries, pizza, etc. but no social life. Churches are far away and disconnected from everything around them.

The primary "social connection" other than work colleagues is disembodied, essentially ersatz "loyalties" to pro sports teams or college teams from a distant alma mater, or some equally ersatz political "party" or cause, in which the primary mode of connection is the donating of money and the consumption of rabid diatribes of simplistic ideology via mail or the Web. There are no meetings of real people and no action taken but empty Web-based petitions which are ignored by politicians of all stripes.

Family life consists of stressed-out parents transporting kids to a whirlwind of classes and "enrichment" to keep them busy and away from the temptations of drugs and sex--a futile hope in a society drenched in drugs legal and illegal and a media which sells everything via a relentless barrage of sex; but neither parent plays an instrument with the kids, or attends the martial arts class with them, or plays the sport with them; the parents are passive observers and taxi drivers.

At night, rather than play music with the kid who is learning to play an instrument, the parents collapse in front of the TV to zone out. Despite the cliche that Americans are health-obsessed, the parents and kids are in poor physical shape; the adults feel guilty they don't spend an hour in the gym every morning at 5:30 a.m. like their more driven colleagues, but they don't go out for a walk because there's no sidewalks, there's no place to walk to, or the neighborhood isn't safe after dark--or they're tired and sleep-deprived.

An assembly of barely-used exercise machines clutter the garage, alongside the bicycles nobody uses, the jet-ski and sled which get used once a year at best, and the usual detritus of lesser "recreation equipment" that collects dust.

Dinner is a slapdash affair slammed together or microwaved at the last minute by the least-exhausted adult; the kids wander in, deaf to conversation due to the iPod buds in their ears, to grab something and go back to their own TV/PC. The parents barely know their own kids' friends, and have only brief "who's picking up who?" contact with other harried parents/step-parents.

To help them get to sleep, the adults swallow a sleeping pill or two, while their teenagers fall asleep with their cellphones to their ears, half-listening to a meaningless "conversation" with a friend, e.g. "whatcha doing, nothing, did you see Kylie today?"

The family budget is in tatters, with the more responsible parent complaining to the other one that "we really need to cut spending" as the credit card debt keeps rising, and the home equity line of credit has been tapped out. The freer-spending spouse grudgingly admits they can't afford $40 takeout dinners so often but he/she is too tired to go grocery shopping or cook real food.

One parent, or perhaps both, wistfully recall life before it became so crazy, and one or the other wishes they could quit their job or cut their hours. But the mortgage has to be paid, and the hundreds of dollars of classes and lessons for the kids have to be paid, and what's life without a grand vacation every year, or skiing trips?

The household receives no newspaper or magazines except a professional journal, and a weekly news magazine nobody reads (paid for by Grandma). News consists of 30 seconds of radio sound bites and the headlines on yahoo. Homework is done using Wikipedia. Nobody reads in the house, expecially now that the Harry Potter series is complete.

The War is terrible, but other than hoping the cousin's son/daughter serving there comes home with all limbs attached, the family feels no impact and has no time or energy for anything to do with the war or any other issue. The upcoming presidential election draws tepid interest; maybe one of the adults is thinking of voting, but none of the candidates seem qualified or appealling. It's easier not to vote.

None of this is new, of course; books on the same theme include Bowling Alone : The Collapse and Revival of American Community and The Lonely Crowd: A Study of the Changing American Character

It seems the trends have only worsened as commutes have lengthened and workloads have increased. So what happens to such a precarious edifice when the recession causes one adult to lose their job? If the family's emotional and financial health is already stretched so thin, what will happen when 1/3 or 1/2 or 3/4 of the family income disappears?

When I think of this, and recall the depth of the 1981-82 recession, I worry for this nation, for there seems to be so little emotional safety net or political awareness of the causes of the coming meltdown.


Thank you, Richard H., ($21), for your generous contribution to this humble site. I am greatly honored by your readership and support. All contributors are listed below in acknowledgement of my gratitude.

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