Why Is This Time Different?

In 1979, when I was finishing high school and starting college, I read Howard Ruff’s How to Prosper During the Coming Bad Years.  I was aware of inflation, was starting to understand what it meant, and I remember a few perilous months in early 1980 when the price of gold shot up, and it seemed at one point that the economy might go off the rails.

Now we face the same problems as back in 1979, only worse.  Howard Ruff has updated How to Prosper.  But we got through the last thirty years in mostly decent shape.  There was no hyperinflationary collapse.

Why is this time different?

More specifically, the bad things that we feared at the end of the 1970s never materialized.  Why should I worry this time?

Two thoughts:

  • In 1979, we were still a productive country.  The Chinese were not in the business of manufacturing anything and everything for export.  There were still many businesses that were run in the interest of providing whatever goods or services they purported to provide, rather than making this quarter’s numbers.
  • In 1980, Ronald Reagan was elected President.  Much has been written about how he turned the country around and made us prosperous again.  But he didn’t balance the budget, and indeed, first brought us into the era of huge deficits.  Reagan was every bit as inflationary as his predecessors, if not more.  But there’s one difference:
    • Under previous Presidents, inflationary spending went everywhere in the economy, and consumer prices went up along with everything else.  When the price of bread and gasoline go up, people get angry.
    • Under Reagan and subsequent Presidents, inflationary spending got directed into the investment markets.  Consumer prices still went up, but nowhere near as quickly as before.  But the stock market and the real estate market shot up.  When the prices of houses and stocks go up, people are happy, as they think they’re getting richer.

In 1979, we had margin for error.  That margin has been relentlessly squeezed out over the last 30 years.

Yes, it’s different this time.

10 thoughts on “Why Is This Time Different?”

  1. We used to be a nation that made STUFF.

    I remember this little tiny manufacturer that was up the block from my aunt’s house — she worked there. it was about 30 second’s walk from her home. I’ve forgotten what they made but they made something useful.

    Even the tiniest manufacturer mattered. And every town had at least one of these small-scale manufacturers.

    Those days are gone.

    Our town used to have 2 iron smelters, a cement company, a slipper factory and a bindery and a metal plater. The cement factory was the last one standing; it closed a year and a half ago. It was there for many many years.

    We do not make anything anymore. We now rely on other countries to make it for us.

    preaching to the choir, yeah, i know. But I figured I’d go on record to mention this anyway.

  2. A few months ago I drove through a small town about an hour from me. This town used to be what was known as a factory town. They made a lot of things and while I forget what they made (I believe some were paper products)it was an active community. People bought houses and sent their kids to school. Some of course moved to the big city (chicago)for professional jobs but others stayed in the town and worked themselves up.

    Anyway now all the plants are closed and vacant. The town looks like a ghost town and it’s sad. I believe there is poverty. This has been repeated in many small towns and bigger ones. This was caused by outsourcing and we now have generations of people who will live worse than their parents.

  3. The same thing has happened here in my area — they blame it on the high cost of doing business in New Jersey; I am not so sure about that.

    Something is pathologically wrong with the picture. What’s happened is that there has been an exodus of companies that used to occupy warehouses and other commercial space; there has also been an exodus of companies that once operated out of the commerical office buildings.

    I saw this 2 years ago when I was cold calling companies. Nobody is in any of those buildings. The renters that are there are these shitty little companies consisting of only a handful of staff that rent out part of a floor and use that space to operate their companies. They are mostly Chinese, Korean and Asian Indian in origin. (it’s mostly soft good and other imported items).

    There was activity where 2 very new and big warehouses were built. One building is done; a tenant has already moved in (lots of $8 an hour warehouse jobs, if you are interested) and the other building is about 3/4 complete. There has been no building activity on that site since end of January.</p><br />
    The point here is this:
    Everything is vacant and closed and abandoned. It’s a ghost town back there too — nobody notices it probably because they have no reason to venture into and out of those commercial areas, unless they have a job back there.

    I do not think you can blame it all on “business is too expensive to base in New Jersey.” Companies merge, companies move for various reasons, owners retire and nobody wants to take over the top spot.

    Companies also go out of business — Syms is a good example. They were a retail off-price clothing store; it turns out that their business model is now an outmoded one. Nobody was interested in shopping there anymore– demographics change — and it’s theorized that off-price stores like TJ Maxx and Marshalls, Century 21 and others is what displaced business for Syms. It’s a mystery to me what happened to “the back road” business district. I’ve seen it also in other towns when I’ve reported to such and such a commercial building for an interview: You’ll see once-thriving buildings with only a very small handful of companies working out of there — one building with 14 floors now houses about 6 companies. (the building is spooky and not well lit and I couldn’t wait to get out of there).

    There are “FOR LEASE” “FOR RENT” and “FOR SALE” signs galore.I saw the same thing very recently in the office complex where I used to work. Those parking lots used to be packed to the borders with cars of employees — there’s about 50% of the vehicles there now. Somebody’s moved out, moved on, gone out of business or something. This isn’t a good portent.

    When companies move out of a town it also kills part of the spirit of the town. The lifeblood of the town is gone. And when these companies are gone, what is left for the town to speak for? A bunch of tiny mom and pop restaurants moving in — this is a bunch that has money, are the people who have the capital to open an eatery or buy a bar — where are the jobs? This is part of what gives a town its worth; something to keep in mind when you buy a house or even if you are considering renting on a very long term basis.

    Nobody wants to move into a town or community with no pulse, no heartbeat and no life. That’s the bottom line. See what this does to your demographics as a town and what it will eventually do to the population numbers. This is what has happened in towns like Union City and Paterson — these towns used to have jobs and manufacturing as its backbone. It was embroidery and textiles. Those jobs bit the dust about a generation ago. What’s moved in are the dregs. Mostly dirt poor uneducated immigrants from Central and South America and who knows how many are here legally?

    Something is rotten in America and it’s not good. Where DID all the companies go???

  4. I have seen exactly that happen in Union City and Paterson — areas that were rich with manufacturing jobs: Textiles and embroidery.

    The embroidery jobs still exist but they are nowhere near as plentiful as they were. The textile jobs in “Silk City” Paterson were shot 2 generations ago. I don’t know what happened to those jobs; perhaps the middle-class people who lived there sent their kids to college or other post-secondary schools where they’d be ready for a job in something a lot better than a textile mill job. Or perhaps they were not interested in working in a silk-based factory.

    I know what happened to Union City — the embroidery jobs trickled down and out; the middle class moved out and away. What’s there now are immigrants, mostly from Central and South America. Not trained for anything, not educated. And who knows how many are here legally?

    These are things to consider, as I said, when you are looking at a community to move into. Everyone wants a close commute job; what good is a town where there are literally no jobs in the immediate area, or very few jobs?

  5. Odds are that the new restaurants are following the “Chinese restaurant” model, where family members work long hours in the restaurant. They created jobs, but only for themselves. This might not apply if the restaurant is a franchise, because the franchise agreement often mandates certain staffing levels and hours that the restaurant must be open.

    Hiring an employee is always the last resort from the company’s perspective. We forget that at our peril, but if we look at how we behave, it becomes very clear. We fix things that we can fix before we call a plumber or electrician or someone else. The only time a service economy “works” is when money is less valuable than time, and that’s when people are working full time, often with overtime.

    You might like the website deadmalls.com , which shows malls that have only a few tenants. My opinion is that the service economy and the infrastructure that it requires, like malls, is vastly overbuilt. The big box store did a lot to kill malls even as they were the “anchors” for the mall in a lot of cases.

  6. Another thing to consider with regard to “how things are different this time” concerns people’s expectations of what a prosperous life involves. I recently bought a two-bedroom house from an estate. The former owners had three daughters, all of whom were raised in the house, and the house has one bathroom and is 960 sq. ft. in area on a 62.5′ X 125′ plot. The thought of raising three children in a house that small, with only one bathroom would fill many people with horror. Even HUD standards limit the number of people who can live in the house to four.

    I know a few things about the family. The father was a member of the Teamsters (they still send the newsletter, 10 years after his death) , and they paid cash for the house when it was built in 1947. At least one of the daughters returned to live in the house because I still get mail for her at this address, and has filed for bankruptcy. Two of the three daughters used the house’s address as their address, which had the amusing effect of leading the title company to mail their checks to my house. I took the checks straight back to the title company

  7. They do all kinds of research.

    Now they are claiming nobody wants to shop in a cave. They now have these shitty big box “lifestyle centers” where you get 4 or more eyesore big box stores that connect each other but where you can’t walk through them.

    itsallmadness: Horror of horrors. haha. As we recall, sisters and brothers used to share rooms. How antedeluvian and all that other rot: that is how things were back then! I shared a room with a grandmother until she moved out and in with an aunt.

    Most of the small town restaurants you see are operated by families. You only get non family run when it’s a great big chain restaurants.

  8. I have been wanting to write about the subject about dead malls because it is a subject that had an impact on me. I shopped at what is now considered to be the most famous dead mall in the USA, probably the world and it’s a sad commentary on everything that has happened in 30 years from societal changes, to economy to pop culture.

  9. There is a mall about a 20 minute drive from here that was finally put out of its misery. The buildings were razed and now there’s nothing there but vacant land. No plans to rebuild and put something else there.

    I never could figure out how that mall stayed open. It was open for years; it limped along and had more or less odds and ends stores in it toward the end.

    There is another building full of retail space that’s going to be converted back into wrehouse space. One by one the leases are running out and whoever is there is closing up shop and moving.

    For the last 3 or 4 years nothing’s been in there but dead and odd stores nobody shops in.

  10. There’s a mal about 10 miles or so north of me and it’s a pretty dead mall now. It still has one anchor but the other three I believe are gone. Most of the stores now in this mall are hip hop related stores instead of what used to be there: record stores, book stores, etc. On the dead mall site it says this mall had troubles because it didn’t have a food court but I don’t think that’s the problem. Besides, it did have a McDonalds and there is where my friends and I ate while shopping. In this case it’s just a change in demographics. Two other malls listed on that site (both razed)were smaller malls that started having problems because much larger malls opened near by. These malls became known really for their movie theatres which were second run shows by the time I was in high school (and I spent a lot of time in high school going to movies there).

    The mall I reference earlier is the saddest thing of all because it stood 30 years vacant and became a site where people would go to take photos. It became famous because it was featured in a very popular movie.

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