Tuesday, March 10, 2009

Gloom in the Blogosphere

'Bleak, negative and forboding' pretty much sums up the economic outlook of the blogosphere as I've reviewed it over the last two days. Obama has been captured by his experts and is flat wrong when he publicly claims that the blogosphere is a realm of simple-minded one-issue commentators. It is a good deal more nuanced than that. But, there does seem to be a certain unanimity about just how grim the future will be. And, after spending a week driving across the American West, which, amber fields of winter wheat lightly dusted with snow and purple mountains majesty (also snow glistening), is still there, still hiring and still dealing, I'm a little curious about the disconnect. Normality, in a minor key, on the one hand, and a crescendo of doom, on the other.

Three possible explanations--

1. The Jungian collective gesalt of the blogosphere is correctly anticipating a political, cultural, economic and military phase change that will end the world as we know it. In other words, this is the winter of 1915 or 1931.

2. This is the psychological capitulation that accompanies a market bottom. That doesn't mean a recovery is imminent. Nor does it mean that further declines will be avoided, since there are multiple markets. But it does mean that animal spirits are dead, that in some markets, at least, we've bottomed, even if the general economy will continue to deteriorate, housing prices will continue to drop, the consumer will stay on the sidelines, and the financial services sector continue to unwind.

3. People active in the blogosphere tend, as a group, to be close to the financial services sector and so they feel proximity to the victims of the direct impact of the current events. I suspect the first wave of Wall Street layoffs, through last summer, weeded out the marginal performers, an enhanced version of regular performance reviews. Starting last summer, good people started losing their jobs. This winter's bonus season was a pale imitation of last year's rewards. The bonus culture is dead. It will be many years before it comes back. Ask a dot.com option holders, ca. 2002.

None of the people (a few special situations excepted) laid off are finding new positions. Further cutbacks are on the way. The savings/assets people had to tide them through are losing value at an astonishing rate. There is a practical limit to how much a person can reduce his living expenses by without leaving town. If you leave town, there is no where to go. There guys are in worse shape than the Enron employees trapped in that wreckage after it collapsed.

I suspect the gloom is the product of a combination of 2 and 3. I've never been a Jungian. Capitulation is the classic explanation. But I've felt for some time that, because in the current crisis high income professionals in the services sector will feel the pain as much as hourly blue collar workers, the cries and lamentations will be louder.


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