Given my background in data warehousing and business intelligence, it would surprise none of you that I loved Kenneth Duberstein’s op-ed piece in today’s New York Times advocated a web-based reporting system of key performance indicators for the country. The closing paragraph:
Great steps forward in American history occur at moments when our deeply held values are reaffirmed in the face of changing realities. Such a moment is at hand. We need a shared frame of reference that will enable us to practice collective accountability. If Congress acts soon, by the time President Obama delivers his first formal State of the Union address next year, Americans will be able to continually assess the state of the Union for themselves.
As a nation, we face complex problems where people legitimately have differing views on the best solutions. But it would be nice if we could at least agree what the problem looked like and where we are now. Such a system would be an important first step.
In more economic news, the New York Times had this article a couple of days ago pointing to a handful of economic indicators showing that, while the economy was still worsening, there are signs that at least the rate of descent may be slowing:
“You go from a free fall to a steady decline,” said Michael T. Darda, chief economist at MKM Partners. “Is that good? No, it’s not good, but at least you’re kind of falling at a slower pace, and that’s the first step to some of these indicators starting to flatten out.”
Note this section towards the end:
The government reported that 598,000 jobs were lost in January, the most for that month in two decades, and economists expect the unemployment rate to rise to 9 or 10 percent from January’s 7.6 percent. Because employment numbers typically lag the broader economy, millions of Americans may still be losing their jobs even after the recession bottoms out. [emphasis added by me]
As I have mentioned in a previous post, housing prices will rise with consumer confidence. If many Americans are losing jobs “even after the recession bottoms out,” I believe that an improvement in consumer confidence will lag behind other economic indicators in an upswing, and any increase in housing prices will lag even further behind that.
Paul Krugman’s NYT column yesterday discusses how, for the past decade, we have been living under the illusion that this was a period of great wealth creation. Unfortunately for us,
Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.
At this point, I think that illusion is fairly well shattered. Much of the growth in our economy was fueled by consumption enabled by personal leverage on real estate assets. Now that the run-up on asset values is gone, that leverage-based consumption is impossible — and our economy must contract. Further, much of that debt (secured by assets with newly-lowered values) is still there, an albatross for many consumers for some time to come.
To continue moving through the vicious cycle: the perception of our wealth drives our consumption, as well as the valuations of assets such as real estate property. As I argued in a previous post, we will need to see this perception fundamentally turn around before we see a general all-around growth in real estate prices. I think there is a long road ahead of us before we see this happen.
Tom Friedman’s column yesterday opens with an interesting (only partially tongue-in-cheek) suggestion to solve our financial (and housing) crisis: open the door to more immigrants who will buy subprime homes, work hard to pay for them, improve the savings rate, and create new jobs.
As I have told some of you, I believe we do two things better than any other country: entertain (culture as export) and innovate. But we are at risk of being surpassed in the latter area. China and India are producing far more college graduates, especially in math, science, and engineering, than we are. Soon, those countries will be able to throw more intellectual muscle behind innovation than we can. Further, the issues in our public school system will exacerbate the situation (which is why we have to invest heavily in education).
In all areas of trade, protectionist policies might make us feel better (briefly), but they undermine us for the long term. This is especially true when it comes to intellectual talent. We have to grow, invent, and innovate our way out of this mess — we can’t just hide behind walls and wait for it to get better. If we deprive ourselves of necessary scientific and engineering resources, then we make it that much harder on ourselves.
I’ll close with my favorite section of the column:
“Dear America, please remember how you got to be the wealthiest country in history. It wasn’t through protectionism, or state-owned banks or fearing free trade. No, the formula was very simple: build this really flexible, really open economy, tolerate creative destruction so dead capital is quickly redeployed to better ideas and companies, pour into it the most diverse, smart and energetic immigrants from every corner of the world and then stir and repeat, stir and repeat, stir and repeat, stir and repeat.”
The Washington Post and Trulia announced today a partnership to launch a co-branded site focused on the DC area, expected to be released in April 2009. In my opinion: the more access consumers have to relevant real estate information, the better.
With all the ground shifting so rapidly in the real estate industry and the American economy, I was reminded of a video that was originally conceived as a PowerPoint presentation for a 150-person staff meeting at a Colorado high school in 2006 (see the Shift Happens wiki for the presentation’s history, source material, and various versions). It went viral and has been seen by at least five million viewers. Updated in 2007, the version embedded above is just as revealing now as when I first saw it. For instance — WAIT! There is more to read… read on »
