Article 43

 

Dying America

Monday, October 16, 2006

Tips For Dealing With A Bad Boss

From WORKING AMERICA

Protect yourself first by building relationships with co-workers and other managers. These relationships can be an important source of support at workand it’s always helpful when a co-worker witnesses your bosss bad behavior.

Get it in writing when your boss makes promises or threats. If there is an incident between you and your boss, writedown your version with the date and time. Mail a copy to yourself in a sealed, postmarked envelope. This could be an important record of the incident later.

Talk to your boss about your concerns. Sometimes bosses dont know when they are making bad decisions or treating employees unfairly. Plan ahead what you want to tell your boss. Practice keeping cool and speaking calmly.

Identify the problem with your boss. Is it a short fuse? A problem with giving clear directions? Once you know exactly what your boss does that drives you crazy, it becomes easier to keep it from getting under your skin. And you can try alternative strategies to deal with your boss’a flaws. For example, if your boss gives vague directions, you might try repeating them back to him or her to make sure you understand them.

Take back your life by establishing boundaries between work and home. Clearly define your time for work, family and friends. Remember that your boss pays you for eight hours a day, not 24.

Manage your stress off the clock. Eat healthy foods and exercise regularly to reduce stress and burn energy.

Ask for outside help. If you think your rights are being violated, read the KNOW YOUR RIGHTS fact sheet. Contact advocacy groups in your community and look for legal clinics and other kinds of help. For example, Working America MEMBERS are eligible for one half-hour of free legal consultation. Finally, if your boss ever becomes physically or verbally abusive, contact the police right away. Don’t be afraid to speak up and get help.

Organize a union at your workplace in order to have a legal say on the issues that matter most to you, including wages, benefits and work environment. Union members, on average, make 28 percent more than workers without a union and are much more likely to have employer-provided health care and pensions. Many unions also have a dignity and respect clause in their contracts. Click this link for more information on how to form a union at your workplace.

Plan your exit strategy if the situation is unbearable and all else fails. Network with colleagues, update your RESUME and watch for new job opportunities.

Join WORKING AMERICA

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Dealing With An Abusive Boss

By Gerri Willis
CNN/Money
October 15, 2004

It’s no secret that there are abusive bosses out there—you know the type. Bullies with big job titles that make the people working for them miserable.

According to the Workplace Bullying and Trauma Institute, an abusive boss is more likely to be a woman than a man. That’s right—forget their nurturing image! Woman to woman bullying represents 50 percent of all workplace bullying; man to woman is 30 percent, man to man 12 percent and woman to man bullying is extremely rare—only 8 percent.

What should you know if you’re the victim of an abusive boss? Here are today’s five tips.

1. Identify the behavior.

There are all kinds of abusive bosses. The Institute classifies them a few different ways.

There are the constant critics who use put-downs, insults and name-calling. They may use aggressive eye contact to intimidate.

There are also two-headed snakes who pretend to be nice, while all the while trying to sabotage you.

Then there are the gatekeepers—people who are obsessed with control—who allocate time, money and staffing to assure their target’s failure. Control freaks ultimately want to control your ability to network in the company or to let your star shine.

Another type is the screaming Mimis who are emotionally out of control and explosive.

2. Don’t take it lying down.

If your boss has a difficult management style, you don’t have to let their bad behavior go. You can respond—just remember to stay professional.

So, if your boss insults you or puts you down, Susan Futterman, author of “When You Work for a Bully” and the founder of MyToxicBoss.com, suggests responding with something like, “In what way does calling me a moron or an idiot solve the problem? I think that there’s a better way to deal with this.”

If you find out that your boss is bad-mouthing you to higher-ups in the company, confront them directly and professionally. Get the evidence in writing from your source if you can. Then, ask him or her what is causing them to do this.

You could say, “I’ve been hearing from other people in the company that you’re not happy with my work, you and I know that this isn’t the case and I want to talk about how we can fix this.”

If your boss has been defaming you, that’s illegal. You may want to consult an attorney.

If your boss is a control freak who’s breathing down your neck, you should address it. Say, “I can’t function effectively if you’re going to be micromanaging me and looking over my shoulder all the time. If I’m doing something fundamentally wrong, let’s talk about it. But this isn’t working.”

If someone screams at you, don’t be a doormat. If you’ve made a mistake, acknowledge it. But let your boss know that they’re creating a difficult work environment. Even if you haven’t made a mistake, you may want to calmly ask what they’re upset about and if you can address it.

3. Take notes.

Documenting your boss’s bad behavior is key for two reasons, according to Futterman.

First, you might not even realize the extent of the problem. Futterman explains, “Taken in isolation, these events may seem trivial, but taken as a whole, it often becomes more clear what’s actually going on. Some victims may be in denial or discount these events as isolated incidents. Your written records can documenthow severe the situation is.”

And, of course, if you decide to take legal action down the line, you may need the information. It’s best to documentthese incidents as soon as possible so they’re fresh in your mind.

Documentation is also important if you plan to report the behavior to your boss’s boss or to your company’s human resources department. And don’t dismiss the idea of taking the bull by the horns and working toward a solution.

Try arranging a face-to-face meeting with your boss. Tell them you want to discuss the problems you’ve encountered because you want to resolve them. Chances are often slim that this will work, however. If they reject the opportunity to discuss things with you, add that to your documentation.

4. Know when it’s too much.

Bosses may exhibit bad behavior sometimes. Hey, no one is perfect, not even bosses. But if your boss is abusing you, that’s a problem.

The problem takes on greater urgency if the abuse starts to make you feel bad. If you chronically suffer high blood pressure that started only when you began working for your boss; or you feel nauseous the night before the start of the work week; or if all your paid vacation days have been used up for mental health breaks.

When the bullying has had a prolonged affect on your health or your life outside of work, it’s time to get out. It’s also time to leave if your confidence or your usual exemplary performance has been undermined.

Ironically, targets of abusive bosses tend to be high achievers, perfectionists and workaholics. Often bully bosses try to mask their own insecurities by striking out.

5. Control your destiny.

Even after you leave your nightmare boss, you’ll still have to explain why you left to potential new employers.

Futterman advises against dramatizing your old work situation. One way to gracefully sidestep the issue: say you and your manager had a longstanding disagreement over the most effective way of getting things done and you thought the most professional way to resolve it was to move on.

“You certainly don’t want to start recalling and recounting the abuse you suffered. You’ll inevitably get upset and that’s not the way you want to handle a job interview,” she says.

Try to control the interview situation to the extent you can. Don’t give your abusive boss as a reference but rather someone else with whom you worked previously. Another good choice might be a colleague or a peer you’re on good terms with or someone who can speak about you professionally.

Also, if you only worked for your bullying boss for a short time, you may want to consider leaving that job off your resume altogether.

SOURCE

Posted by Elvis on 10/16/06 •
Section Dying America • Section Workplace
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Sunday, October 08, 2006

Northwest’s Advice to the Laid Off

layoff.jpg

Northwest’s Advice to the Laid Off: Dumpster Dive

By Frank Langfitt
NPR
August 23, 2006

Losing your job hurts.

But earlier this month, NORTHWEST AIRLINES made things even worse. The company gave pink-slipped employees a tip sheet on how to cut living expenses. Among the suggestions: Rummage through other people’s garbage (Tip# 46: “Don’t be shy about pulling something you like out of the trash").

The tip sheet was called “101 Ways to Save Money,” and it went out to 60 Northwest employees slated to lose their jobs this fall in Montana, Texas and North Dakota.

The top 10 tips on the tip sheet:

1. Set your thermostat to 64 and turn it down to 60 at night.

2. Use the phone book instead of directory assistance.

3. Use coupons at the grocery store.

4. Carpool.

5. Ask for generic prescriptions instead of brand name.

6. Do your own nails.

7. Rent out a room or garage.

8. Replace 100 watt bulbs with 60 watt.

9. Make long-distance calls at night and on weekends, instead of mid-day, mid-week.

10. Throw pocket change in a jar and take it to the bank when it’s full.

SOURCE

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Northwest Airlines List Of 101 Ways To Save Money

Minesotta Headhunter
August 23, 2006

1. Set your thermostat to 64 and turn it down to 60 at night.

2. Use the phone book instead of directory assistance.

3. Use coupons at the grocery store.

4. Carpool.

5. Ask for generic prescriptions instead of brand name.

6. Do your own nails.

7. Rent out a room or garage.

8. Replace 100 watt bulbs with 60 watt.

9. Make long distance calls at night and on weekends, instead of mid-day, mid-week.

10. Throw pocket change in a jar and take it to the bank when it’s full.

11. Always grocery shop with a list.

12. Buy spare parts for your car at a junkyard.

13. Go to museums on free days.

14. Quit smoking.

15. Get hand-me-down clothes and toys for your kids from family and friends.

16. Meet friends for coffee instead of dinner.

17. Request to get interest on a security deposit for your apartment.

18. Take a shorter shower.

19. Writeletters instead of calling.

20. Brown bag your lunch.

21. Make your own baby food.

22. Use public transportation.

23. Drop duplicate medical insurance.

24. Buy old furniture at yard sales and refinish it yourself.

25. Apply for scholarships and financial aid.

26. Exercise for free-walk, jog, bike, or get exercise videos from the library.

27. Form a baby-sitting cooperative with friends and neighbors.

28. Buy your clothes off season.

29. Go to a matinee instead of an evening show.

30. Share housing with a friend or family member.

31. Hang clothes out to dry.

32. Do not use your calling card.

33. Volunteer two hours a month for reduced cost food through the Share Program.

34. Change the oil in your car yourself regularly.

35. Get pre-approval from your medical insurance company before undergoing any procedures or tests.

36. But ‘no frills’ vitamins.

37. Take a date for a walk along the beach or in the woods.

38. Make cards and gifts for friends.

39. Shop in thrift stores.

40. Have your water company do an audit so you are not charged sewage fees for water used in your garden.

41. Refinance your mortgage.

42. Grocery shop on double coupon days.

43. Trade down your car for a less expensive, lower maintenance one.

44. Convert your cash value life insurance to term.

45. Shop around for eyeglasses.

46. Don’t be shy about pulling something you like out of the trash.

47. Recycle.

48. Move to a less expensive place to live.

49. Use low flush toilets or water saving devices in the tank.

50. Drop unneeded telephone services like call forwarding or caller ID.

51. Buy fruits and vegetables in season.

52. Avoid using your ATM card at machines that charge a fee.

53. Bicycle to work.

54. Shop around for auto insurance discounts for multiple drivers, seniors, good driving records, etc.

55. Ask your doctor for samples of prescriptions.

56. Borrow a dress for a big night out. or go to a consignment shop.

57. When you buy a home negotiate the sales price and closing costs.

58. Turn the hot water heater down and wrap it with insulation.

59. Never grocery shop hungry.

60. If you qualify, file for Earned Income Credit.

61. Shop around for prescriptions including mail order companies (Medi-Mail 800-331-1458, Action Mail Order Drugs 800-452-1976, and AARP 800-456-2277).

62. If you pay for childcare, make use of the dependent care tax credit or your employer’s dependent care flexible spending account.

63. Buy, sell, and trade clothes at consignment shops.

64. Shop around for the lowest banking fees.

65. Caulk windows and doors.

66. Iron your own shirts.

67. Plan your weekly food menu before shopping.

68. Buy a good used car instead of a new model car.

69. Purchase all of your insurance from the same company to get a discount.

70. Cut your cable television down to basic.

71. Go to an optometrist for routine vision tests or to change an eyeglass prescription.

72. Buy pre-owned toys and children’s books at garage sales.

73. Have potluck dinners with friends and family instead of going out.

74. Use the library for books, video tapes, and music.

75. Inspect clothing carefully before purchasing it.

76. Don’t use your dishwasher dry cycle; open the door and let them air dry all night.

77. At the grocery store, comparison shop by looking at the unit price.

78. Make your own coffee.

79. Use old newspapers for cat litter.

80. Shop at discount clothing stores.

81. Skip annual full mouth x-rays unless there is a problem; the ADA recommends x-rays every 3 years.

82. Water your garden at night or early in the morning.

83. Shop around for long distance rates.

84. Hand wash instead of dry cleaning.

85. Grow your own vegetables and herbs.

86. Shop around for auto financing.

87. Donate time instead of money to religious organizations and charities.

88. If you are leaving a room for more than five minutes, turn off the light.

89. Shop at auctions or pawn shops for jewelry and antiques.

90. Keep your car properly tuned.

91. Request lower interest rates from your creditors.

92. Trade in old books, records, and CDs at book and record exchanges.

93. Pay bills the day they arrive; many credit card companies charge interest based on your average daily balance.

94. Buy software at computer fares.

95. Search the internet for freebies.

96. Compost to make your own fertilizer.

97. If your car has very little value, you probably only need liability insurance.

98. Cut the kids hair yourself.

99. Increase your insurance deductible.

100. Buy in bulk food warehouses.

101. If your income is low, contact utility companies about reduced rates.

SOURCE

Posted by Elvis on 10/08/06 •
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Sunday, July 09, 2006

Lawless Workplaces

By Stewart Acuff and Sheldon Friedman
TomPaine
July 7, 2006

The last thing America’s workers need is another economic kick in the groin, but the Bush labor board may soon deliver what could be its lowest blow yet.

In a series of pending cases known as Kentucky River, the Bush board could strip what remains of federal LABOR LAW PROTECTIONS from hundreds of thousands - perhaps millions - of workers whose jobs include even minor, incidental or occasional supervisory duties. The pending cases involve charge nurses in a hospital and a nursing home and lead workers in a manufacturing plant, but these workers could be just the tip of the iceberg.

The Bush National Labor Relations Board is easily the most anti-worker labor board in history, but even against this sorry backdrop, the scope of what they now are contemplating is breathtaking.

The consequences of bad labor board rulings in these cases have the potential to strip coverage in every nook and cranny of the workforce and create innumerable new opportunities for mischief by employers bent on denying workers’ their fundamental human right to form a union. Long established collective bargaining relationships will also unravel, as employers emboldened by the NLRB’s rulings assert that they no longer have a duty under federal labor law to recognize or bargain with their employees’ unions. It will be back to the law of the jungle in industries like health care, where disruptions from labor disputes became so severe in the early 1970s that Congress passed special legislation to bring employees of private non-profit hospitals under federal labor law coverage.

The stakes are high for the public, too. In health care, for example, scholarly research has documented that heart attack survival rates are higher for patients in hospitals where nurses have a union than in hospitals where nurses do not.

Already in 2000, months before George W. Bush was declared president, Human Rights Watch issued a powerful report that found U.S. labor laws were grossly out of compliance with international human rights norms. That organizations bill of particulars was lengthy, but the first item on their list was the failure of U.S. labor law to cover millions of workers, including among others, managers and supervisors in the private sector.

Two years later, the Government Accountability Office estimated that 32 million workers lacked coverage under U.S. labor laws and thus were denied even the minimal protections afforded by these laws. Included in this number were nearly 11 million private sector managers and supervisors, even before the NLRB’s rulings in Kentucky River.

The ink was barely dry on the GAO report before the huge numbers they reported became out of date, in the wake of a full-scale assault on workers’ rights by the Bush administration, its labor board and right-wing Republican governors in several states. In the private sector, the Bush board stripped coverage from graduate student employees, certain disabled workers and employees of temporary help agencies. These retrograde rulings harmed large numbers of workers, but are a drop in the bucket compared with the possible impact of Kentucky River.

Congress opened the door in 1947 by excluding supervisors from coverage as part of the notoriously anti-worker Taft-Hartley amendments to the National Labor Relations Act. Even that reactionary Congress, however, made it clear that it did not intend to deny coverage to professional workers, lead workers or others whose jobs did not include responsibility to hire, fire and discipline other employees.

Ever since, a shameful series of decisions by unelected judges and NLRB members has steadily expanded the supervisory exclusion. In its notorious 1980 Yeshiva decision, for example, the Supreme Court ruled that because professors at private universities participate in campus governance, they were supervisors and therefore not covered by federal labor law. Henceforth private universities could and did snuff out faculty organizing campaigns with impunity. Within a few years of Yeshiva, private university faculty collective bargaining virtually vanished.

The decisions pending in Kentucky River could be Yeshiva on steroids for workers who have ever given incidental direction to a colleague or coworker in the performance of their job. The United States is already paying a high price for its failure to protect workers’ freedom to form unions; the Bush labor board’s rulings may be about to make a bad situation dramatically worse.

It is therefore imperative to push back against the Bush board’s assault on workers’ rights. We must, moreover, go beyond good defense; we must win serious protections for workers’ rights. The Employee Free Choice Act (EFCA) is the most significant federal legislative proposal in nearly 30 years to protect the freedom of America’s workers to form unions and bargain collectively. Since its introduction in the 109th Congress by Ted Kennedy, D-Mass., and Arlen Specter, R-Pa., in the Senate (S. 842), and by George Miller, D-Calif., and Peter King, R-N.Y., in the House (H.R. 1696), EFCA has garnered 215 House cosponsors, just three shy of a majority, and 43 in the Senate.

EFCA’s three main provisions are democratic majority sign-up, first-contract arbitration and stiffer penalties for illegal employer conduct. When EFCA becomes law, workers will be able to form and join unions without fear and coercion. EFCA will honor workers’ choices, discourage employer interference, and create more democratic workplaces.

The AFL-CIO has declared a national week of action starting July 10 to protest against the Bush labor board at NLRB headquarters in Washington and at regional NLRB offices and other sites around the country. Members of Congress have been asked to urge the NLRB to permit oral arguments by workers who will be adversely affected by the pending decisions. This is the least the board can do before ruling in a matter of such importance, but so far its Bush-appointed Chairman Battista shows every indication that he will deny even this modest request to allow these workers to be heard.

The need is urgent and the stakes are high. These are important fights to protect workers’ rights.

Stewart Acuff is the director of the AFL-CIO’s Organizing Department; Sheldon Friedman is research coordinator, AFL-CIO Voice@Work Campaign.

SOURCE

Links
LABOR LAWS NO LONGER PROTECT WORKERS RIGHTS
NLRB DENIES NEWS CARRIER UNION
SYMBOL OF THE SYSTEM
GLOBAL REPRESSION OF UNIONS ON THE RISE
DEMOCRACY AND UNIONS
SAVING THE MIDDLE CLASS

Posted by Elvis on 07/09/06 •
Section Dying America • Section Workplace
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Saturday, June 10, 2006

Democracy Hollowed Out Part 10

House Rejects Net Neutrality

Reprinted from Free Press
By John Nichols - The Nation
June 9, 2006

The First Amendment of the Internet the governing principle of net neutrality, which prevents telecommunications corporations from rigging the web so it is easier to visit sites that pay for preferential treatment - took a blow from the House of Representatives Thursday.

Bowing to an intense lobbying campaign that spent tens of millions of dollars and held out the promise of hefty campaign contributions for those members who did the bidding of interested firms - the House voted 321 to 101 for the disingenuously-named Communications Opportunity, Promotion and Enhancement Act (COPE). That bill, which does not include meaningful network-neutrality protections creates an opening that powerful telephone and cable companies hope to exploit by expanding their reach while doing away with requirements that they maintain a level playing field for access to Internet sites.

Special interest advocates from telephone and cable companies have flooded the Congress with misinformation delivered by an army of lobbyists to undermine decades-long federal practice of prohibiting network owners from discriminating against competitors to shut out competition. Unless the Senate steps in, (Thursday’s) vote marks the beginning of the end of the Internet as an engine of new competition, entrepreneurship and innovation. says Jeannine Kenney, a senior policy analyst for Consumers Union.

In case there was any question that Kenney’s assessment was accurate, the House voted 269-152 against an amendment, offered by Massachusetts Democrat Ed Markey, which would have codified net neutrality regulations into federal law. The Markey amendment would have prevented broadband providers from rigging their services to create two-tier access to the Internet with an “information superhighway” for sites that pay fees for preferential treatment and a dirt road for sites that cannot pay the toll.

After explicitly rejecting the Markey amendment’s language, which would have barred telephone and cable companies from taking steps to block, impair, degrade, discriminate against, or interfere with the ability of any person to use a broadband connection to access services over the Internet, the House quickly took up the COPE legislation.

The bill drew overwhelming support from Republican members of the House, with the GOP caucus voting 215-8 in favor of it. But Democrats also favored the proposal, albeit by a narrower vote of 106 to 92. The House’s sole independent member, Vermonts Bernie Sanders, a champion of internet freedom who is seeking his state’s open Senate seat this fall, voted against the measure.

Joining Sanders in voting against the legislation were most members of the Congressional Progressive Caucus, including its co-chairs, California Representatives Barbara Lee and Lynn Woolsey, as well as genuine conservatives who have joined the fight to defend free speech and open discourse on the internet, including House Judiciary Committee chair James Sensenbrenner, R-Wisconsin, and Intelligence Committee chair Pete Hoekstra, R-Michigan.

The left-meets-right voting in the House reflected the coalition that has formed to defend net neutrality, which includes such unlikely political bedfellows as the Christian Coalition of America, MoveOn.org, National Religious Broadcasters, the Service Employees International Union, the American Library Association, the American Association of Retired People, the American Civil Liberties Union and all of the nations major consumer groups.

House Minority Leader Nancy Pelosi, D-California, opposed COPE, while House Speaker Dennis Hastert, R-Illinois, and Majority Leader John Boehner, R-Ohio, were enthusiastically supported it.

Among the Democrats who followed the lead of Hastert and Boehner - as opposed to that of Pelosi were House Democratic Whip Steny Hoyer and Maryland Representative Ben Cardin, who is running for that state’s open Senate seat in a September Democratic-primary contest with former NAACP President Kweisi Mfume. Illinois Democrat Melissa Bean, who frequently splits with her party on issues of interest to corporate donors, voted with the Republican leadership, as did corporate-friendly New Democrats such as Alabamas Artur Davis, Washington’s Adam Smith and Wisconsins Ron Kind - all co-chairs of the Democratic Leadership Council-tied House New Democrat Coalition.

The fight over net neutrality now moves to the Senate, where Maine Republican Olympia Snowe and North Dakota Democrat Byron Dorgan have introduced legislation to codify the net neutrality principles of equal and unfettered access to Internet content into federal law. Mark Cooper, the director of research for the Consumers Federation of America, thinks net neutrality will find more friends in the Senate, at least in part because the Save the InternetӔ coalition that has grown to include more than 700 groups, 5,000 bloggers and 800,000 individuals is rapidly expanding.

“This coalition will continue to grow, millions of Americans will add their voices, and Congress will not escape the roar of public opinion until Congress passes enforceable net neutrality, says Cooper.

Coopers correct to be more hopeful about the Senate than the House. But the House vote points up the need to get Democrats united on this issue. There’s little question that a united Democratic caucus could combine with principled Republicans in the Senate to defend net neutrality. But if so-called New Democrats in the Senate side with the telephone and cable lobbies, the information superhighway will become a toll road.

SOURCE

Democracy Hollowed Out
PART 1 - PART 2 - PART 3 - PART 4 - PART 5
PART 6 - PART 7 - PART 8 - PART 9 - PART 10
PART 11 - PART 12 - PART 13 - PART 14 - PART 15
PART 16 - PART 17 - PART 18

Posted by Elvis on 06/10/06 •
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Wednesday, April 26, 2006

The Next Recession Part 2

By Gary North
garynorth.com
April 26, 2006

On March 23, the Federal Deposit Insurance Corporation, which insures bank accounts in the United States, issued a report: “Scenarios for the Next U.S. Recession.” On the whole, this was more forthright than most published reports by quasi-government agencies.

Before deciding how relevant this FDIC report is, check the latest shape of the interest yield curve. When the 90-day T-bill rate is higher than the 30-year T-note rate for 30 days, this is a very good indicator of a looming recession. Check here.

The FDIC panelists warned about the situation in the housing markets.

A large, long-term increase in consumer indebtedness has raised concerns that the next U.S. recession could originate in the household sector. The housing boom of recent years has resulted in a surge in new consumer debt, most of it in the form of mortgages.

In the first six years of this decade, the net increase of household wealth has been $5 trillion. This increase is enormous. American households, feeling wealthy, have cut back on their rate of savings . . . to zero, then negative. They are living inside their own savings accounts. Home owners see on paper that they are worth more money, and they assume “this real estate market is normal.” But it isnt normal. The condition of the housing market is unusual, to say the least.

Moreover, the increase in net housing wealth during the first half of this decade alone was two to three times as large as the gains posted during each of the prior two decades.

Despite the abnormality of this market, home owners are complacent. They see their homes as ATMs.

Although some new buyers have put very little down on their home and thus have accumulated little equity, many longtime homeowners have accumulated significant additional equity that remains untapped.

This increase in the market-imputed value of housing has persuaded residents that they are rich, that they need not save for retirement or anything else.

During recessions, households tighten their fiscal belts. They cut spending and begin saving more. This makes money available for capital construction and hiring. Thus, in the two years after most recessions end, economic growth is rapid and sustained. But the 2001 recession broke with this pattern.

Because Greenspan’s Federal Reserve poured money into the economy, cutting the federal funds rate from 6% to 1%, this capital accumulation phase of the recession was retarded. The recovery has therefore been the most anemic on record.

Furthermore, the housing market soared in response to the FEDs low interest rates. This makes the present situation unique, the panel concluded.

Historically, recessions have provided an opportunity for households and businesses to retrench and rebuild balance sheets that might have become strained late in the previous expansion. The response of businesses during the 2001 recession provides a classic example in this regard as investment, spending, and hiring activities were curtailed sharply from their heady, late-1990s pace.

The consumers felt wealthy because of the increase in the price of housing. They refused to cut spending.

In part because of the wealth-offset provided by housing, however, the long jobless recovery following the 2001 recession did not weigh heavily on the consumer sector. Consumers did slow their pace of spending growth in 2001 and 2002, but spending growth never fell below a 1 percent annual pace in any quarter, and in no quarter did it actually decline. By contrast, during the early 1990s recession, consumer spending declined for two straight quarters. At this point in time, however, the consumer sector has not experienced a real recession in 15 years.

The final sentence is worth considering. Consumers have not experienced a real job-threatening, gut-wrenching, savings-promoting recession in 15 years. They are totally confident today.

This has changed the mentality of consumers. They are not afraid of a turndown in the economy. They are convinced the government can and will protect them from adversity.

In some sense, this long recession hiatus itself raises concerns. Consumers have gradually become more indebted over time - so much so that they are now spending more in aggregate than they arn, resulting in the much-lamented negative personal savings rate.

In the classic childs fable of the grasshopper and the ant, the grasshopper has a great summer but a bad winter. Greenspan decided to become the star of a re-make of Bruce Brown’s 1966 surf movie classic, The Endless Summer.

The personal savings rate may turn out to be a bit of a statistical anachronism in an economy where so much spending is driven by the accumulation of wealth rather than current income. Even so, home prices will not boom forever. Even a moderation in home-price growth would reduce the amount of new home equity added to the economy each year. This slower accumulation of wealth, coupled with rising interest rates that increase the cost of tapping that wealth, could soon begin to curtail the pace of U.S. consumer spending growth. Just as there has been a positive wealth effect from soaring home prices in recent years, the concern is that an end to the housing boom could result in a slowdown in consumer spending growth. However, it is important to keep in mind that such an outcome would likely play out over several years, as happened during the boom.

So, the panel is concerned about a long, slow decline in consumer spending. This in turn would slow the overall economy. This is another way of saying that the next recession could be far longer than the typical post-World War II recession that lasted a year.

DEBT, NOT PRODUCTIVITY

The report noted this amazing fact: The publics increase in debt in 2005 was greater by far than its increase in after-tax income.

It is very likely that housing wealth has been a significant factor behind growth in consumer spending. Through the use of cash-out refinancing, increased mortgage balances, and greater use of home equity lines of credit, as well as through owners selling homes outright and cashing in on their accumulated equity, it is estimated that anywhere from $444 billion to $600 billion was liquidated from housing wealth during 2005. Whichever estimate one uses, the total almost surely eclipses the $375 billion gain in after-tax income for the year.

Now the sword of Damocles is beginning to swing. The FED has adopted policies that have raised short-term interest rates. This has led to rising rates for annual renewable mortgages (ARMs). The new buyers with bad credit who were extended these loans are now trapped. Rising rates mean rising monthly mortgage payments.

Meredith Whitney noted at the roundtable that the recent use of revolving home equity lines of credit in lieu of down payments has enabled an increasing number of first-time buyers to qualify for homes that they otherwise could not afford.

Overall, Ms. Whitney’s research suggests that a group that includes approximately 10 percent of U.S. households may be at heightened risk of credit problems in the current environment. This group mainly includes households that gained access to mortgage credit for the first time during the recent expansion of subprime and innovative mortgage loan programs. Not only do many borrowers in this group have pre-existing credit problems, they may also be more vulnerable than other groups to rising interest rates because of their reliance on interest-only and payment-option mortgages.

Think about this. Ten percent of mortgage payers may soon be in trouble. The threat of default by these people is growing.

The new bankruptcy law does not allow most of them to escape if they wind up owing more than the house can obtain in a foreclosure sale. But creditors will find that the cost of hiring lawyers to pursue these people will exceed the assets owned by these people. Nevertheless, the debtors credit ratings will be ruined for years.

Having said all this, the report says banks are in fine shape to weather the next recession. The problem is, the economy may not be.

CONCLUSION

The economy has been dependent on savings from foreign investors, including Asian central banks, for its growth. Consumer spending has increased, not by increasing productivity, but by debt. The American consumer is convinced that the bills will not come due, that he can tap into his home’s equity at low rates at any time. Save? Why?

This is transferring ownership of American capital and claims on future payments (bonds) to foreigners. Americans are de-capitalizing themselves. The central bankers of the world have spotted their marks, even as drug pushers in public high schools spot their marks. Americans are their marks. The “buy now, pay later” philosophy is gone. Today, its “buy now, pay never.”

But, as the grasshopper learned, winter eventually comes. He can sing “the world owes me a living” all summer long, just as he sang in Disney’s 1934 version of the famous fable. But the world doesnt owe him a living. Neither does the world owe us a living.

Summer isn’t endless. Also, killer waves eventually wipe out those surfers who refuse to paddle back to shore when the paddling is good.

Greenspan paddled ashore. Bernanke bought the well-used surfboard from Greenspan and paddled back out.

I prefer to watch this from the shoreline, thank you.

Gary North is the author of Mises on Money. Visit his WEBSITE. He is also the author of a free 17-volume series, An Economic Commentary on the Bible.

The Next Recession
PART 1 - PART 2 - PART 3 - PART 4 - PART 5 - PART 6 - PART 7 - PART 8 - PART 9 - PART 10 - PART 11 - PART 12 - PART 13

GREENSPAN SPEAKS
2006 ECONOMIC PREDICTIONS
BAD MOON RISING

Posted by Elvis on 04/26/06 •
Section Dying America • Section Next Recession, Next Depression
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