Month: October 2008

Three of us got together this evening to watch the Obama versus McCain debate. Each candidate seemed skilled at criticizing his opponent. Barack Obama had the additional skill of criticizing George W. Bush. Neither opponent seemed to have many ideas for improving the economy or American competitiveness. This was rather disheartening on yet another day when the stock market crashed a full 5 percent. We (the American people) may be on our own…

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Last week the U.S. Congress decided to give trickle-down economics its biggest test ever. They appropriated $700 billion in taxpayer funds so that we could give every mansion owner in Greenwich, Connecticut $1 billion each, with enough money left over to give every Park Avenue townhouse owner $100 million. The result was supposed to be renewed economic vibrancy across the whole U.S. What did we get instead? Another stock market crash, with the S&P 500 losing almost 4 percent of its value. To put this into perspective, this is roughly one year’s return on U.S. stocks, evaporated in a single day. The S&P 500 is now back to where it was in early 1998.

[Had you put money into the U.S. stock market in early 1998 you would have realized approximately 1 percent annual income in the form of dividends and a 0 percent capital gain. In other words, a gal who had diligently saved up $100,000 would have added $1,000 per year to her income by placing her faith in America’s largest companies.]

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I’m finally getting around to cleaning up some old personal photo essays and so forth, moving them from photo.net to philip.greenspun.com. An example is my personal guide to New York City. Almost every page in this little museum piece of how the Web worked back in 1995 and 1996 contained a link to the Yahoo directory, e.g., http://dir.yahoo.com/Arts/design_arts/fashion/. Despite having thousands of employees, Yahoo was apparently unable to maintain a set of redirects and all of these links are now dead. That’s a great way to lose readers and lose Google Rank.

It is tough to understand why Microsoft would pay billions of dollars for a company that can’t manage this fundamental part of Web publishing. I admit to being rather lame and sloppy, but links that I published back in the early 1990s are still functioning, albeit sometimes through one or two redirects (transparent to the user).

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We apparently have an extra $700 billion of taxpayer money to spend in an effort to improve our economy. How are we planning to spend it? We are going to give it to investment banks and other financial services firms. What could we expect the result to be? America’s investment banks and financial services firms will be in great shape; the rest of the U.S. will lag behind.

What do you call a country with a thriving financial services sector and everything else rusting and obsolete? England. The City of London has been a leading provider of financial services worldwide for the last couple of centuries. During this period the rest of the country has lost its empire, lost its military power, lost its leadership position in scientific and engineering research, lost its leadership in manufacturing, and suffered from slow economic growth compared to its European neighbors.

By some accounts, the 1.22-square-mile City of London contributes roughly 20 percent of the UK’s GDP, employing only 300,000 people. (This compares to the U.S. financial services industry, which has grown from about 6 percent of the economy in the 1970s to roughly 10 percent today.)

Seven hundred billion dollars is enough money to reshape the American landscape. New York City real estate will become even more desirable. The rest of the country will decline gradually.

Do we have to spend our money this way? Why not put the $700 billion into tax credits for businesses that make capital investments? Or reduce the corporate tax, which would increase the value of American stocks? Or give tax breaks to foreign companies that open factories or R&D facilities here in the U.S.?

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After a helicopter flight this afternoon, I ran into a friend in the hangar. He works for the biggest air taxi (airplane charter) company in Massachusetts. “We just laid off two thirds of our staff,” he noted. “We’ve returned most of the airplanes to the lessors.” Driving home, I passed by Mattress Discounters. They had a “going out of business” sign out front. I stopped in to ask why. “They’re closing all of our New England stores,” said the manager.

We have cold weather, per-capita tax expense roughly double New Hampshire’s (compared to other states), and extremely high housing costs. Young people keep leaving to build careers in the more rapidly growing regions of the U.S. Still, I would have thought enough of us oldsters were still here to need a comfortable mattress…

[I did my share for the Massachusetts GDP this week. A crack appeared in my car’s windshield and the whole windshield needed to be replaced. This expanded GDP by at least $500. Maybe if we all smash each others’ windshields we can make the GDP numbers for Q3 look good…]

[Correction: The air taxi company has slimmed down on turboprops, from 6 to 3, partly due to the seasonality of business up here. They’re keeping their 4 Eclipse jets, but not counting on them for any revenue due to the fact that service and support for the Eclipse is almost non-existent. One serious problem with the Eclipse is that, although the plane in theory can be approved for flight into known icing conditions, in practice it is impossible to schedule an existing plane for the required retrofits. The Eclipse remains a jet that can flown only in clear and/or very warm weather.]

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