1/30/2002 headlines from #### -
New wave of fear - The Enron story is about an era, not just a company, by Steve Bailey, Boston Globe, C1.
[Steve Bailey really hits his stride in this one!!]
The former vice chairman of Enron Corp. is found dead in his Mercedes...a suicide note...beside him
Geo.W.Bush and the General Accounting Office are headed for a constitutional crisis over the president's refusal to turn over records of meetings between the administration [eg: the VP] and Enron last spring ["They're PRIVATE!" Yeah, right - to set public energy policy.]
The wife of disgraced ex-Enron chairman Kenneth Lay...gfoes on the "Today" show to say her husband was a victim, duped by the executives who worked for him [and furthermore, that his family is "financially ruined"! - what about that $100m, Linda?]
The Rev. Jesse Jackson emerges from a meeting with Lay at Enron's Houston HQ and likens him to Job. [WHAAAT? The Biblical model of long-suffering?!! Talk about spinning the villain as victim!]
And we're surprised there's a crisis of confidence?
The bad news got worse yesterday.
Williams Co., one of the largest US energy traders, was rocked by the biggest one-day decline in its stock in 20 years after the natural gas-pipeline owner said it faces as much as $2.4B in costs from a communications business it spun off.
[And as the queue forms behind Enron, Steve hasn't even mentioned ImClone, but he does include -]
Exeter, NH-based [except for their tax-evading pro-forma HQ in Bermuda] Tyco International's stock also suffered its biggest decline in 2 decades after it paid $20m to a director and a charity he controls in exchange for his help in competing an acquisition. [Faithful readers will remember Tyco as probably The Biggest corporate takeover artist.]
And it was the morning after for telecom bust Global Crossing Ltd., which a day earlier made the 4th-largest bankruptcy filing in American history [Enron was 1st-largest - note article on same page of Boston Globe as Steve's column - "Global bust won't affect New England service," by Peter Howe, BG, C1. Oh thank God - as long as we're OK the rest of the country can go to ####, right? And should we mention "FleetBoston loses $507m in 4th - Kmartr [whatta typo!] and Enron bankruptcies, crisis in Argentina blamed," by Scott Nelson, BG, C1. And don't forget the crisis in Japan. And the crisis in Turkey.]
Yesterday...the Federal Reserve questined PNC Financial Services' accounting methods, forcing the Pittsburgh company to reduce its 2001 profits by $155m..\..
The Dow Jones Industrial Average dropped nearly 250 points yesterday [Jan. 29, compare Oct. 29, 1929 - note another article on same page of Boston Globe as Steve's column - Dow hits lowest level since Nov. - Earnings, Enron seen taking toll, despite two upbeat reports," by Scott Nelson, BG, C1.]
Call it the second wave of fear [ah, Steve, 9/11 would make it the third].
In the wake of the dot-com bomb, the Enron debacle is creating a new meltdown, this time focused on the overcapacity in the telecomms industry and the murky art of accounting.
While all the moving parts may be difficult to follow without an MBA, the result is not: Confidence is crumbling at an astonishing pace. [Points to realize -
In a highly industrialized society of "intelligent" beings, confidence = mutual faith is EVERYTHING because despite all our ridiculous chest thumping about our "freedom" and "independence," we are the most inter-dependent society in the 5000 years of human history and the 2,000,000 years of human evolution (or have they only dated homo erectus back 1m years so far?)
Stocks are company-specific money, and money is the most faith-dependent symbol you can imagine. It symbolizes a unit of average value of human worktime across a given economy, adjusted for generally expected future potential.
Overall, every industry in our entire global economy is in a crisis of overcapacity relative to what can be profitably purchased by consumers, because for the last two generations, we have been injecting work-saving technology on one side and on the other side, we've been downsizing our workforce alias consumer base, without adjusting downward our workshare per person per time unit (i.e., workweek) in the middle. On the contrary, instead of reducing our 1940-level workweek to spread the vanishing human employment, we've been increasing our flood of jobseekers - the postwar babyboomers hit the job market around 1990 crimping family income, so housewives hit the job market in the 70s and 80s, and then compassion-talking vote-hungry Democrats slammed a record number of immigrants into the job market in the 90s. And overcapacity means Great Depression II. The only recovery paths are militarization (and accompanying epidemics), and timesizing = trimming hours, not lives. Bush is selecting militarization. "Axis of evil" indeed!]
...Let's remember, too, that the American economy seemed to be coming unglued in the midst of
the S&L crisis of the late 1980s
And the collapse of Long-Term Capital Management, the high-profile hedge fund,
and the failure of the Russian economy in 1998....
[Steve tries to make out that we survived these just fine - they were just "buying opportunities" - and we're correcting them just fine. In short, there's nothing negatively cumulative going on or, the economy is like an infinite ocean that can take any amount of abuse and pollution. But 66% of our economy, the biggest, and 60% of Japan's, the 2nd-biggest, depend on the consumer base, and the consumer base depends on the job market, and the job market was proved non-infinite between 1929 and 1941. Nothing automatic within the economy made it recover from the demobilization of 1918 and the downsizings of the 1920s. Nothing in the New Deal's extensive expensive feel-good backbends ever managed to cut the 25% unemployment below 14%. It was only the remobilization, the unprecedented militarization of World War II which yanked trillions of excess manhours out of the job market, some permanently, that made us recover from the Great Depression - and for all the wealthy's whining about taxes today, we had a 90% tax bracket on the wealthiest all the way from the War to 1959 to help centrifuge that income and get it spent and BACK INTO CIRCULATION. Neither the dramatic but ineffectual New Deal nor the WW2 militarization were matters of automatic economic recovery forces that seem to have gripped the faith of so many otherwise intelligent people today. Both were outside the economy and artificial rather than natural or automatic or "cyclical" as all the misleading blather about a business "cycle" would lead you to believe.]
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