Great post today. You are more correct than you know. Back in 2000 a friend of mine at Army Intelligence (stop chuckling) informed me that the media houses were hiring MI (military intel) (okay you can chuckle a little bit) but the purpose was highly classified. Why would the government classify something the private media is doing? That is all I can say.

With regard to today's 'Media Disconnect' I would like to share a story: A few years ago, a close friend of mine was stuck at home in Atlanta with a brief illness. He is a Senior Producer at a major news network. I happened to be passing through town and spent the night at his house. In the morning, over coffee, he told me he would let me listen in on his conference call if I promised to stay quiet. It goes without saying, that it is bad form or unethical to allow an outsider to be on the line when other participants are unaware of you presence, but we are close friends and he knew I would find it fascinating. I don't have anything really shocking to share about the experience except to say I found it a bit chilling.

I have never forgotten the call and how I felt about it ever since for one particular reason: There must have been 15 different Producers or Executives running through the days news in a conference room explaining their status on each story. The tone of the conference call was jovial and cynical with an occasional joke about how they knew how predictable a particular story was going to be.

Why it disturbed me so much is that the process didn't allow room for disagreement or challenging of any take on a story. The Executive Producer running the meeting was setting the tone and each Producer seemed to be programmed on an acceptable approach. There was no discord, there was no debate. Day after day, I watch the mainstream television media and see certain stories never make it on the air. The executives at these networks have programmed their employees with what is acceptable and it was clear to me from the conference call that day, that you might have a long career if you toe the company line.

Yesterday as you certainly know the Madrid Stock Exchange practically exploded with housing and construction firms losing up to 13% in one day’s trading.

Spain has been building more homes than other country in Europe and the bubble is of huge proportions. This was just Act I.

I mentioned Hendaye last year and these last weeks I have seen in the San Sebastian area housing construction has rocketed.

The interesting thing is I planned to invest in a bigger apartment nearer the beach and I met several realtors, they all told me the same story, nothing is selling,

the market has stalled, mainly because the buyers have been priced out of the market. So I have put off any plans for the present.

I followed the whole Madrid debacle on Spanish TV and though the government has tried to calm things down, the house price collapse and that of connected industries has begun.

The major banks were also losers with a fall of 3% to 5% on Tuesday.
This has alarmed the Brits who are big buyers in Spain.

Search engines have long generated the same results for queries whether the person searching was a mom, mathematician or movie star. Now, who you are and what you're interested in is starting to affect the outcome of your search.

Google Inc. and a wide range of start-ups are trying to translate factors like where you live, the ads you click on and the types of restaurants you search for into more-relevant search results. A chef who searched for "beef," for example, might be more likely to find recipes than encyclopedia entries about livestock. And a film buff who searched for a new movie might see detailed articles about the making of the film, rather than ticket-buying sites.

The company plans eventually to offer personalization based on a user's Web-browsing history -- including sites people visited without going through Google -- when users agree to let Google track it.

Also, within three to five years, Google will start serving up personalized ads to searchers, says Marissa Mayer, Google's vice president for Search Products & User Experience. Another possibility: reflecting a user's interest in watching videos or searching inside books.

"You can't believe anything you see or read," complains Ted Murphy. "You think those judges on American Idol want to drink those giant glasses of Coke?"

It's funny to hear him say this because Murphy, who founded a Tampa-based interactive ad agency called MindComet, also runs a side business that pays bloggers to write nice things about corporate sponsors -- without unduly worrying about whether or not bloggers disclose these arrangements to readers. (A scan of relevant blog searches strongly suggests that, often, they don't.)

One major issue for many newspapers online: Roughly 70% to 80% of their online revenue is tied to a classified ad sold in the print edition -- known as an "upsell," says Paul Ginocchio, a newspaper analyst at Deutsche Bank. And as newspapers see a sharp erosion in classified advertising for real estate and jobs, their Web sites are being hit as well.

Underlining this pressure is a shift under way within Internet advertising. The ad formats that have so far proved strongest for newspapers -- banner ads, pop-ups and listings -- are losing ground to formats such as search marketing. Ad buyers say automotive, entertainment, financial-services and travel companies -- all major newspaper advertisers in print and online -- are aggressively shifting dollars into search marketing.

The book I recommended last week, Reminiscences of a Stock Operator

Astute reader R.Y. reminded me that the best analysis of corporate control of the media (or one of the best) is Manufacturing Consent: The Political Economy of the Mass Media

Just the "First Inning"--Very interesting Graph of Housing Starts:

source: California Housing Forecast
original chart by Dr. Nouriel Roubini and Christian Menegatti, www.rgemonitor.com

The events would unravel like this:

A) Credit Crunch, from SubPrime Lending Meltdown;
B) Toxic ARMS etc, REFIs of underwater homeowners fail & "Mortgage Lending is Tight";
C) Defaults, REOs, Foreclosures Soar in '07;
D) For Sale Inventory Way UP, to over ~ 8 to 12 month supply;
E) With mostly SELLERS, Few BUYERS, Home Sales Crash;
F) With sky high Inventory, Falling Sales, Prices Slump ~ 10 %;
G) Consumers with Debts @ MAX, forced to CUT Spending, as House ATMs, Closed for Business;
H) With Auto sales down, House sales down, Home building Slow, Durable sales down--USA GDP rate Tanks & goes Negative;
I) Last ASSETS to take the Big Hit--Stock Mkt , Hedgies/ Derivatives "Blow Up", & DOW/S&P 500 sink by ~ 30 % or more, later this year;
J) FED & Uncle BEN have TWO very BAD CHOICES:
    1) Loosen, Inflate the USD, via lower FedFunds--but Dollar Crashes & Inflation Soars;
    2) Fed Funds holds @ 5.25 % or Goes UP, USA Economic Depression

My "Best Guess" is that FED Holds Long as it can, US Economy Crashing, then FED Opens the Spigots, like ~ 2000 to 2003 (again)

March 22 – Bloomberg (Jody Shenn): “The subprime credit crunch is beginning to ensnare even borrowers with good credit. Lenders are increasingly refusing to lend to homebuyers who can't make a down payment of more than 5 percent, especially if they won't document their income. Until recently such borrowers qualified for so-called Alt A mortgages, which rank between prime and subprime in terms of risk. Last year the category accounted for about 20 percent of the $3 trillion of U.S. mortgages, about the same as subprime loans, according to Credit Suisse Group. ‘It’s going to be very difficult, if not impossible, to do a no-money-down loan at any credit score,’ said Alex Gemici, president of… mortgage bank Montgomery Mortgage Capital Corp. Companies that buy the loans ‘are all saying if they haven’t eliminated them yet, they’ll eliminate them shortly.’”

March 19 – Bloomberg (Hui-yong Yu): “U.S. homeowners, lenders and investors may lose as much as $112.5 billion through 2014 as mortgage payments go up on adjustable-rate loans, triggering defaults and foreclosures, according to a study by mortgage-risk data provider First American CoreLogic. An estimated $2.3 trillion of adjustable first mortgages were originated from 2004 to 2006, many of which will begin to reset in two to three years. As they reset at higher rates, about 1.1 million loans amounting to $326 billion may go into foreclosure, the study said.”

According to Bear Stearns, subprime loan balances have grown to approach $1.5 Trillion. And there is another $1.1 TN in “Alt-A” and another $1.4 TN of “Jumbo” loans that have accumulated in the marketplace.

Much of this risky mortgage exposure now resides in various securitizations and derivatives (including CDOs). It is, then, today fair to ponder the facilitating role derivatives played in this huge and destabilizing Flow of Risky Credit. How significantly did the capacity of Wall Street “structured finance” to transform a large percentage of these weak Credits into highly-rated and liquid securitizations (“Moneyness of Credit”) abet the boom in risky mortgage Credit? Clearly, derivative market risk intermediation was integral to the flood of finance into the subprime space. Marketplace risk perceptions were drastically distorted during the boom, and we’re certainly seeing similar dynamics at play today throughout corporate and M&A finance.

Excerpts from today’s Credit Symposium keynote address by Timothy Geithner, President of the New York Fed: (worth reading)
Credit market innovations have transformed the financial system from one in which most credit risk is in the form of loans, held to maturity on the balance sheets of banks, to a system in which most credit risk now takes an incredibly diverse array of different forms, much of it held by nonbank financial institutions that mark to market and can take on substantial leverage.

U.S. financial institutions now hold only around 15 percent of total credit outstanding by the nonfarm nonfinancial sector: that is less than half the level of two decades ago. For the largest U.S. banks, credit exposures in over-the-counter derivatives is approaching the level of more traditional forms of credit exposure. Hedge funds, according to one recent survey, account for 58 percent of the volume in credit derivatives in the year to the first quarter of 2006.

Financial shocks take many forms. Some, such as in 1987 and 1998, involve a sharp increase in risk premia that precipitate a fall in asset prices and that in turn leads to what economists and engineers call "positive feedback" dynamics. As firms and investors move to hedge against future losses and to raise money to meet margin calls, the brake becomes the accelerator: markets come under additional pressure, pushing asset prices lower. Volatility increases. Liquidity in markets for more risky assets falls.”

This remains the most incredible period in financial history. A strong case can be made that the traditional Credit Cycle has turned – an especially momentous development considering the scope of previous Mortgage Credit Bubble Excesses and attendant economic imbalances. Can we, then, infer that the Liquidity Cycle has similarly turned? Are they not one and the same? Well, in the age of contemporary Wall Street securities finance, they are not. And the case that the Liquidity cycle has turned is not yet as convincing.

To this point, there are few indications of waning derivatives growth; or a slowdown in financial sector expansion; or a meaningful moderation in global Credit growth. Worse yet, there is ample evidence of Wall Street’s keen desire to push the envelope of leveraged speculation in preparation for the Credit slowdown-induced Fed easing cycle. Perhaps U.S. and global markets this week demonstrated to the Fed why Liquidity and speculative excesses should be the focus. Central bankers should be in no rush to appease. Cutting interest rates would likely temporarily accomplish a few things, but promoting a Smooth Flow of Credit would definitely not be one of them.

We know from the NASDAQ bubble that once risk appetite changes, prices can shift violently in the other direction. Housing is different from equities because it is much less liquid; therefore price adjustments take more time. In a down housing market, the gap between buyers and sellers widens, and volumes fall. Buyers pull back and sellers take time to realize their listing prices are too high.

Eventually, housing prices in entire neighborhoods will get reset downward by the weakest hand. Just as prices went up and everyone in the neighborhood applauded the newest neighbor who bought at the top, prices will likely start to fall as financially-stretched home owners and speculators sell, and are forced out of the market. As this process unfolds, risk appetite for housing should take a sharp turn for the worse. This year’s weak start to the traditionally strong spring selling season suggests we have indeed entered the “buyer’s strike” phase of the cycle.

At reader/analyst Harun I.'s recommendation, I just read Reminiscences of a Stock Operator

First up: Financial Armageddon: Protecting Your Future from Four Impending Catastrophes

The book widely regarded as his classic is Slaughterhouse-Five

Most of the world's oil is drawn from super-giant fields. The last super-giant oil field was discovered in the 70s--since then, nada. If you want to understand why, please read Beyond Oil: The View from Hubbert's Peak by geologist Kenneth S. Deffeyes.

Global reserves have been overstated for years. Saudi Arabian reserves are a key example--see Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy for documentation. (recommended by analyst/contributor U. Doran) See links below for additional information.

Petroleum isn't just for cars; it's the feedstock for jet fuel, fertilizers, plastics and myriad chemicals. As production declines, a wide array of key industries will be negatively affected. See The Party's Over: Oil, War and the Fate of Industrial Societies for more.

U.S. relations with China have entered an era of aggressive trade policy, and this morning's trade numbers out of Beijing are only likely to bolster the hawkish case being made in Washington.

China's trade surplus in the first quarter widened to $46.4 billion, nearly double the $23.3 billion recorded a year earlier, the Chinese customs bureau said.

But despite Chinese efforts to reduce its trade surplus with eased import restrictions and export incentives, that lower number will do "nothing, zilch, nada to address political concerns in the U.S. about China's overall trade surplus," as economist Stephen Green of Standard Chartered Bank tells Bloomberg. "The numbers have now settled down, but still to a very high level."

For years -- and especially during the 2004 election year -- China has been the bete noire of both Democrats and Republicans in Washington who argued the government wasn't sufficiently protecting U.S. workers from unfair trade practices abroad. By filing formal complaints with the World Trade Organization yesterday, the Bush administration was, in effect, "finally doing to China what it has alternately implied, suggested, hinted and sometimes vaguely threatened it would do," Variety notes.

Ten days after it reversed years of policy with the imposition of potentially steep tariffs on some Chinese paper imports, the administration accused China of failing to halt the rampant piracy of U.S. movies, music, books and other intellectual property. In fact, trade specialists and industry officials tell the New York Times the move was in part a signal to Democrats who planned to legislate even tougher sanctions if the administration hadn't acted.

But "the new policy risks angering or embarrassing those in Beijing who may be trying to reform economic policies as Washington wants," the Times says. "In addition, many trade experts worry that China might retaliate against American imports or cut back on cooperation sought by Washington on other issues, like diplomatic problems involving Iran, North Korea and Sudan."

The head of China's largest beverage maker, Zong Qinghou of Wahaha, accused the French food giant Danon of failing to understand China and Chinese culture. "I told them the Chinese have stood up and the era of invasions by eight-country armies is long-gone," he said, in remarks the Financial Times notes were "unusually aggressive and nationalistic."

While most Chinese manufacturers have to settle for razor-thin profits due to extreme competition--according to BusinessWeek, 5% or less ("How Rising Wages Are Changing The Game In China"), American corporate profits are rising to unprecedented heights (see chart above). U.S. corporate profits have risen 10% or more, quarter after quarter, for 14 straight quarters--the longest run of such rich returns ever.

So who's making all the profits in this trade? The U.S. companies. This was carefully documented in an August 2005 article in Foreign Affairs entitled A Trade War with China?. The author demolishes all the hearsay arguments about how trade with China is detrimental to the U.S. economy, revealing that much of China's manufacturing is owned and managed by foreign corporations. In effect, the companies aren't Chinese at all; only the workers are Chinese.

In essence, China is competing not with the U.S., but with other low-cost manufacturing nations. The choice for many companies isn't between manufacturing in the U.S. or abroad; the choice is between suppliers of low-cost labor and infrastructure: China. Vietnam, Mexico, Romania--anywhere but the U.S.

For people bemoaning the loss of manufacturing jobs in the U.S., here's a suggestion: get real. Companies go where they have to in order to survive and prosper in a world where foreign corporations will gladly take sales away from them. If they don't compete on quality and price, they wither. For a better understanding of the realities of the global marketplace, read this Foreign Affairs article, Offshoring: The Next Industrial Revolution?

Many U.S. companies still have huge American manufacturing workforces--Catepillar and Boeing come to mind, both global leaders which generate big profits--but they also manufacture components in other nations as well, for a number of compelling reasons which may have little or nothing to do with low-cost labor. Boeing, for instance, essentially guarantees sales in Japan by subcontracting out the wing assemblies to high-tech Japanese manufacturers. No parts made in Japan, no sales in Japan, and so fewer planes made in Seattle. Pink slips fly, both in Japan and America--not good for anyone.

If you compare the rates of "hard core" long-term unemployment in the industrialized nations (see chart), then you'll see that the U.S. workforce has a far smaller problem than the European nations, which are staggering beneath a long-term unemployment rate of 40% - 50%.

The volume of ARM credit outstanding is not known for certain. Growth in this type of credit was compounded not only by the rising share in mortgage originations, but also by the fact that the average ARM loan is much larger than fixed-rate loans (by a factor of about 1.5 in 2003–06). Thus, the share of ARM mortgage debt in total debt outstanding was probably close to 35% at the end of 2006—this translates into roughly $3.5 trillion of single-family mortgage debt, out of a total of about $10 trillion.

At the end of 2006, subprime and alt-A loans accounted for roughly 72% of ARM debt outstanding—that is roughly $2.5 trillion in debt, or 25% of the total mortgage debt outstanding. This represents about 9.6 million loans, or roughly 19% of the total number of mortgage loans outstanding.

At frequent contributor Harun I.'s recommendation, I've been reading Reminiscences of a Stock Operator,

As background for the plausibility of such a financial panic, please read the book The Misbehavior of Markets and these two articles: Financial Disasters Will Keep Coming and The Sordid Business of Predicting A Crash

Japan's foreign exchange reserves rose to an all-time high of US$908.96 billion at the end of March from the previous record of US$905.05 billion in February, the finance ministry said Friday.

Tokyo's foreign exchange reserves remain the second largest in the world, after China, whose holdings reached US$1.07 trillion at the end of 2006, according to official data from China's central bank.

The figure is now roughly double the $1.5 trillion a day traded in 1996, the year before the Asian financial crisis. Some perspective: the $3 trillion figure is ten times the value of daily stock and bond turnover, and a hundred times the value of daily goods and services trade.

When I saw that house of cards, my FIRST thought was that every one of those cards are also currently being played in the United States economic game.

{sarcasm}
Wait, are we talking about China or the United States?
{/sarcasm}

Here's the problem with China: they built an economy dependent on exports. So if they can't buy their own stuff now, how in the world can they do it after income is reduced when the US slowdown accelerates?

When you rely on exports to grow your business, you have to always be the cheapest. You will lose your customer when the next guy becomes cheaper.

Second, when you rely on exports and your own people cannot buy your goods, how will you ever grow your own economy?


My brother, who is very smart, has a pro-China argument that I haven't been able to explain away: China is not getting any money now for the stuff they sell us. Basically they are getting dollars which are ultimately worth less in the future. They print yuan for every dollar they get. So they can just keep printing yuan and keep the factories busy even if the US stops buying. Let China's banks continue to buy the goods! I hope this makes sense.

China needs to raise the wages. As Richard Duncan says, the solution is a global minimum wage.

I firmly believe that China is also seeing the US consumer slowdown, which started here about 6 months ago. We know Christmas retail was down. They have got to know! So how are they adapting? Are they scared out of their wits? Have the banks accelerated business bailout?

How many "riots" did they have last year? 75,000? I took a lot of Chinese history classes at university and although I no longer remember the order of the dynasties, I still remember lots of names of "rebellions" and "incidents" and other uprisings. I studied Chinese, and lived in Taiwan for a while, where I sometimes witnessed miniature riots when people cut in line at the movie theater.

That culture is the foundation for the house of cards, so to me the risks of real upheaval are genuine.

My wife brought up her favorite point of contention with Chinese society -- the one child policy and how it encourages selfishness. I suppose she has met some very selfish "only children" and is worried about a whole society made up of such folks.

Anyway, I am not convinced that the future of China is completely smooth sailing

Life in rural communities in China, India and elsewhere is tough. Are we to displace a non-money economy with formerly self-sufficient peoples moving to the mega-cities to live in slums? In the recent PBS documentary, China From the Inside, rural people dislocated due to the damming of rivers were given new high density housing. But as one of them exclaimed, we have no jobs and cannot raise our food anymore. Relocation from dam areas, like the Three Gorges, is causing huge social upheaval (75,000 riots in China in 2005).

Thousands of families are divided throughout China as parents spend most of the year in large cities making a living, while their children remain in rural villages with grandma tending to all the chores and to the fields. In other cases, women are left in the villages to raise children while husbands go off alone to the cities to work.

Expectant mothers still abort female fetuses or abandon newborn girls because of the long-held view that women are not as valuable to the culture as men. China is the only nation in the world where the suicide rate for women is higher than that for men. Of course, relocated peasants cannot afford the laces on the brand-named shoes they manufacture in sweatshops. But then, again, they do get to see their children four days out of the year! So yes, they are “out of poverty” according to the $2.00 a day rule, but at what cost?

One other problem you didn't mention in China's House of Cards, but I think it's a big one, is the flight of China's best and brightest, or maybe that's crookedest and best connected, to foreign safe havens, along with millions if not billions of dollars in ill-gotten gains, er, profits, which thereby flowed out of China.

My Dad sold his house in West Vancouver to an investor from Shanghai - for about a 20% premium on the market back in January 2006, so I know a bit about that from personal experience.

The most important thing one has to grasp when comes to the current development of China is to understand what "Golden Ages" of histories are all about. "Golden ages" of civilizations are essentially movements of collective social consciousness. Think back on the Golden Ages of Greece, Rome, and that of the Renaissance. Were those times of great upheavals, rampant warfares, wide spread social injustices, corruptions, poverties, ..etc. Yes! But what makes those times "Golden Ages" golden were the collective upsurges in social consciousness to do better and better.

Despite or perhaps inspite of the problems, people of those societies and their immediate subsequent generations at those times decided to rise above their physical limitations and accomplished what we later called the "Golden Ages" of their respective civilizations. When contrasted with the "Dark Ages" just a few years back, Europe & the Europeans at the time of the Renaissance simply would not be denied, and as a result we are all are reaping the benefits of it today.

China of today, after almost 500 years of humiliations at the hands of the global colonial powers and after over 100 years of internal bloody revolutions and strifes has now finally decided to "wake up". This "awakening" is one of the spirit. It is the same spirit that Jim Rogers first felt and saw years ago when he visited China; it is the same spirit that many of the leading Western business leaders understood, and the same spirit that I felt when I lived there from 2002-2005.

Once unleashed, the spirit of the "Great Awakening" (or here in the West called the "Spirit of the Renaissance") can not be easily dispersed, if at all. History making is taking place and it will take its due course. Surely there would be many trials and tribulations; but as Jim Rogers said, the next time when you see China is in trouble, it's time to bet the farm and buy everything there; then wait for a few years and retire rich and wealthy (Rogers, Hot Commodities 2004).

Pax Anglo-Americana is surely not done yet; in fact, we have just gotten started (All truth be told, the spirits of the Greco-Roman empires and Imperium Brittanica has metamorphosized and got incorporated into the current Pax Americana order, or as they say, "it's a New World Order, baby!". Sino Conferation is just about to start. Will the two future super powers live in peace, co-creating a truly global prosperous planet as we take to the stars or will we descend into fiery competition and self-destructive warfare? Only time will tell; but what an interesting time we live in!

After reading your comparision of 2007-2011 economic conditions I believe you should open this comparision up to your readers, you may get some really funny ones. I would like to suggest one:
2007-You scan the Sunday circular looking for an ATV, mini motorcycle or mini scooter for your boy.
2011-You push a go cart that you and your son fashioned from parts found in the town dump down the hill.

Small TV found on curb won't work because all TV transmissions have gone digital, and the old receivers can't handle them without a converter box.

Download of songs from iTunes won't work -- massive piracy will cause all for-pay services to collapse.

Windows98 PC useless, since you can't connect it to the internet without immediately picking up a virus.

Social Security check not "huge", since government attempts to bail out the economy have devalued the dollar.

Not sharing one DVD amoung family -- bootleg DVD's are nearly free.

WebMD not in library -- government funding for nonessentials has evaporated. Instead, use pirated DVD.

Last home computer you bought was not sold -- it was nearly worthless. Still works fine though, except for the virus-ridden software.

The TV from the curb won’t work in 2011 as all analog broadcasts will be discontinued. So, no TV at all.... Maybe people will find books from the trash, or the free bin from the second hand book place, to read instead.

from an MSN story: "Legislation passed by the Senate on Wednesday would require broadcasters to end their traditional analog transmissions by Feb. 17, 2009, and send their signals digitally. Such technology promises super-sharp pictures and better sound."

You forgot to put 1967 with the same items as 2011 as a third column. the only TV I watched when I was a kid was rocky bulwinkle on our next door neighbor's TV before school. Then we got a TV around '67 or '68 because we watched batman, disney etc on a 9" black-and-white zenith TV that still works.

Here's one of mine on the 2007-2011 theme

2007: Fly to far off cities to visit your parents and siblings.
2011: Walk to the basement or garage for a visit.

My feeling is that things will be getting much more local and when times get tough people will pull back and try to form traditional extended family groups. If this is the case think what that will do to the real estate market. In 2006 (in the above example) three houses are required, in 2011 only one is required. Consider the numbers if this trend becomes commonplace. A practically instantaneous fifty percent drop in demand for housing if just one formerly independent family component coalesces around another with a job or salvagable house/mortgage. This effect is the accelerated opposite of the familial diaspora in evidence since the 50's. The fact that many families are estranged will doubtless complicate this. However, I believe that the families that do manage to gather in will be much happier than before.

We’ll have government programs to ensure people get their daily intake of Starbucks coffee.

Right up until the whole edifice collapses on itself. (which is probably further away than 2011, although you never know)

Everyone is protected against their bad decisions. Those of us with little debt, lots of savings, etc, we’ll be taxed as hoarders or something similar.

I constantly hear people like Bill Gates (most recently in Mexico) stating that America doesn't have any trained people and we need to increase 'migration' and visas etc...I guess my 25 years in IT doesn't qualify! What is sad is that the general population thinks it is true because it is in the media.

Well I have a friend of a friend whose wife graduated from medical school several years ago and she was never able to find a full time position?! Seems that every hospital wants to hire her part time, no benefits, and on an as-needed basis. She has had to work at 2 to 3 hospitals at the same time to actually get 40 hours a week. She doesn't have the funds to start her own practice.

The same experience I have fought in IT for decades!

It is always difficult to hire an employee regardless of position or skillset. I have had to directly find and hire people for probably 15 years. There was a book published back in the mid 1990's that was based on the premise that because of the way Human Resource departments at American corporations are set up, American corporations will fail and completely collapse. HR practices will destroy America. I can't find the title and the book as it in deep storage 1000 miles away so I can't get the title.

Everything in the book has come to pass...

Microsoft can not find enough skilled employees - at the salary they wish to pay!

Microsoft hires Visa/outsourced employees because they pay them less in actual salary and benefits when compared to hiring Americans. If I am an American living in Redmond I must make $100k a year to live a decent lifestyle in America (buy inflated house, car, etc). Temporary workers make a better salary than they would in their home country and they don't need to make as much because they will not have to stay in the inflated economic area. They bank cash, put their lives on hold, and leave in 5 years.

Lack of experience and training is an old, tired excuse. If those visa holders had to buy a home and have their spouse come over and pay for schooling and pay for all the stuff a permanent resident must pay for they wouldn't come here --- and accept the same low pay!

Healthcare is part of it but you are not the 'real problem' as related to healthcare - it is your wife and kids. Men, even older men, do not get sick. They just die. Woman and kids are like 80% of the costs to the healthcare plans at companies. Most men do not get pregnant or have breast cancer or have kids. I think if you could find the stats, most young men (20-55 years old) don't have medical conditions (that probably is changing due to obesity). How many women aged 20-45 have you known that had uterine or breast cancer? It is frightening. Also kids are a black hole today for medical costs!

There are skilled American IT workers out there but I do feel that there are fewer today than say 10 years ago. Almost all of my friends have moved from technical areas to non-tech areas. They had enough of the 'work for a year then get laid off' lifestyle, spending your life in a hotel, and constant re-training and certification merry-go-round. We have lost a huge number of really experienced workers in this country.

I have worked as a COBOL programmer, Siebel programmer, and Visual Basic programmer. I actually sat and coded all day. If you know programming those are about as different mindsets as you can get! My budgets usually ran from $25,000,000 to $400,000,000 (yes 400 million dollars).

In the 1990's companies quite training employees. As soon as they trained the employee, the guy promptly left for more money. Headhunters would swoop in and steal all the trained employees. Then we started outsourcing with visas and later overseas. I wasn't allowed to code but was 'moved into management' where my job was to find workers recently laid off and give them just the minimum training needed to do a job and then we used these 'just in time employees' for contract gigs (I worked at different consulting firms).

Companies just gave up on their employees I think. Corporations don't have a soul to save or an ass to kick. It is a company's purpose to maximize profits and I can't hold that against them.

Remember back in the 1980's the articles about how in the future companies would hire employees literally by the hour to complete a job. There would be no permanent employment. For myself and a lot of my friends that is the reality today and it is working its way to other areas outside of IT. Many professional health care workers are going thru this because their salaries are so high.

It does make financial sense for companies to only pay for work when they need it. Why hire a programmer to work on a project for 6 months then sit for 3 months till the next project starts. The company could use that 3 months of salary on another project.

The problem is that there isn't a mechanism to manage this process. Yes we have human resource departments but they are still operating on the old 'hire them for life' methodologies. HR is broken. My friends who aren't entrepreneurial are just lost! They are not equipped to market themselves 24 hours a day and work 35 jobs a year. It is killing them. Being self-employed can be terrifying.

My first real job after school was 5 brutal years working on COBOL programs for billing, a/r, sales, provisioning, call center, and marketing. Today how do recent graduates get this kind of experience when companies only want to hire people for 3 month contracts? Also the HR dept is responsible for screening applicants. Back in 1932 a manager need to hire a welder. Well this guy was 50 years old and has been a welder for 30 years. He now manages welders but he knows everything about welding so he can tell in 10 minutes the qualifications of an applicant.

Today not even the hiring manager is experienced. I worked at a Fortune 10 company. Major, huge company with 175,000 employees. I was in a review with my manager who had zero technical experience. I told him he didn't have a clue how to manage my job, well his reply was he didn't have to understand my job - he was a manager and he managed people! How true but how stupid!

For a couple of decades we have 'pushed' non-technical people into technical management positions because of affirmative action. My own mother was pushed into management because of a class action lawsuit based on the low number of females in management. How can these people find qualified employees. I can tell in 10 minutes if you really programmed VB or if you have actually used software Quark or Indesign on a daily basis. I have decades of technical experience, my mother doesn't.

The career path that created a stream of skilled employees broke down in the 1990's. I can find kids that are great at ASP or PHP because they are the nerdy kids that sat in their room programming with their friends for 10 years. IT is special in that regard. You can learn many IT skills on your own. Try finding a petroleum geologist that has 10 years experience. We laid these people off after the slowdown in the 1980's and we killed the path creating a steady stream of experienced employees. Same for medical professions and mechanical engineers etc etc etc.

My geologist friend is now a pilates instructor! My engineering friend is a secretary!

I get 5 emails a week asking if I can work on a 3-month Siebel gig. They usually want 5-7 years experience and certification. The training costs alone per year are easily $10,000. Forget it. I can't pay inflated Siebel training costs and accept de-flated salaries. When I say that HR has broken down, one example is that the salaries companies expect to pay are based on the salaries of the employees they laid off 5 years ago but I am not an employee. I am a business and I can't survive on the old employee hourly salary. I bill just like a business does. That means they may have paid $45 an hour for an employee but you will pay me $45,000 for the 2 week gig.

I am not your employee! I must pay for my own office equipment, accounting, marketing, training, healthcare, etc, etc. Also I pay self employment taxes. Even with write-offs I pay a fortune in taxes. I have watched so many of my friends crash and burn when they started working freelance and not approaching the situation as a business.

HR can't afford me for a 3 month contract so it is true that HR can't find qualified applicants (for the salary they expect to pay!)

I was a Director in a company several years ago and it was a non-stop fight trying to hire people. HR must maintain 100% control to maintain their power in the organization. I would find 10 candidates and they would be screened by HR first. HR would reject all 10! A typical reason was that the kid had very poor communication skills. What! I am trying to hire a ASP programmer. These kids are uber nerds. They just want to go to their cubicles and code and code and code. Sales people must be great listeners / communicators but ASP or PHP programmers just code!

Part of the HR problem related to not being able to find qualified people has to do with the systems they have been using since the mid 1990's. HR software defines job qualifications for HR. When you setup a large HR software system you usually buy the most common 3000 job descriptions. This is useful because the 18-year old HR employee doesn't have to create the job description. OK lets let the hiring manager create the job description for a PHP programmer. Well wait a minute, she was never a programmer. She was an arts major but now she manages 5 technical people. She can't write the description. So the software provides the descriptions, just click the dropdown box and pick the title 'PHP programmer' and the description is provided for them.

The problem is that the descriptions are not realistic. A perfect example is a friend of mine. She handles marketing for companies and started back in 1985. She had just graduated with a journalism and marketing degree. She learned all the manual processes like typesetting, etc. Well the Macintosh and Quark had come out and she felt that was the future and she learned to use a computer and the software. The older workers didn't and eventually had to hire her to do the work or go out of business because document creation became 100% digital. Around 1995 she decided she wanted to work for a company instead of freelancing. Freelancing is a really lonely job as you work by yourself 90% of the time. So she started looking for a job. She found that even though she had 10 years experience, she wasn't qualified!

By 1995 HR had combined website creation with the old marketing skills. That meant that artsy type people now needed to know html and javascript! People who can draw a horse freehand are a completely different mindset from the nerds that program javascript but because the software description listed both as a requirement she couldn't find a job and the companies couldn't 'find qualified applicants'. She never found a position.

So again HR can't find qualified applicants! The system is setup to 'not find qualified applicants'.

I could go on for pages but on to the question about healthcare...

I have not had real benefits since 1990! I have never had a contract job that provided benefits. I worked for Xerox and they provided 100% coverage for anything, anywhere, anytime with no deductible! It was unbelievable and cost that company a fortune! I know of situations that the medical bills came to over 1 million dollars and Xerox paid - no questions asked. (one example was a friends child was born without part of their skull and another was a friend who was in an automobile accident and had a major head injury) They paid for dental and eye care also.

What is even more incredible is that they would give every employee $400 a year in CASH to cover the little things like cold medicine and aspirin from the drug store! I knew people that would go on 'mental disability' for a year and get full pay. How insane was that! The actual reason for the mental problem was 'I hate my job'! No kidding!

Those days are long gone! The employers I have worked for since have had benefits but they are the 'fake' kind meaning I paid for all the coverage. That meant that I had $5000 deductible and coverage up to $10,000. What good is that! Statistically how many times does the insurance company payoff with weird rules like that? No dental. No eye care. By law companies have to provide coverage but they can really just pass most of the expense thru to the employee with huge deductibles. The big hit for the employer is the signup costs. That is why I don't want employees quitting after 3 months. High turnover will cost you.

I think that healthcare is a factor in companies trying to go to outsourcing or visa type employees. It does cost money even if you only provide the bare minimum coverage required by law but companies are very good at beating down those costs. If you stated that an older person could not get a fulltime position with company A but could get a contract position (without benefits) with company A then I would say that healthcare costs are a factor. The problem is that I don't know of to many people getting high paying contract jobs! No one is hiring.

All high paying jobs are few and far between regardless of the jobless stats and the media talking about 100% employment. Companies have laid off a majority of their workers and have been on life support since 2000. Read the financial annual reports on most companies in America and a huge amount of profit is derived from financial transactions/speculation - not from their core business. (example GM and GMAC).

The high paying jobs went to China. Design the mp3 player overseas, manufacture it overseas and sell it marked up 90% to Americans. Every time you try and use your cell phone and it has some weird bug like the time keeps changing that means the code development was cut short, layoff the contract programmers, and never hire people to maintain the code. I see stuff like that everywhere because I know how stuff is made but my Mom just ignores the problems as most American do.

Why hire you when people don't care if the accounting software has a bug and bills you an extra 25 cents! The cash registers at Home Depot crash and everyone has to wait for 30 minutes - Home Depot has 3 network people instead of the 50 needed to maintain the system. My mom just stands there and waits like a sheep. I understand they are pushing the costs off on me - I wait and they only need to hire 3 network employees.

This is all about the 'productivity' numbers that have been so great since 2000. Companies laid everyone off and do not fix or maintain stuff. There isn't a need for all the experienced workers out there if you cut out 80% of the development and maintenance.

I guess my answer is that companies are not hiring because their core business is broken. It isn't you! If we hadn't had the housing bubble we would have had a huge depression. I love tech but I dearly want to quit IT but I can't come up with a 'old school' trade that people will (can?) pay for.

Sorry about the rambling but I wrote this one paragraph at a time while packing to go back home.

Well, if the premise of the article is valid, and China is as important to the world economy as many folks believe, then what next when two Chinese workers are supporting four Chinese retired parents? It kind of makes our Social Security problems look like a walk in the park.

My favorite leading indicator is in the 81 & 91 recessions Porsche went from 45,000 to 5,000 sales. See notes here on delusion / denial of cars on consignment vs dumping. Subprime Mortgage Collapse Eviscerates California Headquarters.

A few doobies, a couple of beers and a maybe some Owsley would have been a healthier approach but it was probably trying to quit smoking and sucking back that B-12 that did it. They really need to ban the damn supplements!

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I would be honored if you link any essay to your website, print a copy for your own use or add my RSS or Atom feed. And of course I appreciate your recommendations of this weblog and your comments: csmith@oftwominds.com.

                                                                       

wEssay noun, combination of 'web' and 'essay,' denoting a short online essay which exploits the hyperlinks, interfaces and interactive capabilities of the World Wide Web; coined by Charles Hugh Smith on May 1, 2005, in Berkeley California.

Aphorisms I like:

"Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited." (George Soros)

"The way of the Tao is reversal." (Lao Tzu)

"Chance favours the prepared mind.” (Louis Pasteur)

"It is neither necessary to hope to undertake, nor to succeed to persevere." (French proverb)

"You must have a willingness to do something when everyone else is petrified. You must learn the lesson of following logic over emotion." (Warren Buffett)

"Success consists of going from failure to failure without loss of enthusiasm." (Winston Churchill)

"May a fair road always be open to you." (CHS, April 2, 2006)


All content and images copyright © 2006 - 2007 Charles Hugh Smith, All rights reserved in all media, unless otherwise credited or noted.