"Reset" - The new buzzword to describe the current U.S. economy

I talked about 2008 being the year of Great Disruption in my March 8th blog post, referencing Tom Friedman (NYT) and Paul Gilding

I argued that this Disruption is not merely a down phase of an economy's usual up-and-down cycles, but rather represents a reset to new sustainable paradigms on several fronts. "Reset" is apparently becoming the new buzzword to define the current climate of American economy. It's on the cover of the Time magazine's latest issue of April 6th.

Here are a few excerpts from the Time's cover story that lists excesses in America during the quarter century period starting early 1980s and leading up to the current global financial meltdown:

From 1980 to 2007, the median price of a new American home quadrupled.

The Dow Jones industrial average climbed from 803 in the summer of 1982 to 14,165 in the fall of 2007.

From the beginning of the '80s through 2007, the share of disposable income that each household spent servicing its mortgage and consumer debt increased 35%.

Average household savings decreased from 11% of its disposable income in 1982 to less than 1% in 2007.

...until the late '80s, only Nevada and New Jersey had casinos, but now 12 states do, and 48 have some form of legalized betting.

From the beginning to the end of the long boom, the size of the average new house increased by about half.

During the boom years, the average American gained about a pound a year, so that an adult of a given age is now at least 20 lb. heavier than someone the same age back then. In the late '70s, 15% of Americans were obese; now a third are.

We knew, in our heart of hearts, that something had to give....no one wanted to be a buzz kill.

Yes, none of the commercial news outlets wanted to kill the buzz.

However, National Public Radio (NPR), the listener supported public radio in America, by far my favorite news source, ran a full hour program on this topic on May 9th, 2008, four months before the crisis surfaced on the mainstream news. "The Giant Pool of Money," an hour-long episode of This American Life (TAL), a production of Chicago Public Radio, in collaboration with NPR news, provided one of the most insightful investigative anatomy of the sub-prime mortgage mess in a vivid and humorous narrative easily understood by common man. I'd strongly encourage readers to listen to the May 9th TAL podcast.

NPR business reporter Adam Davidson, who co-created the above podcast, claimed in a recent Fast Company article that the financial crisis story demanded public-radio-style journalism. "I don't think this is a good story for newspapers, to be honest with you. Because it's an emotional story, it's a shocking story. We're used to all the people who formed the architecture of our economic infrastructure having the voice of God -- like Alan Greenspan. They're the experts and they understand the world and they're going to explain it. And business journalists had that tone too. We're now in a world where anybody who tells you they know exactly what's going on, you can just dismiss them as a liar."

Celebrities on Twitter

The growing popularity of the micro-blogging service Twitter, having grown by 13x over the past year to 7M+ uniques in Feb 09, and its increasing use for promotion/marketing, has made it popular among celebrities as well. Michael Phelps, Martha Stewart, Jane Fonda, Jimmy Fallon, P. Diddy, Deepak Chopra, Ashton Kutcher, Al Gore, are among a wide range of celebrities who are active Twitter users. Fans definitely welcome it, as they prefer direct and unfiltered updates from their stars, who also get an opportunity to connect with their fans in a manner that was not possible before such technology tools came along. Some celebrities, of course, appoint a staff member to manage their Twitter account.

Below is a representative celebrity Twitter ecosystem from The New York Times. The chart shows celebrities following one another on Twitter (as of March 18). Click of the chart to enlarge it.

"Domesticated" lions

A fascinating clip from South Africa. The guy says "this is normal."

Visualizations to explain the economic crisis

Graphic artists are having a field day in trying to explain complex financial concepts related to the ongoing global financial crisis. FlowingData has pulled together from various sources 27 visualizations and infographics.

I've included a few of them below. Click on the image to enlarge it.

2008 financial crisis
-by Carolyn Aler and Sam Conway


Alternate View of Obama’s $819 billion Stimulus Package


The Fall of GM
-by Jess Bachman


Where did all the money go?
- by Emilia Klimiuk

Role of "quants" in the demise of Wall Street

In November, while discussing the factors that let to the financial meltdown on Wall Street, I pointed out the key role played by quantitative analysts (better known as "quants" within the industry). The New York Times today has a great coverage on this topic, They Tried to Outsmart Wall Street. It also includes anecdotal accounts from physicists and other scientists who were the architects of complex derivative securities that enabled excessive risk taking and almost brought down the entire global financial services industry.

2008: The year when the "Great Disruption" started

I returned from my travels earlier this week. While catching up on my readings, I saw Tom Friedman's Op-Ed in yesterday's New York Times, in which he quoted Paul Gilding, a veteran activist and social entrepreneur from Australia, who has always championed the virtues of sustainable development. I follow both of these individuals, so I thought I should share with my readers Friedman's Op-Ed in which he aptly links Gilding's concerns in his article from last July - The Great Disruption - to the global economic and financial meltdown that started a few months later.

Gilding claimed in his July 17th article that 2008 will be a momentous year in the human history - it'll be the year when the Great Disruption began. It'll be marked as the year in history when both Mother Nature and Father Greed hit the wall simultaneously. The events that started unfolding on the global economic scene in September 2008, just two months after Gilding's article, should eliminate any doubt whatsoever anyone might have to his theory.

Friedman encapsulated similar thoughts in his Op-Ed. Few excerpts are below:

"...crisis of 2008 represents something much more fundamental than a deep recession? What if it’s telling us that the whole growth model we created over the last 50 years is simply unsustainable economically and ecologically and that 2008 was when we hit the wall — when Mother Nature and the market both said: “No more.”

"We have created a system for growth that depended on our building more and more stores to sell more and more stuff made in more and more factories in China, powered by more and more coal that would cause more and more climate change but earn China more and more dollars to buy more and more U.S. T-bills so America would have more and more money to build more and more stores and sell more and more stuff that would employ more and more Chinese ...

“We created a way of raising standards of living that we can’t possibly pass on to our children,” said Joe Romm, a physicist and climate expert who writes the indispensable blog climateprogress.org. We have been getting rich by depleting all our natural stocks — water, hydrocarbons, forests, rivers, fish and arable land — and not by generating renewable flows.

“You can get this burst of wealth that we have created from this rapacious behavior,” added Romm. “But it has to collapse, unless adults stand up and say, ‘This is a Ponzi scheme. We have not generated real wealth, and we are destroying a livable climate ...’ Real wealth is something you can pass on in a way that others can enjoy.”

The consumer driven free market economy is here to stay, but the Great Disruption of 2008 in my opinion does not merely represent a typical down cycle that will be replaced by old glory days. It instead represents a reset - a reset in both the nature and composition of economic activity in the western world, a reset in the level of conspicuous consumption, a reset in the wealth gap between rich and the poor, a reset at the Wall Street, a reset in people's priorities, and a reset in the definition of happiness and the manner in which people pursue it.

And the underlying principle of the reset will be a focus on sustainability.