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by Rob Horning

8 Nov 2008

In Vanity Fair, Niall Ferguson has a long article tracing the history of our current financial crisis. None of it will surprise you if you have been following things for a while, but it’s a good overview of the roots of the crisis if you haven’t (though the bit about goldbugs being “vindicated” in their crusade against fiat money seems a bit crackpot to me). All the bases are touched: the Chinese savings glut, Fannie and Freddie, financial derivatives gone wild, S&L deregulation, delusional quant models, etc., etc. His main conceit is that thanks to unprecedented leverage and a kind of blind faith, operations in the financial world (Planet Finance) had come to dwarf the goings-on in the actual world. As investors recognized there was no ground beneath their feet, that Planet began to self-destruct.

Interestingly, Ferguson connects the rise of leverage to stagnating wages.

By the 1980s, in any case, more and more people had grasped how to protect their wealth from inflation: by investing it in assets they expected to appreciate in line with, or ahead of, the cost of living. These assets could take multiple forms, from modern art to vintage wine, but the most popular proved to be stocks and real estate. Once it became clear that this formula worked, the Age of Leverage could begin. For it clearly made sense to borrow to the hilt to maximize your holdings of stocks and real estate if these promised to generate higher rates of return than the interest payments on your borrowings. Between 1990 and 2004, most American households did not see an appreciable improvement in their incomes. Adjusted for inflation, the median household income rose by about 6 percent. But people could raise their living standards by borrowing and investing in stocks and housing.

Throughout the bubble, right-leaning economists tended to argue that wage stagnation didn’t matter for this very reason: people were garnering tax-advantaged gains in assets and shrewdly borrowing against them, so wages were an outdated way of measuring how well-off people were. Better to judge that by their consumption, because as we all know, spending is a proxy for feeling good, and more stuff equals more joy. And consumers were not flagging at all in their spending through the bubble period, and they new better than any fancy economic analyst what they could comfortably afford.

It’s a much different picture now, with retail sales “collapsing” according to this NYT headline, and the credit supply all but dried up for many would-be borrowers. The NYT article offers this choice anecdote about glum shoppers:

Two stylishly dressed friends spending time in Midtown Manhattan on Thursday said they used to enjoy shopping. “I want to impulse-buy again,” said a wistful Louise Van Veenendaal, an actress. But these days, economic anxiety is prompting the women to steer clear of stores. They refuse even to look at sales circulars.
“I’m much poorer than I’ve ever been,” said her friend, Kate Pistone, also an actress, who makes ends meet by working at a restaurant. Sales there have been declining. “I made $5 last night,” she said.
Analysts who spend time prowling the nation’s stores to track trends say that consumers are simply shell-shocked by all the grim financial news.
“You walk the mall and consumers look like zombies,” said Mr. Morris of Wachovia, after visiting a mall last week. “They’re there in person, but not in spirit.”

I have mixed emotions reading such accounts. I want to find something hopeful in people steering clear of shopping, but if the choice is forced by anxiety, than no progress is being made. The idea is for not shopping to make people less and not more like zombies. If we are less preoccupied with acquiring and collecting stuff, the thinking goes, we’ll have more energy to devote to actually doing things. (The presumption is that shopping is not quite a real activity but a substitute—we buy a skiing magazine and imagine going skiing rather than just heading to the mountains.) But such anecdotes as the one in the NYT article remind us that we as a nation are going to experience shopping withdrawal, which most likely will only enhance the allure of the now-rarefied pleasures of impulse buying. We may have forgotten to some scary extent how to enjoy things outside of the structure of a retail exchange. Shopping has become the stage for our pleasurable experiences, making a purchase the trigger for joy. We won’t unlearn that immediately simply because it has become economically expedient.

As the wistful waitress-actresses demonstrate, without more money coming in via wages, we have to scale back spending and lose access to the surest pleasures we know. And worse, fewer and fewer Americans are drawing wages at all. This keeps consumer confidence spiraling downward, making it impossible for them to lead a economic recovery.

Paper gains can’t supplant wages in sustaining economic growth. In assessing the degree to which the current crisis echoes the Great Depression, historian James Livingston points out that when the share of productivity gains that go to wages falls, consumers can’t be counted on to sustain economic expansion:

At the very moment that higher private-sector wages and thus increased consumer expenditures became the only available means to enforce the new pattern of economic growth, income shares shifted decisively away from wages, toward profits.  At the very moment that net investment became unnecessary to enforce increased productivity and output, income shares shifted decisively away from wages, toward profits.

And those profits had nowhere to go but into inflating bubbles.

Ferguson connects the reliance on investments rather than wages to the essential problem with the ownership society:

Once upon a time, people saved a portion of their earnings for the proverbial rainy day, stowing the cash in a mattress or a bank safe. The Age of Leverage, as we have seen, brought a growing reliance on borrowing to buy assets in the expectation of their future appreciation in value. For a majority of families, this meant a leveraged investment in a house. That strategy had one very obvious flaw. It represented a one-way, totally unhedged bet on a single asset.

Hence, as housing prices fall, people panic. Housing is better thought of as something you consume, not as an investment, and certainly not your only form of savings. During the housing boom, it was trendy to argue that America’s negative savings rate wasn’t a problem because it was off-set by swelling asset prices. What we are confronting now shows exactly what was wrong with that thinking.

by Bill Gibron

7 Nov 2008

If you ask Guillermo Del Toro what his most personal films are, the answer seems obvious - at first. The Devil’s Backbone was a chance for the Mexican moviemaker to discuss the impact of Spanish Civil War on his ancestral homeland. It combined a Gothic ghost story with a strong political agenda. Similarly, Pan’s Labyrinth extended the meditation to the Franquist repression during the Franco regime. Again, we got a mixture of history, heritage, honor, and horror. The third choice, however, is the oddest overall. While no one expects Blade 2 or Mimic to join the others, both Cronos and the original Hellboy were close to his humble geek heart.

Yet, oddly enough, it’s the sequel to his 2004 comic book hero epic that sits closest to the man’s soul. As part of the amazing three disc DVD presentation (new from Universal) of Hellboy II: The Golden Army, we hear Del Toro, in his own self-deprecating way, explain how the larger than life flights of fancy peppered throughout the underappreciated Summer blockbuster represents an literal illustration of his own fertile imagination. It’s everything he wanted the original film to be and much, much more. Purposefully plotting out certain scenes to thematically represent his view of mankind and its uneasy coexistence with forces outside of reality, Del Toro delivers the kind of wide-eyed entertainment that will only grow in approval in the coming years.

You see, long ago, when the Earth was green, humanity and the elements of magic battled for control of the planet. Seeing the error of their ways, the two sides came to a truce before the mythic Golden Army (a goblin-made indestructible mechanical killing armada with no remorse) could be let loose. Now, centuries later, the son of King Balor, Prince Nuada, wants to pay humanity back for its crimes against his fellow creatures. He seeks the three pieces of the royal crown, the device that controls the feared robotic redeemers. Crossing over into the real world, he unleashes his otherworldly minions to help him seek the sections.  Naturally, this puts him in direct conflict with the Bureau of Paranormal Research and Defense. Along with the fire-conjuring Liz Sherman, and the aquatic empath Abe Sapian, it will be up to the heroic demon with a decent heart named Hellboy to stop Nuada and save the day…if he can.

Clearly, the connection to Mike Mignola’s comic and character is now very loose, to say the least. In fact, Del Toro reveals as part of his discussion, that when he first heard the idea for a follow-up film, Hellboy’s daddy was distraught. He didn’t like or appreciate much about the follow-up. But leave it to the likable Latino with the mind of an ADD amplified arrested adolescent to bring him around. The Golden Army is indeed great. It is two hours of monsters, myth, and moviemaking majesty. Since he no longer has to give us the title character’s origins, and can swiftly bypass any further character introduction, Del Toro goes right for the throat. From the opening stop motion animation that sets up the storyline, to the finale which pits armored automatons against our heroes, this is nothing short of pure visual bliss.

Del Toro has always been the biggest of genre mavens, an old school nerd who plies his obsessions with a fetishist’s fascination. You can sense him marveling over his own novelty over the course of the film, his camera capturing the actual awe and inferred wide-eyed wonder. Our synapses shouldn’t fire this liberally or often, and yet Hellboy 2 makes the overload feel like a familiar friend. This is big screen fantasy as a wish fulfillment free for all, a far out fairytale told in the most intricate of celluloid calligraphy. Luckily, this is one director who makes room on his crowded canvas for moral fiber and subtext. This movie is more than just a collection of setpieces showing off the best that CGI and other F/X have to offer. Instead, it’s a deep meditation on magic, and how civilization has lost touch with its ethereal power.

Returning to remind us of how great they were the first time around, Ron Pearlman (Hellboy), Selma Blair (Liz Sherman), and Doug Jones (now also voicing Abe Sapian) provide the nexus for our emotional involvement, and all do splendid work. Especially impressive is our title titan, a muscled bad ass with a soul as sensitive as a little child. This version of Hellboy may not match his graphic familiar note for note, but as a conduit to how Del Toro views the world around him, this link between the various planes of existence remains a remarkable work of fiction. And thanks to how Pearlman plays him - strong yet unsure, macho yet mindful of his purpose - we grow to like him more and more as the movie progresses. Jones is also good at channeling Abe’s inner turmoil, a battle Hellboy fought semi-successfully in the first film. 

Par for his creative course, Del Toro delivers villains who moderate their evil with a sense of purpose and potential decency. Prince Nuada (beautifully underplayed by Luke Gross) doesn’t only want to destroy the human pestilence that populates his world - he wants to reset the order, to regain the respect and dignity the supernatural forces once held among the living and undead. He goes about it in nasty, underhanded ways, but the valiance in his purpose is not unnoticed. Similarly, the various creatures created for the film rely on a Brothers Grimm kind of seriousness to support their sinister purpose. They aren’t just the things that go bump in the night. These are the nightmares meant to remind man, as the movie says, of why they originally feared the dark.

All of these underlying themes and subtle subtexts are further explored in the DVDs bonus features (by the way, the final disc is just a digital copy of the film). We learn how the Troll Market reflects Del Toro’s views on good and evil. We see deleted scenes meant to strength the bonds between the characters. As part of the Director’s Notebooks, Del Toro discusses how Pan’s Labyrinth and the difficulty of said shoot allowed him to escape into the world of The Golden Army. And all throughout the added content, form and design, shape and approach are dissected and described, Del Toro’s unique idea for the film fleshed out by artisan’s able to fully realize his aims.

That’s why this movie is one of 2008’s best. Del Toro describes it best when he says that it’s the kind of film that, if he had seen it when he was an eager 11 year old, he would have obsessed on it for months. That’s because, instead of pulling back, this director unleashes the full force of his creative power - and the results are ridiculously resplendent.  It’s like a freakshow film noir where Men in Black meets Clive Barker’s Cabal (or Nightbreed, for those of you not literarily inclined). There is a telling texture to this filmic universe, a real sense of gravitas and threat.

So we really shouldn’t be surprised to see a gentle giant with Satan’s skin standing right alongside the real world characters caught between war and remembrance in Del Toro’s canon. To dismiss Hellboy II: The Golden Army as nothing more than a pleasant popcorn experience is to underestimate the power in this filmmaker’s soul. Of all the foreign voices finding a way in mainstream genre moviemaking, Guillermo Del Toro is truly one of the best. It will be interesting to see what he does when given the canvas crafted by Peter Jackson and the universe inhabited by the equally endemic characters of JRR Tolkien. If it’s anything like this amazing masterwork, the two-part Hobbit will be another item in Del Toro’s list of favorites. And what an impressive collection it is.

by Terry Sawyer

7 Nov 2008

I admit that most of the happiness I derive from this video is the visceral pleasure of watching Monae perform.  The Annie Lennox gender bending, the classic dance nods to Michael Jackson and James Brown, and the way she opens her arms in wide swim strokes like everybody should step back so her outsized persona can get through.; it’s completely mesmerizing.  She’s strikingly self-possessed. 

But that’s just the most obvious surface.  The song itself is bold for audaciously shedding anything like a standard pop format: sounding like a Curtis Mayfield opera written for the Uptown String Quartet. It’s riveting and full of tangential suites, where dream-sequence acapella breaks into a list-rap of denigrating terms that one presumes Monae has had directed at her.  The song is existentially searching without being pretentious.  When she challenges the listener with “So when you’re growing down/instead of growing up/tell me are you bold enough to reach for love”, it’s really a gorgeous plea asking people if they can manage to be the best of themselves under the worst circumstances.  My answer:  not so much.  But damn, it’s a great lyric.  The rest of the song explores themes rather than hewing to a chorus; it’s a galaxy of a song with a charismatic center.

by Jason Gross

7 Nov 2008

Following up on my last post about cultural questions for the next prez, who thankfully is Mr. Obama, the President-Elect now has a site up to talk about his transition process including a blog and an agenda of issues.  Though it comes under “additional issues,” he does address the arts:

“Our nation’s creativity has filled the world’s libraries, museums, recital halls, movie houses, and marketplaces with works of genius. The arts embody the American spirit of self-definition. As the author of two best-selling books – Dreams from My Father and The Audacity of Hope – Barack Obama uniquely appreciates the role and value of creative expression.”

Kind of brief and vague for now so let’s hope he puts more thought into it.  If you have your own ideas about it, he’s got a place for you to sound off too.  Needless to say, I’ll have a thing or two to suggest to him.

by Rob Horning

7 Nov 2008

In a post titled “Recession Trumping Brand Loyalty,” Yves Smith links to this WSJ article about consumers discovering generic products while shopping:

About 40% of primary household shoppers said they started buying store-brand paper products because “they are cheaper than national brands,” according to a September report by market-research company Mintel International, which interviewed 3,000 consumers. Nearly 25% of respondents reported that it is “really hard to tell the difference” between national brands and store brands of paper products. Store brands on average cost 46% less than name-brand versions, Mintel found.

That 25% figure seems a little low to me and suggests the tenacity of brand brainwashing.

But progress is being made on that front, if the several, almost comic anecdotes the article offers as evidence can be trusted:

When Summer Mills visited her local CVS drugstore recently, to save a few dollars she bought the store-brand facial scrub rather than the Olay version she normally uses.
“I thought I’d be able to tell the difference, but I couldn’t—I looked at the ingredients and they seemed almost the same,” says 30-year-old Ms. Mills, a stay-at-home mother of two in Ardmore, Okla. On her next shopping trip, “I’m going to buy the store-brand moisturizer and cleanser—it’s less money.”

You don’t say. (Smith’s acid aside on this: “Moisturizers are one of the many ripoffs foisted on the fairer sex to keep them broke and dependent on male support.”)

It seems silly that people would need to discover that there’s little qualitative difference between branded and unbranded goods. But perhaps what makes this discovery so salient for consumers is the reassurance it provides that their changing spending behavior won’t lead inevitably to a decreased standard of living. You can kept the same sort of stuff, only cheaper, when you go generic. People generally choose to fail to recognize this discovery in flush times because it impedes the chief appeal of brands, which is to serve as a vector for the consumer to experience the lifestyle marketing for various products vicariously—brands allows us to turn the soap we use into an expression of our inner truth, to make buying a new shirt our momentary entrée into a world of glamor, to make a richer identity for ourselves through the myriad associations brands can be made to bear.

The Economist’s Free Exchange blog, in this response to the WSJ article, blames the abandonment of brands on “recessionary thinking,” an inordinate crisis of confidence at the individual level that has irrationally driven up what economists call the demand for cash.

Only, it doesn’t make sense that everyone else is cutting back. Yes, many people have lost their jobs. Some other have founds themselves with enormous debt burdens they’re struggling to meet. But many households, maybe even most households, aren’t facing seriously different circumstances than they were six months ago. And yet their behaviour is changing, and those behavioural changes will themselves generate reductions in spending, investment, and ultimately employment. Good labour will find itself idled because folks like me are nervous, and for no other reason.

From this view, the stream of bad economic news alone was sufficient to alter consumer behavior and undermine consumerism, even though the chief consumers are not actually feeling the economic pain. If you want consumerism to be thwarted, is there reason for optimism in that? Or does that show how shallow shopping habits are and how susceptible they are to capture?

Update: Rob Walker points out that “unbranded” goods are merely branded by the retailers themselves, without the aid of expensive marketing campaigns. He suspects these branded store lines have better margins then the old generics because they get a brand premium—a better price for the name and look alone. I think those ad campaigns are what make brands feel like brands—something you are participating in as a consumer—and even though the store brands have gotten better at mimicking the packaging appeal of branded goods, they fall short, unless the store itself has become a powerful brand, a la Wegman’s.

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A Chat with José González at Newport Folk Festival

// Notes from the Road

"José González's sets during Newport Folk Festival weren't on his birthday (that is today) but each looked to be a special intimate performance.

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