I am here at The Simple Kitchen having dinner with John Matthews at a small meetup I had not attended before, and it is quite nice. The focus of one speaker is B2B Social Media and using it massively in large enterprises.

A German visitor is taking about social media being called other things, such as knowledge management. And right now, John showed me an advanced copy of The Whuffie Factor by Tara Hunt that is coming out in April.

While painting today – it came to me that certain things about our current economic situation are starting to gel for me – and look, this is only my opinion, and I could be wrong.  I’m seeing Depression 2.0, which might be jumping the gun, but then again, look at the news story about Japan’s Economy Plunges at Fastest Pace Since ’74

“…The fourth-quarter results were Japan’s worst quarterly drop since its economy contracted at an annual pace of 13.1 percent in the first three months of 1974.

The sharp downturn is exposing the vulnerability of Japan’s export-driven economic recovery. The dismal figures also place Japan firmly among the worst-hit in the global crisis, dwarfing economic declines in the United States and Europe.”

The New York Times also had a story about Job Losses Pose a Threat to Stability Worldwide where it was mentioned that …

“….Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs.”

Doing some quick math and tying back to my post on Scoring Conversational Media using Comscore I gave the link to a spreadsheet where the collected GDP of each country is estimated (see “Data” tab) using Wikipedia and other public sources such as the World Bank.

In short, 50 Million workers losing their jobs equates, to about 2 Trillion dollars less spending (based on an average of 20,000 USD per worker per year – averaged across the globe).   Added to the rest of the downturn, and it’s not hard to see choppy waters ahead.

Paul Krugman says it better than me in his post on  Decade at Bernie’s

…. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.

At one level this should come as no surprise. For most of the last decade America was a nation of borrowers and spenders, not savers. The personal savings rate dropped from 9 percent in the 1980s to 5 percent in the 1990s, to just 0.6 percent from 2005 to 2007, and household debt grew much faster than personal income. Why should we have expected our net worth to go up?

Yet until very recently Americans believed they were getting richer, because they received statements saying that their houses and stock portfolios were appreciating in value faster than their debts were increasing. And if the belief of many Americans that they could count on capital gains forever sounds naïve, it’s worth remembering just how many influential voices — notably in right-leaning publications like The Wall Street Journal, Forbes and National Review — promoted that belief, and ridiculed those who worried about low savings and high levels of debt.

At the end of his post Paul Krugman mentions the only thing that pulled the world out of the Last Depression was World War II

…. If you want to see what it really takes to boot the economy out of a debt trap, look at the large public works program, otherwise known as World War II, that ended the Great Depression. The war didn’t just lead to full employment. It also led to rapidly rising incomes and substantial inflation, all with virtually no borrowing by the private sector. By 1945 the government’s debt had soared, but the ratio of private-sector debt to G.D.P. was only half what it had been in 1940. And this low level of private debt helped set the stage for the great postwar boom.

Since nothing like that is on the table, or seems likely to get on the table any time soon, it will take years for families and firms to work off the debt they ran up so blithely. The odds are that the legacy of our time of illusion — our decade at Bernie’s — will be a long, painful slump.

In a blog post earlier today Krugman adds an insight he did not present in the OP-ED I quoted above – the post is titled Debt in wartime

….. One way to look at our current predicament is through the lens of Irving Fisher’s theory of debt deflation: as everyone tries to work off excessive debt, the combination of a contracting economy and falling prices puts everyone deeper in the hole. But how do you get out? I’ve drawn the above chart using debt data from Historical Statistics of the United States Millennial; it shows the debt-deflation spiral of 1929-1933, and the partial recovery of the New Deal years.

It also shows something I haven’t seen emphasized: the role of WWII in cleaning up private-sector balance sheets. During the war years there was very little private borrowing, thanks at least in part to wartime restrictions; meanwhile there was both strong economic growth and a lot of inflation. The result by the war’s end was a very low private debt level relative to GDP.

How big a role did these improved balance sheets play in the fact that the postwar economy didn’t fall back into depression?

I realize not everyone agrees with Paul Krugman – and that he has no official role in the Government bailout – but he’s very influential in the debate, none the less, and has been just about the only one who can explain the complexity of what’s happened to us, to the World, in layman’s terms, though Robert Reich has tried to do the same thing, over at TPM (Talking Point Memo) but doesn’t come up with anything different than Krugman and his posts are a lot longer.

However, it also occurred to me, while the problems that brought the financial system down, were long in the making (not everything can be blamed on W. and the Republicans) much  of it can, especially, the preoccupation with Iraq and deregulation of the housing market.

I’m trying not to say it – don’t really want to but it’s almost hard not to miss the obvious - the last 8 years set the stage for the fall of Western Economic System - the very system Osama Bin Laden tried to topple with 9/11, G.W. Bush’s policies managed to accomplish - again, he didn’t do it alone – but had the largest share of responsibility, in my eyes.

Sure, we spent too much, almost all of us did, and saved too little (almost all of us did that too) – but the US Government was there to encourage just THAT, and crippling any oversight that might get in the way, including oversight of Wall Street.

Paul Krugman thinks Alan Greenspan bears the largest blame True, but i think an even larger reason for this mess we’re in is the focus on Iraq and … hunting Osama in the wrong place and in the wrong way, along with unfolding of the Sub Primes caused this mess to unfold as it did -and I believe it all points to 2012; how, I’m not sure.

Btw, here’s the work (which may not be done yet) that I worked on as I thought about the above

By the way, if you want to read another insight about Paul Krugman – take a look at More from Paul Krugman on the Economy over at Harvard Business Review Editors Blog where he gives what it would take to bring the United States out of Recession – and I know this a vision not everyone agrees with – but bear in mind, Krugman has been right almost 100% of the time, when it comes to Economics.

The rest of Krugman’s video clips at Harvard are here.

At the end of the day, hopefully, before 2012 – just about everything that Paul Krugman said in the clip above, I believe, will have to be done; sooner is better – unfortunately – it looks like we’ll probably end up trying to avoid doing much of this – based on the first month of Obama’s administration.

But … I think, by 2010, hopefully before, it will be clear there’s no other choice than the above, and it has to be all out application along the lines of what Krugman is saying, not half way measures. At least, by that time, it’ll be painfully obvious, there won’t be any alternatives – and that will help get any needed legislation, passed.

Let’s hope it doesn’t end up taking till 2012 to find this out – what we already know, “in our Gut”, so to speak. We know this is what’s needed – let’s just do it, now – all the way.

While walking to work this morning I thought about news of the last day; that we’ve been in a Recession since December 2007 (one year!), that several of my friends have already lost their jobs, that rents and other fixed expenses continue to rise, but income is falling and the economy,as a whole, is moving toward Deflation.

My mind races to paint a picture of what we’re likely to see next year and what I came up with, is this.

Economy continues to go deeper into recession as Barack Obama takes office in January 2009; the first stimulus package is passed by early Feb and the first money for stimulus flows out of the Tresuary in late April 2009. Unfortunately, the stimulus is too late to help the unemployed and nothing much happens.

A second stimulus happens in late 2009, but 2009 is already a wash out, and it’s not till spring of 2010 that employment starts to grow again, and not till 2011, before it recovers to a pre recession level. I think a third stimulus will happen in early 2010, and that will seal the recovery.

In all, about 2 Trillion Dollars will be spent over the next two years, trying to revive the economy, and that had nothing to do with stimulus going on in other countries at the same time.

I expect the usual challenges that everyone is talking about, but the problem is going to be, how to survive through 2010.

And the problem is that there’s going to be a lot of difficulty around “uncertainity” in when the economy will recover.

Maybe, the best thing Obama can do, at this point, for the economy is bring a sense of certainity back to the markets and to provide as many alternative energy jobs as he can create.

Of course, this is all my own views (no one else’s) and I may be all wet.

We’ll see.

Btw, this post was written on my iPhone, expect the usual spelling and grammar errors.

Again, I digress from Web Analytics, to talk about current events outside Analytics – but which Analytics could be applied to.

I am happy to see that Conseratives and Liberals, Right and Left, Republicans and Democrats, – no one likes the $700 Billion Bailout Plan proposed by the Bush Administration – even though everyone agrees on some type of radical action needs to be taken now.

Paul Krugman’s Cash for Trash OPED in today’s New York Times displays an understanding of the current financial situation and his ability to simplify it into 4 steps (almost like the 4 stomachs of Cows); by being able to conceptualize this Wall Street Meltdown into a series of steps with sequences he’s displaying the best skills of a Web Analyst – the ability to take complex information and synthesize it into a working model.

I believe, making sense of the data, what Paul Krugman does, is the one fundamental skill all Web Analysts need – the ability to use synthesis to take a complex situation and derive insight into it.

Even if you don’t agree with Paul Krugman the $700 Billion Bailout Plan if too flawed to pass in anywhere near it’s current form, at least you can get a sense of understanding, of empowerment even, by reading his OPED on Cash for Trash.

Here’s Paul Krugman’s 4 step analytics summary of current dire economic predicament the United States is in; Krugman thinks instead of bailing out Wall Street firms at step 4, with no accountability, we should be giving them more liquidity at step 2, in return for part ownership.

I just want to point out, again, the importance of forming a “working model” of a situation from which you can then preform analysis - if you can not conceptualize a problem, then any solution (ie: Secretary of the Treasury Paulson’s solutions, for example) are little better than throwing darts at the dart board (problem), and in the dark.

” … So let’s try to think this through for ourselves. I have a four-step view of the financial crisis:

1. The bursting of the housing bubble has led to a surge in defaults and foreclosures, which in turn has led to a plunge in the prices of mortgage-backed securities — assets whose value ultimately comes from mortgage payments.

2. These financial losses have left many financial institutions with too little capital — too few assets compared with their debt. This problem is especially severe because everyone took on so much debt during the bubble years.

3. Because financial institutions have too little capital relative to their debt, they haven’t been able or willing to provide the credit the economy needs.

4. Financial institutions have been trying to pay down their debt by selling assets, including those mortgage-backed securities, but this drives asset prices down and makes their financial position even worse. This vicious circle is what some call the “paradox of deleveraging.”

“….. The logic of the crisis seems to call for an intervention, not at step 4, but at step 2: the financial system needs more capital. And if the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place.”

And, even arch conservative William Kristol does not like the Bush Administration’s $700 Billion financial Bailout Plan, and most conservatives don’t like it either – for much the same reasons that Krugman does not like it – it’s bailing out the wrong people and has no oversight previsions, making the Treasury Secretary too much power.  William Kristol writes in his New York Times OPED:

“… I’ve been shocked by the number of (mostly conservative) experts I’ve spoken with who aren’t at all confident that the Bush administration has even the basics right — or who think that the plan, though it looks simple on paper, will prove to be a nightmare in practice.”

Of course, Kristol wonder’s if Barack Obama or John McCain have the courage and exhibit the political will to oppose the $700 Billion Bailout Plan with the upcoming Presidential Election around the corner – what if, by opposing the $700 Billion Financial Bailout Plan the economy gets even worse, perhaps going into a deep recession, or even … a depression, then the electorate will blame what ever candidate voted against it.

On the other hand, were Barack or McCain back the current $700 Billion Bailout Plan and it fails quickly, blood would be on their hands, as well - and it could change the outcome of the election.

Using the Analytics approach I mentioned earlier in this post, the synthesis of information into a working model, so that you can then come up with insight and wisdom - the $700 Billion Bailout Plan looks too much like Authorization plan the Bush Administration floated just before it went to War with Iraq - the pressure to quickly “act” and vote – seems to be a familiar tactic that is used by this administration, to force people to act, often out of fear, against their own best interests - because they don’t realize, with the rush to act, what interests are actually being compromised.

We do need to do something quickly – but not that quickly – perhaps not even before the upcoming election .

We should, I think, work towards a solution and try to contain the damage on Wall Street and in the Global Financial Markets, but without giving the Treasury Secretary a blank check to do whatever he wants.

I also enjoyed reading Roger Cohen’s  Fleecing America in the New York Times OPED section tonight - Cohen brings another perspective – that United States is no longer the predominant Economic Super Power and that, primarily, under the Bush Administration, the bulk of what was once our Wealth, has moved off shore, to China, Russia and India. .. and the joke is on us – though Krugman was warning about this day for the last 5 years, last I counted – and the joke is on us – all of us – now that reality is setting in.

Not only that, but he somehow brings in sales for the disgusting artwork of Damien Hirst – the guy who puts dead large Sharks in formaldehyde, just like this one at the Metropolitan Museum of Art; here’s part of a story about this artwork in Time Magazine in a story tiled “A Shark’s Tale”

Damien Hirst’s pickled shark, formally known as The Physical Impossibility of Death in the Mind of Someone Living, has been presented as a three year loan by its owner, the hedge fund billionaire Steven A. Cohen, to no less a grand lady than the Metropolitan Museum of Art in New York.

And to think, this is the same Met whose trustees used to be touchy —granted, it was long ago — about admitting Picassos into the collection.”

In case you missed it, the age of America as the dominant financial power – gone.  Read this (you can agree with it, or not, but even if you don’t agree – then come up with something better to explain what’s going on):

“…. It’s that the Hirst bull market in the midst of the most convulsive week for financial markets since 1929 says something important about the global economy and America’s declining place in it. In case you missed it, Hirst sold 223 works last week for just over $200 million, well above Sotheby’s pre-auction estimate.

Oliver Barker, the auctioneer, identified the Russians as major buyers. Sotheby’s took a preview of the sale to New Delhi, where it received a number of pre-auction bids. Jose Mugrabi, a New York dealer, told my colleague Carol Vogel that Hirst is a “global artist” who can defy “local economies.”

For local, read American.

Anyway, a post script. In his piece for Bloomberg News that I’ve linked to above, Martin Gayford notes that the same Damien Hirst is asking 50 million pounds — $100 million — for his new diamond encrusted skull.

Sounds like the “diamond encrusted skull” of Damien Hirst won’t be sold to anyone around here – unless Treasury Secretary Paulson has his way and gets his and G.W. Bush’s  $700 Billion Bailout Plan approved by Congress – then maybe, maybe, some Wall Street Bank or Financial Instituion will have the money to throw at Damien Hirst and buy the diamond encrusted skull - and put it next to “The Bull” on Wall Street (Nah, maybe Goldman Sach’s will buy it with TaxPayer’s money and display the skull in their lobby.

But seriously, just about everyone thinks the $700 Billion Wall Street Bailout Plan is too flawed to pass in it’s current form.  Hopefully, the pressure to “do something now” will not be successfully exploited, as it has in the past, to stick us all with a bill we don’t want or, for a fact, need.

And while I’m at it – I said the other day I would provide an “influencer” list from Radian6 surrounding the the $700 Billion Bailout Plan – here it is.

And here’s a link to the entire file – knock yourself out – but note the Huffington Post seems to be on top of almost any political story, including this one.  Could it be the Huffington Post is “more influential” for this discussion on $700 Billion Dollar Bailout than the New York Times?  Beats me.

Finally, here’s a series of Topic Clouds from Radian6 on the $700 Billion Dollar Financial Bailout and how it varies by media:

Blogs only:

Blogs tend to focus on discussing the government “plan” to buy the distressed securities while letting the Financial Institutions that got us into this mess, off the hook.

Online Videos Only -

Online Videos focus more on the size of the Bailout – based on the Topic Cloud Meta-data:

Main Stream Media -

Twitter – Micro Media

Interestingly, the Topic Cloud for Twitter is much more useful than the others, from my point of view as it contains some of the TinyURL’s that are being shared online over the last day.  I think, and maybe Radian6 needs to figure out a way to do this – a way to work URLs into the Topic Clouds are needed, in general.

At least, here they happen, with Twitter, due to the nature of the content and the size of a micro post.

For example, the stories that are being talked about in Twitter are “Bush administration wants $700 billion for Wall St. bailout” with the “size” of the bailout being most notable – also the use of slang missing from the other Topic Clouds shown.

Forums

Well, that’s about it for this long, long post.

I expect Monday and Tuesday to be filled with a lot more turmoil as Congress and Online News Media take a closer look at the the $700 Billion Bailout Plan - but I hope we just don’t find ourselves back in 2003, when Bush called the shots and we ended up going into Iraq due to faulty information.