Debt before depression

Debt….depression….these are things I deal with constantly.

But no, this post isn’t about me. Actually, it’s about the interesting things said by President Franklin D. Roosevelt‘s Fed Chairman, Marriner S. Eccles, who served from November 1934 to February 1948.  In his memoirs, Beckoning Frontiers, he described what he believed caused the Great Depression and what he believed could have been done differently.

I think the excerpt is chilling, and I wanted to share it with you.  I think his description of the debt and of the poor distribution of wealth sound eerily familiar.  I wanted to share the excerpt with you, as I think it’s a very interesting read (Thanks Wikipedia!):

As mass production has to be accompanied by mass consumption, mass consumption, in turn, implies a distribution of wealth — not of existing wealth, but of wealth as it is currently produced — to provide men with buying power equal to the amount of goods and services offered by the nation’s economic machinery. [Emphasis in original.]

Instead of achieving that kind of distribution, a giant suction pump had by 1929-30 drawn into a few hands an increasing portion of currently produced wealth. This served them as capital accumulations. But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped.

That is what happened to us in the twenties. We sustained high levels of employment in that period with the aid of an exceptional expansion of debt outside of the banking system. This debt was provided by the large growth of business savings as well as savings by individuals, particularly in the upper-income groups where taxes were relatively low. Private debt outside of the banking system increased about fifty per cent. This debt, which was at high interest rates, largely took the form of mortgage debt on housing, office, and hotel structures, consumer installment debt, brokers’ loans, and foreign debt. The stimulation to spending by debt-creation of this sort was short-lived and could not be counted on to sustain high levels of employment for long periods of time. Had there been a better distribution of the current income from the national product — in other words, had there been less savings by business and the higher-income groups and more income in the lower groups — we should have had far greater stability in our economy. Had the six billion dollars, for instance, that were loaned by corporations and wealthy individuals for stock-market speculation been distributed to the public as lower prices or higher wages and with less profits to the corporations and the well-to-do, it would have prevented or greatly moderated the economic collapse that began at the end of 1929.

The time came when there were no more poker chips to be loaned on credit. Debtors thereupon were forced to curtail their consumption in an effort to create a margin that could be applied to the reduction of outstanding debts. This naturally reduced the demand for goods of all kinds and brought on what seemed to be overproduction, but was in reality underconsumption when judged in terms of the real world instead of the money world. This, in turn, brought about a fall in prices and employment.

Unemployment further decreased the consumption of goods, which further increased unemployment, thus closing the circle in a continuing decline of prices. Earnings began to disappear, requiring economies of all kinds in the wages, salaries, and time of those employed. And thus again the vicious circle of deflation was closed until one third of the entire working population was unemployed, with our national income reduced by fifty per cent, and with the aggregate debt burden greater than ever before, not in dollars, but measured by current values and income that represented the ability to pay. Fixed charges, such as taxes, railroad and other utility rates, insurance and interest charges, clung close to the 1929 level and required such a portion of the national income to meet them that the amount left for consumption of goods was not sufficient to support the population.

This then, was my reading of what brought on the depression.

If the economy implodes

Today I read about the House’s rejection of the bailout package and the resulting stock market drop, as well as what I thought was a great e-mail on the bailout from Dan Cantor and the Working Families Party (Wikipedia).

My next thought, which almost made me cringe with guilt, was “Good. I hope the whole system implodes, and we have to build anew.  And as we build our economy up again, we can reshape it to reward behavior that measurably improves society.”

Essentially, I think we should rebuild fiscal policy to focus on the double bottom line, which describes when not only fiscal profit but also positive social impact are maximized.   Or, we could go a step further, and measure a triple bottom line.  That’s a term used to describe “an expanded spectrum of values and criteria for measuring organizational (and societal) success: economic, environmental, and social.”  Does it sound radical?  Not to the world community, as the UN ratified this approach in early 2007.

After thinking this, I decided to do some more research on the situation.  Being signed up for many progressive lists, I had received a few invites to some bailout protests and activities.  But I wasn’t sure if I was against it. I thought back to the stock market crash of 1929 that led to the Great Depression, and wanted to review more of the details of what had happened.  I was worried enough that I didn’t want to write it off as something that will only affect Wall Street without learning some more.  Being lucky enough to live in the time that I do, this information was easy and quick to obtain.  So I was able to spend a few minutes doing some research to help me make up my own mind about what I think should be done.

I won’t be shocked if we really do have a depression. But I also think it can be averted…

What do you think?

Baby’s smiles and brain research

I’m having a grand ole’ time working hard for the company that husband and I own, but I miss being immersed in science on a daily basis.  My particular passions are math and chemistry – as they have been since high school!  So one thing I’ve been doing to make sure I get my dose of science is to add the Scientific American, Wired, and Science Magazine homepages to my firefox homepage tabs.  The Science Magazine one I linked up through my school’s library, so that I have full access, which is something I get to keep as an alumni – yay!

Anyhow, today I read this article on baby’s smiles and the mother-infant bond.  It was an interesting article about a study in which the researchers studied first-time mothers’ response to pictures of their 7-month old babies.  The moms had not seen the pictures before, and the researchers showed them to them while monitoring their brain response with functional magnetic resonance imaging, or fMRI.  They found that the baby’s smiles triggered a strong response in the reward centers of the brain, and used this to theorize that the baby’s smile acts as a strong reward.  While I respect their efforts to study the brain with the scientific method, I can’t help but think “well, duh.”

I am curious about different questions.  Sure, none of us are surprised to hear that an infant’s smile is a reward for mom.  But how are the brain responses different in dad?  What about primary caretaker dads (like SAHDs) versus fathers who leave most of the baby raising to mom?  What about nannies that spend more time with the baby than mom?  Those are, to me, more interesting questions.

I feel a strong connection to the babies I care for, which grows in intensity usually based on how often I care for the baby and how long I’ve been working with that family.  In my own experiences, there have even been times when, spending 20 hours a week with the baby and observing his interactions with his mom as well, I’ve felt there were certain signals that I could read better than baby’s mom.

I would definitely be interested to see research not just on different parts of mom’s brain responses but also comparing this to brain responses in dad and other caretakers.  While I have no doubt that the mother-baby bond can be exceedingly strong, I think sometimes society assumes that only the mother can understand the baby that way, and implies that all mothers should.  Really though, in today’s society, families all do it differently, and those old assumptions don’t make much sense anymore.

From Graduate School to Small Business Owner/Tech Entrepreneur

Today we pitch.

We’re asking for a reasonable sum – six digits – (of which we hope to get 25-50% from this particular investor).  It is an unimaginable sum to me, to us, who have been eating only pasta all too often lately and are months behind on our rent.  But it is a small sum in the world of capital raising for tech start-ups, and it is a small sum to this man who lives in an exclusive building that turns away people who make millions in annual income but don’t also have millions saved (too risky).  And there is much more to be made, and much in our plan to help the company’s value grow.

We are going for our second meeting with a potential angel investor today, at noon, at his Fifth Ave office.  He was very excited and interested after the first meeting, way back in April, when Husband showed him the demo of the program he had written, and rewritten, and rewritten again.  In April, I offered my comments and feedback, my thoughts and responses, and my support.  But I didn’t have a personal stake or title in the company – it was his thing and mine was graduate school, and science.  Not long before I took my quals for the second time, I attended a convention with my husband for his company. I had a great time, and I came away very excited about the field he was working in and the prospects for his company, which I knew intimately although I had no formal role.

So when I had to leave the doctoral program I was in, a move to working on my husband’s project, which was an innovative tech start-up, seemed both natural and exciting.  It was not only his project but his dream, to have a successful idea and to be able to be his own boss and do something that he enjoys. I want that so much, not only for him but also for me.  That job description is also ideal for me in my desire for a fully flexible, mom friendly career. And it’s appealing to me – in particular I’m loving learning all of these new things!

The skills and confidence that I had developed through my education and research experience in my field of engineering are well put to use here.  Chief among the skills I learned and honed in school that I use in my role now are: analytical thinking, mathematical analysis, problem solving, project planning and management, working on teams, putting together well-written documents, presenting and public speaking, and general research (before it was science, now it is marketing).

So helping Husband out with the company was an exciting choice.  I eagerly dove in, and learned all about the industry and the market (adding that to what Husband had already told me about the technology).  With the help of an awesome lawyer who was a friend of a friend, I arranged for and oversaw the drafting of hundreds of pages of legal documents for such things as incorporation, intellectual property law, stock agreements, and employment agreements.  And then I read all of them to make sure we approved and understood…many jokes were made about caffeine IVs!  But really I am so passionate about making this company work that I almost read them eagerly.

I learned also learned about business taxes and employment law – from reading IRS guides and government regulations.  And with the help and advice of my mom, I learned how to use quickbooks and the basics of business accounting.

Today, I go with Husband, as an equal, as a partner in the company, to this very important presentation and business meeting.  It happens to be with a man who managed a small office of mostly men (the women didn’t stay long), and who occupies a completely different economic echelon of society.  I will be giving half of the presentation, all of which I created myself.

I’ve never done this before.

I am going to walk in there with confidence.  Confidence that I am an officer, a shareholder, a manager, and the corporation’s secretary and treasurer.  Confidence that I am crucial to the team, and that my work and development of the company plan will speak for themselves. And confidence that he won’t want to pass up this investment opportunity.

Obama answers ScienceDebate2008 science questions

You can read all of his answers here.  In my opinion, they’re very detailed and describe plans based on facts and science, recognizing and improving on areas where we are currently weak.  One part in particular stood out to me; it was in response to a question about pandemics and biosecurity:

I will build on America’s unparalleled talent and advantage in STEM fields and the powerful insights into biological systems that are emerging to create new drugs, vaccines, and diagnostic tests and to manufacture these vital products much more quickly and efficiently than is now possible. Unfortunately, the Bush administration has failed to take full advantage of the Bioshield initiative. Because of the unpredictability of the mode of biological attack, I will stress the need for broad-gauged vaccines and drugs and for more agile and responsive drug development and production systems. This effort will strengthen the U.S. biotech and pharmaceutical industry and create high-wage jobs.

That is right up my alley of skills.  While I’ve never been too excited over the thought of working in industry, I really think I wouldn’t mind one of the jobs created by this initiative!