Friday, December 31, 2010

Where’s My Personal Hovercraft?

You don’t have to be a dedicated science fiction fan to realize that the 21st century hasn’t, so far, lived up to its billing. The moon base and space flight to Jupiter in the well-known 2001 movie still seem like science fiction as we head into 2011. The personal hovercraft that was supposed to become our primary means of transportation isn’t even on the drawing board. And setting aside the gee-whiz technology of science fiction stories, the movement toward a more peaceful, enlightened civilization also seems to have been sidetracked. You almost have to ask, what were we doing with this last decade? Was it all a big mistake?

Never fear. Progress doesn’t proceed in straight lines and can’t be accurately measured by what you see on the surface. For New Year’s Day, 2011, we can say “Take two!” and start the new millennium rolling all over again — but incorporating some of the loose ends we developed, but weren’t quite able to use, over the past ten years or so.

I think of this in terms of the difference between a crystal and a laser. A laser is a crystal, but with power added so that it can project its geometric structure as a coherent beam of light. The new century so far has been taking shape mostly in the dark — with basically nothing happening in the business world or in the corporate-owned media, and with relatively little talk about the new things that are happening. Now it’s time to turn on the laser and see what we’ve got.

Thursday, December 30, 2010

How Much Things Can Change

It is easy to underestimate how much things can change in a few years.

An example I am looking at this week: the Toto tour being planned for the summer of 2011. This is a band that less than three years ago was said to be completely through, and for reasons that no one could argue with. But then there were benefit shows this year, and now, with a 68-word announcement, the band is heading out on the road again.

It might seem like a stunning reversal until you consider how much time went by for the people involved. A year, or two, is a short time only if you cast yourself in the role of a distant observer. When what happens depends in part on your own decisions and actions, or when you are close enough to see a small part of the action, then it becomes obvious that even one year is a period of time that encompasses incomprehensible amounts of uncertainty and potential.

It’s something to remember if you make a new year’s resolution. It isn’t much help to make several small resolutions that fit squarely within your current view of your life. Instead, focus on one change you can make that will take you outside your current situation into something new and different.

Wednesday, December 29, 2010

Science vs. Medicine on Vitamin D

The worlds of commercial medicine and science haven’t always seen eye to eye, but at one time it would have been unthinkable to see such a public spat as we have seen in the controversy over vitamin D this month. Both sides agree that most people are not getting enough vitamin D, at least in the colder months of colder climates. But while science sees enormous benefit and slight risk in people getting a small amount of vitamin D (such as one capsule per day), medicine sees only theoretical benefit in this and imagines considerable risks (without any scientific evidence to support the supposed risks), and is suggesting a much lower level of vitamin D (such as one capsule per week).

It’s a controversy that scarcely matters to the ordinary person. If you get one vitamin D capsule per week (in winter), you’ll do better than most people, who aren’t taking any. If you take one per day, you may do better, and if there are any risks in this, they have yet to be medically or scientifically demonstrated. Most of the people who take vitamin D in winter fall somewhere in this range anyway, so it’s not one of those medical disputes that people have to keep their eyes on.

The more interesting point about the controversy is that it shows commercial medicine willing to completely ignore science when doing so serves its purposes. The new medical recommendations on vitamin D are based strictly on the role of vitamin D in bone growth, sweeping aside a century of science about the many functions of vitamin D, such as its role in deterring cancer.

Medicine is dismissive of vitamin D partly because there is no money in it. Supplying the entire United States with vitamin D for the winter, at the levels that scientists are talking about, would cost perhaps $1 billion. Compare that to the $100 billion spent annually on cancer treatment alone, and you can see why medical people don’t spend much time on vitamin D.

The objectives of commercial medicine and scientific research are so much at odds that I predict we will see more and larger splits between science and medicine in 2011 and the years to come. By 2018, “scientific medicine” may become the name of a new branch of alternative medicine, as commercial medicine charts its own course increasingly independent of scientific knowledge.

Tuesday, December 28, 2010

Job Market Ready to Unfreeze

The U.S. job market may unfreeze next year, if a recent Manpower survey reported by is any indication. In 2010, 60 percent of workers said they would be looking for a new job. That number goes up to 84 percent for 2011. That’s five out of six workers who hope to quit their jobs during the year.

Many businesses will be in peril if worker mobility returns. A slow job market provides a kind of protection for weak workplaces, as the workers there can’t easily move on to other jobs. These companies may be unprepared to replace workers as they depart, and some may not have budgeted enough money to hire qualified workers and train them. From anecdotes, it is clear that many employers have forgotten what it takes to hire people, as they advertise for non-existent skill combinations at blue-collar wages.

But even if competing employers won’t hire workers away, workers will quit eventually anyway — to go back to school, retire (early), start a business of their own, or try their luck as freelancers. Workers who feel stuck tend to cut their spending so they can build the financial strength to make a career move, and that day will be coming for millions of workers every year, whether their employers are ready or not.

If five out of six workers are ready to move on, it could be seem as a sign of low worker morale — but it can also be seen as a sign of workplace stagnation. Workers can see that things could be improved, but businesses aren’t seeing that potential. Businesses may have gone into a holding pattern during the economic slowdown, but workers have continued to advance, so that there is no longer such a good match between workers and businesses. As the job market unfreezes, businesses will have to catch up. This is a challenge that has not come up during the lifetimes of most of the people managing the businesses. Not all businesses are prepared for the adjustments they will need to make.

Monday, December 27, 2010

After-Christmas Sale Canceled Due to Lack of Interest

Empty shelves are one deterrent to the after-Christmas sales. Snow cover over almost half the country is another.

Christmas items especially sold out early, friends tell me, with many stores running out of Christmas lights and similar items the weekend before Christmas. There is plenty of leftover inventory in categories such as clothing and consumer electronics, but these are not the most exciting categories at the moment, and the excess stock is not so great that anyone can expect to see deep discounts. The thought of getting a sweater for 40 percent off its original price is not exciting enough to get most shoppers out in the cold.

Then there is the snow. A wave of heavy snow has crossed the country, keeping people home in New England today after collapsing the Metrodome roof in Minneapolis on December 12. Slippery road conditions and the fatigue from hours of snow shoveling make it harder to decide to go out to a ho-hum department store sale.

The calendar also may work against the after-Christmas sale crowds, at least for now. With Christmas falling on Saturday, and New Year’s Eve on Friday night, many people are looking forward to an entire week off, and with holiday leftovers, they may not have to leave the house until Friday.

Retail layoffs began early again this year, with some stores reducing to off-season staffing levels the Monday before Christmas. With fewer workers to prepare a sale, not so many shoppers on the way, and no piles of excess merchandise to liquidate, it isn’t exactly a setup for a big sale. Don’t be surprised to see stores holding “after-Christmas sales” in name only, with a few interesting items marked down while the retail workers focus on clearing out the Christmas section and getting the Valentine’s Day merchandise set up.

Sunday, December 26, 2010

Placebo Effect Is the Power of Attention

If you have an illness, it helps to pay attention to it. That’s the conclusion I draw from a recent clinical study on the effectiveness of placebo.

A placebo has the outward physical form of a medication, but it contains materials known to be relatively inert in medical terms. It could be a capsule filled with a combination of sugar, starch, silica, and gum. All of these substances have metabolic significance in larger quantities, but not in the amount that would fit inside a capsule. The intriguing thing about placebos is that they cure diseases. They aren’t consistently effective, of course, but they may be nearly as effective as the drugs that people take for illnesses. A pharmaceutical agent is considered particularly potent if it is twice as effective as a placebo.

In the 20th century, the effectiveness of a placebo was generally attributed to the power of belief. People taking a placebo were told that they were, or might be, taking a drug that was known to be effective in treating the illness that they had. They weren’t told they were taking a placebo, because then, it was thought, the placebo effect would vanish.

Like most things in commercial medicine, this understanding of the effect of a placebo was accepted as fact for ages without ever being clinically tested. Now it has been tested, and the results are surprising.

One group of patients in the study were told that they were taking a placebo with no effective ingredients. It was a pill delivered in a bottle labeled “Placebo,” so there wasn’t much room for doubt that it was just a placebo. The other group of patients received no treatment. According to the belief theory of placebos, the result of the placebo should have been about the same as the result of no treatment at all, since the patients were told that the treatment was only a placebo. But in fact, the placebo group had twice the medical improvement of the group that didn’t receive any treatment. It was a statistically significant difference, more significant than that found for many drugs in common use.

In my opinion, what this study suggests is that the placebo effect is the result of attention, rather than belief. The patients taking the placebo were taking an action relative to their illness. It may have been only a token action, but it still focused their attention on their illness for a few moments every day.

The idea that the placebo effect is the result of attention might seem inconsistent with the observation that people who simply worry about an illness don’t tend to get much relief from their worry. But there is a difference between worrying about an illness and paying attention to it. Worry focuses attention on imagined scenarios, often frightening stories of what might happen, so perhaps it does not really include much attention to the present situation.

Similarly, belief is essentially little more than a set of stories, which may be mostly imaginary. Stories do have some power, but when it comes to curing illnesses, it appears that attention is more important.

Saturday, December 25, 2010

Alone on Christmas, and the Illusion of Time

Christmas has become the holiday most associated with the fear of being alone. Consider, for example, that one of the top Christmas songs again this year is the Waitresses song “Christmas Wrapping” (heard here in a newer version from Miranda Cosgrove). Lurking not far below the song’s hectic holiday surface are the threads, one in each verse, of a busy woman’s year-long fear of finding herself alone on Christmas.

For single people, the thought of spending Christmas alone is hardly unfounded. Over the last 40 years, the observance of Christmas has become so aggressively family-oriented that people who cannot get together with some semblance of a family on Christmas can hardly escape the feeling of being left out. Yet this experience of being alone and left out on Christmas is more universal than it might seem. The people who seem to be in the middle of the Christmas celebration may also be alone for half an hour, an hour, or several hours at a time. Some of us are cooking for hours. Or we find ourselves fussing over the assembly instructions for a new gadget, shoveling snow, looking for the right battery, setting up the fireplace, or making a late trip to the grocery store for an all-important but previously forgotten ingredient. Or we are left to entertain ourselves, watching television, checking the weather forecast, or even reading or writing blogs while other people tend to the essential holiday chores. (For my part, I spent more than half of Christmas Eve working by myself preparing karaoke tracks for Christmas Day.)

Logically, none of these situations, not even the scenario of spending an entire day alone, calls for a somber reflection on our existential aloneness. Yet more of us than will admit it will fall prey to this at some point during the day today. It is easy to imagine, if you are slaving away in the kitchen, that the people in the living room are the ones having fun. But if you are stuck in the living room while the real action is taking place in the kitchen, it is just as easy to feel left out.

In other words, if you feel alone on Christmas, you are not alone. The emotion involved is based on the thought of being the only person in a particular place, and this thought is more arbitrary than it seems in the moment. It draws on a series of illusions. If you want to get philosophical, try to prove that “place” and “separation” actually exist. But it is ideas about the nature of time that make feeling alone on Christmas particularly vexing. The idea as it relates to Christmas, of course, is that this is a “special” time, a day with more inherent meaning than other days.

That is a thought so abstract and so rooted in cultural assumptions that I won’t attempt to discuss it. But where, in general, does the value of time come from? The answer, perhaps a surprise to some, is that attention creates the value of time. Time has no value if no one is paying attention, if no one observes the passage of time or thinks about taking action or changing anything. It is almost as if the time does not exist. But time becomes a real thing as soon as you start to pay attention to it, and the more clarity, coherence, or passion is present in your point of view, the more value time has. If you are absolutely determined to get something done, and you know exactly how it will go, that’s when time becomes a precious commodity.

If you are stuck by yourself, feeling left out, not knowing what to do with yourself, it is a good time to practice paying attention. Just observe, then observe the way this process of observation “creates” time. Spend a minute observing your feelings and your immediate surroundings. Your breathing. Your posture. But then go on to look for things you want to change. Yes, it’s good to notice things that you like just the way they are, but don’t stop yourself from seeing the things that could be better, because that is what will lead you into action. Find any little thing you can improve, even something as little as putting a clean dish away in a cupboard. Observe your own action. Notice how this process changes the nature of time.

We are social creatures, but we are also workers. It is our nature to proceed by ourselves at times and to share our experiences with others at other times. We aren’t fully functional as humans if we aren’t doing both more or less continuously. And this is easier to manage if you don’t get hung up on the separation between one and the other. Fundamentally, they go together. You do things, then you show people some of the things you’ve done. The lag time that takes place between one and the other is not so important. The suspense inherent in this is the dynamic of Christmas gift-giving, of course. You have a gift for someone, but for a time, they don’t know what it is yet. Then they find out.

Beyond the ritual of exchanging gifts, nothing about Christmas can happen without all the individual tasks that take our attention away from the group, if only for a moment. Someone, we hope, can mash the potatoes, and someone can check the directions online, and so on.

The way this works is more obvious if you are off by yourself for only an hour, less obvious if you are alone for an entire day, or longer, but the dynamic is the same. If you practice observing the possibilities in your situation, you quickly realize that the whole holiday season is not nearly enough time to do all the things that people are waiting to see you do. If you happen to have a day free, it is valuable time, if you are paying attention. It is a time when you can do something that will surprise people, when they finally get to see the results.

Friday, December 24, 2010

This Year’s Podcast, and the Celebrity Babysitter

As usual on a Christmas Eve, I can be heard in the Bah & the Humbugs Christmas Eve Podcast. The big question in this year’s podcast is, who will be the celebrity babysitter? It’s a joke that may be a little more true to life than people would imagine.

Thursday, December 23, 2010

Bee Deaths Explained

We may have most of the answer to the mass bee deaths that scientists and farmers have been puzzling over for the last five years. A previously secret study recently obtained from the EPA shows that a popular insecticide is massively toxic to honey bees. It doesn’t kill bees instantly, making it possible for bees to carry the poison back to the hive, where it can potentially kill most of the bees in the hive. Search for “EPA bee” and you can find many of the details of this new controversy.

The EPA knew of the harm that the insecticide would do to bees, yet kept the scientific study locked up for seven years, keeping state wildlife authorities, scientists, and the beekeeping industry in the dark. Now that the study has come to light, there is reason to hope that this particular insecticide can be pulled off the market before the fruit industry collapses from lack of pollination — and before there are no bees left in the wild anywhere in the United States.

Wednesday, December 22, 2010

Travel Troubles Point to Infrastructure Neglect

This week’s travel tie-ups in Europe — occurring because of cold weather and snow, for the third winter in a row — highlight the fragility of our travel system. The transportation network leans on hundreds of weak nodes. These stations and corridors operate close to the point of failure on ordinary days. They can fail when anything out of the ordinary happens, overloading hundreds of nearby points in the network.

Heathrow is getting special attention this week as snowfall is having a disproportionate effect on the airport’s operations, preventing perhaps 50,000 ticket-holding travelers from getting home for Christmas. Last weekend’s storm produced unusually heavy snow, but it was nothing like a catastrophic weather event, so travelers and officials are wondering why the airport remains mostly closed after five days. Of course, the problems are not limited to Heathrow, and snow-related cancellations are clogging travel for hours at a time around Britain and across northwestern Europe.

Many of the problems cannot really be blamed on the weather, but are the effect of ill-advised cost-cutting. Budgeteers should be more zealous in protecting the most essential activities, particularly the ones that allow ordinary workers to work. The £1 million (or whatever the amount is) missing from Heathrow’s ice and snow budget might have felt good at budget time, but is tiny compared to the productivity lost when tens of thousands of people are stranded for five days at a time.

But more than that, a more robust network should be put together, not just in transportation but also in communications. The recent tendency is to cut budgets for transportation and communications infrastructure when the economy slows, but the opposite strategy would be a better approach. In the United States, when the job market finally improves, the rush hour traffic will be even worse than before, as virtually nothing has been done to add capacity in the interim. An economic slowdown should be a time to solve the most pressing infrastructure problems so that when the economic recovery comes, it will not be stopped in its tracks by a lack of capacity.

Tuesday, December 21, 2010

U.S. Population Growth Still Too Fast

How soon would you want the United States to have a population of 1,000,000,000 — 1 billion people? When I think of this, I am convinced we will be better off if it doesn’t happen. Yet we are heading in that direction, according to the new census report.

If the rate of population increase of nearly 1 percent per year continued, the U.S. population would reach 1 billion in 2137, likely within the lifetime of some of the people being born this year.

Of course, there is an enormous amount of uncertainty looking forward over the next century — for all we know now, people will be moving to Mars by then — but still, the pattern of rapid population increase adds to the risks ahead.

There is little any government can do to influence the rate of population growth. It is up to people collectively as a culture to produce a population level that can be sustained within the resources that are available. When this fails, history suggests that life becomes more difficult for everyone, and large numbers of people die from poverty, violence, or infectious diseases.

I don’t think the census report is any cause for alarm. There is a trend toward lower population growth. Technological breakthroughs are likely to improve our lives by making them fit into smaller and smaller spaces. But it’s important not to take those scenarios completely for granted. New developments, such as the depletion of the world’s oil and uranium stocks, which after all is projected to occur before 2115, could reduce our population carrying capacity, perhaps even below current levels. In spite of every effort take so far, further cultural changes may be needed to reduce the rate of population growth. That is one reason why it is so important to keep track of population statistics. The new census report suggests that the U.S. population is still increasing faster than we are prepared to provide for.

Monday, December 20, 2010

Solstice and Lunar Eclipse Tonight

Tonight a rare combination of events takes place: a solstice, when Earth reaches its maximum tilt (in reference to the sun), and a total eclipse of the moon, when the moon turns dark red as it crosses Earth’s shadow, visible in most of the northern hemisphere and in countries near the Pacific Ocean.

Tonight’s solstice is the winter solstice in the northern hemisphere, and the solstice is occurring at night over the Atlantic Ocean, providing the longest night possible in Europe and North America. With the long night, there is especially wide visibility for the lunar eclipse.

Saturday, December 18, 2010

Going Too Far: Getting Past Minimizing and Maximizing

Everything in everyday life has good and bad qualities. To simplify, though, we often focus just on the good qualities, or just the bad qualities. This leads us to try to minimize or maximize. These are simple, familiar examples of minimizing:

  • The noise from equipment can be annoying, and the accompanying vibrations shorten the useful life of the equipment, so engineers try to make equipment as quiet as they can.
  • Excessive salt in the body can contribute to some diseases, so many people try to eat as little salt as possible.
  • A computer manufacturer is concerned about the way customers can be misled by inaccurate information about products it is still designing, so it tries to keep its future products as secret as possible.

And these are examples of maximizing:

  • Trying to have as many friends as possible.
  • Keeping the refrigerator completely full of food.
  • A business that opens new locations as fast as it can.

Minimizing and maximizing make sense when you have relatively little control. If most of the food you eat is loaded is salt, and you get to choose the food you eat only on weekends, then you might well choose to eat salt-free food all weekend. In a difficult social setting where you will be lucky to have even one friend, it makes sense to do what you can do maximize the number of friends you have. The problem with minimizing and maximizing is that you can go too far. If you have more control than you realize, you can go from minimizing bad qualities to minimizing good qualities before you know it. For example, if you seal a house very well, you can save on energy costs for heating. But seal it too well, and you may see toxic fumes building up inside because of the complete lack of fresh air. At some point, you have to stop and ask, what is the optimum amount of air exchange between the building and the outside? Similarly, if you get into the habit of having as many friends as possible and then join online social networks — well, you know by now what would tend to happen.

The key to avoiding this kind of pitfall is to pay attention to how much control or influence you have in a situation. Minimizing and maximizing are useful simplifications in situations where you have little control. But if you notice that you have much more control over the situation than you expected, the usual impulse is to celebrate: “Look at how many cars I have now!” or “Really? I can eat the rest of the cake?!” This impulse to celebrate a breakthrough or unexpected success is your cue to ask what the actual optimum is. How many cars, how much cake, how much secrecy, etc., is really best? Then, make sure you’re still moving in the right direction.

I wrote about one example of this two days ago, when engineers testing the new electric cars discovered that they had made them too quiet. The shift from minimizing to optimizing is hardest to make in this kind of situation, where minimizing has been the rule for lifetimes, long enough for whole categories of social assumptions have been built around the idea of minimizing. A better example of this is the physical activity involved in office work. We all know that the physical movement required by the average office job is not enough to keep a person alive. The correct response to this is to find ways to do office work that involve more standing, walking, lifting, and carrying than the minimum needed to get the job done. Yet more office workers than not still look for ways to minimize physical effort in their jobs. The habit of minimizing physical effort goes back to the beginning of the agricultural age. This habit has been with us for so long that it will not be broken quickly.

These are other examples of situations that call for looking for the optimum:

  • You’ve been wishing you could earn more money, and your employer tells you that you can work as much overtime as you want for the rest of the year. Don’t just start working 24 hours a day! Instead, pick a good tradeoff between your need for money and the other demands of life, including sleep.
  • After years of eating mostly factory-made food that is loaded with salt, you start cooking for yourself. You don’t have to add salt to anything unless you want to. It then becomes important to know (particularly in warm weather) that too little salt is more dangerous than too much. You’ll need to add a little salt to your food.
  • Your new car has an engine powerful enough to drive at three times the speed limit. Drive at a responsible speed, even though you know you could go faster.

Minimizing and maximizing are simplified ways to look at a situation. They are useful in situations in which you have relatively little control, but when you gain more control, it is possible to go too far. To avoid going too far, it is important to stop and look for the optimum.

Read more: I look at several examples related to clutter in the Fear of Nothing blog.

Friday, December 17, 2010

This Week in Bank Failures

The FDIC said, in releasing its budget for next year, that it was over the hump when it comes to the current bank failure episode. If so, here is an example of why: Bank of Montreal is buying out Marshall & Ilsley (M&I), a Wisconsin-based regional bank that had seen its stock decline 83 percent from its peak in 2004. M&I had been losing $1 billion per year for the last three years and had a TARP loan it was unable to repay. Large banks in the United States generally have been struggling to find a new niche after the Wall Street bailout provided a series of competitive advantages to the 10 or 20 largest banks, and several large regional banks have been bought out by foreign interests. This, of course, is better for the banks’ customers and for the FDIC (and especially for the stockholders) than if the banks were to fail. The pace of buyouts of troubled banks is likely to pick up if executives and investors believe the prospects for banks is improving in the short run. As more troubled banks are bought out, the FDIC has less work to do.

If bank failures are slowing down, it was not evident tonight. There were six bank failures, perhaps the last ones of the year, resulting in a total of 157 bank failures for 2010. All six were small, though, each with between $28 million and $241 million in deposits.

In Florida, The Bank of Miami failed, with three offices in Miami and Coral Gables. Another South Florida bank, 1st United Bank, is taking over the deposits and purchasing the assets.

There were three small bank failures tonight in northern Georgia:

  • United Americas Bank, with two locations north of Atlanta. Local bank State Bank & Trust is taking over the deposits and purchasing the assets.
  • Appalachian Community Bank, FSB, with three offices in McCaysville, Georgia, Murphy, North Carolina, and Ducktown, Tennessee, in the area of the southern Appalachian Mountains where those three states meet. This closing does not affect other banks and locations that may have similar names. Another bank that already has a small presence in the area, Peoples Bank of East Tennessee, is taking over the deposits and purchasing the assets.
  • Chestatee State Bank, four locations in the Dawsonville, Georgia, area. Arkansas-based Bank of the Ozarks is taking over the deposits and purchasing the assets.

In Arkansas, First Southern Bank failed. It had locations in the towns of Batesville and Searcy. Missouri-based Southern Bank is taking over the deposits and purchasing 80 percent of the assets (and putting a tarp over the word “First” in the bank signs).

The future of First Southern Bank was in question after the bank became suspicious last month about $22 million in bonds it held, eventually determining that the bonds were fakes — a catastrophic event for a bank that had a total of $19 million in capital. Last week, questions were directed toward the bank’s majority shareholder, who apparently sold the bonds to the bank and may also have improperly used money borrowed for another purpose to buy additional stock in the bank during a recent stock offering. The majority shareholder is missing, and his home has fallen into foreclosure. Meanwhile, other banks nearby are double-checking their own bond holdings.

A small bank in Lino Lakes, Minnesota, Community National Bank, failed. Iowa-based Farmers & Merchants Savings Bank is taking over the deposits and purchasing the assets.

All the branches of tonight’s failed banks will remain open, becoming branches of the successor banks.

Also tonight, the NCUA took control of AEA Federal Credit Union in Yuma, Arizona. The credit union has 49,000 members. It will continue operating under NCUA control.

Thursday, December 16, 2010

Electric Cars: Too Quiet?

Probably at least once, you’ve had the experience of someone walking up to you so quietly that by the time you noticed you were there, they were close enough to startle you.

Most likely, they weren’t trying to sneak up on you, but a person walking naturally tends to be relatively quiet.

Now imagine that a car could do that — a car that runs without an engine, so that it can move as quietly as a person walking, or even quieter.

As it turns out, that is what happens when you take the engine out of a car. At high speeds, of course, cars generate enough wind noise that you can’t mistake them, and even at moderate speeds, you are sure to hear the sound of the tires on the pavement. At low speeds, though, a hybrid car in electric mode can be as quiet as a person walking — and an electric car can be even quieter. What is more, as tires become more efficient, cars will be still quieter. If you think you can be startled by a person walking up to you, imagine how startled you will be when a car brushes by you at 15 miles per hour, going so quietly that you don’t hear it until after you see it.

This becomes a safety issue if a driver doesn’t see a pedestrian and the pedestrian doesn’t hear the car coming. To reduce this risk, the new electric cars make a kind of chirp at low speeds so you can hear them as they approach. Congress has now voted to make that mandatory, after engineers study the issue and determine how much sound is needed and what kind of sound is effective. We’re not talking about the beep-beep-beep alarm of a garbage truck backing up, obviously. The objective is to make an electric car louder than the sound of a person walking, but not necessarily as loud as a car that has an engine.

Even when car operating sounds become mandatory, though, there will be a way to disable them. Whether doing so is legal or not, it is something some people, perhaps just kidnappers and assassins, will want to do. There is little doubt that the electric car will quickly become the car of choice for certain stealthy characters in Hollywood movies, and it is worth considering who else might like the idea of sneaking up on someone in an electric car.

Wednesday, December 15, 2010

Credit Card Usage on Black Friday: 16.3%

I was getting the impression that credit card usage had fallen among this year’s Christmas shoppers, but I didn’t have solid evidence. I was only speculating from retail traffic patterns. Now a survey, cited by a new Reuters story, confirms that shoppers are using their credit cards less:

Only 16.3 percent of consumers polled used credit cards over the Black Friday weekend this year, down from 30.9 percent last year . . .

A separate survey from The Members Group says much the same thing, finding a strong move from credit cards to debit cards. Looking at transactions in its user base over Black Friday weekend:

. . . nearly 80 percent were debit. The total number of debit transactions, as well as the total dollar amount of all debit transactions, each increased by 10 percent as compared to 2009.

This continuing transition from credit cards to debit cards and cash is important for consumers, some of whom may avoid debt trouble this way, but it has more immediate significance for retailers. Consumers make impulse purchases less often when they are limited by their available cash than when the credit limit of their credit cards is the limiting factor on their spending. If individual Christmas shoppers spend 20 percent less using debit cards, and 20 percent of Christmas shoppers have made the transition from credit cards to debit cards in the last year, that would translate to a 4 percent decline in Christmas shopping revenue at retail. Those numbers are only guesses, but they show how much is at stake for retail.

Other reports indicating an increase in the average credit card ticket on Black Friday weekend suggests that wealthier households are not making the transition away from credit cards so quickly. It may be that credit card use will mainly belong to the richest households in the end.

Tuesday, December 14, 2010

Oil Prices and Gasoline Prices

Gasoline prices have done what almost no one expected. They stayed almost the same for more than two years. Now they will be going up. Up 10 percent already, they are likely to go up further as a result of a rise in world oil prices, as speculators foresee the decline of the U.S. dollar from the Fed’s latest monetary easing tricks.

But seeing gasoline prices over $3.00 a gallon is no longer shocking. What is shocking is what will happen to gasoline prices if the U.S. labor market improves in a big way and 20 million more workers are driving to work in gasoline-burning cars. That would create enough of a global oil shortage to drive gasoline prices up near $6.00 a gallon. Of course, that, in turn, would create another recession. But world oil prices will go up eventually regardless of what happens to the U.S. economy. We should enjoy the low fuel prices while they last.

Monday, December 13, 2010

Court Strikes Down Individual Health Care Mandate

The one highly problematic part of the health care reform package, the individual health care mandate, was struck down by a federal court today.

The individual mandate was struck down for the same reasons that make it problematic. The mandate requires individuals to purchase insurance, at a price not determined by the government, but by private companies. This puts too much public policy power in the hands of businesses. It places burdens on individuals under the guise of regulating businesses.

This court made a relatively cursory review of the law, partly because half a dozen other courts are considering the same question. So far, no court has ruled to uphold the individual mandate, and a court would be hard pressed to do so. The real decision will come in the appellate courts.

Some observers worry that if the courts ultimately strike down the individual mandate, much of the health care law will go with it. That is unlikely. There are problems of financial balance in the health care law without the individual mandate, but these problems are not as severe as the personal problems that the individual mandate would create.

Without an individual mandate, the number of people with health coverage will surely be smaller, but not much smaller. For all the talk of universal coverage, the health care reform was only going to cover about 70 percent of people, and without the individual mandate, that may fall to 65 percent — not a huge difference, nor very different from the way things are now. With the majority of voters wanting some semblance of universal coverage, Congress will have to try again regardless of the way the courts rule.

Sunday, December 12, 2010

The Christmas Shoppers Are Back

The Christmas shoppers are back after two weeks off. I saw busy retail parking lots at on Friday as workers rushed to pick up gifts during their lunch hours. Retail traffic has remained busy, if a little less so, over the course of the weekend.

This pattern suggests that more people are doing their Christmas shopping with debit cards and cash. That would explain the rush of shopping on payday. The emphasis on lunch hour says that people want to finish their Christmas shopping without putting a lot of time, effort, or emotion into it.

If people are putting less time and attention into shopping and aren’t willing to pull out their credit cards, there isn’t so much leeway for impulse purchases. Even if you were to see something in the store, it’s hard to stop and consider it if you are limited to the money you have in your pocket and are due back in the office in a few minutes. It is also harder for a shopper to get caught up in the festival atmosphere of holiday shopping on a very short shopping trip or while daydreaming of being somewhere else.

The good news for retailers is that the same people will get paid again after Christmas and may come back for the sales then.

Saturday, December 11, 2010

Hospital Expansions and Layoffs Shrink

The dysfunctional pattern of expansions and layoffs at U.S. hospitals is continuing, but on a smaller scale. In one of the most stark examples of this pattern, Shore Memorial Hospital in Somers Point, New Jersey, is offering severance packages to more than 300 employees to cover the gap created by a $115 million expansion plan, which is going ahead in spite of the financial distress. In general, though, recent hospital layoffs are leaving dozens, not hundreds, without jobs, and the scale of hospital expansions is smaller, with most hospital building plans being scaled down to $30 million or less, postponed, or canceled.

Another change is that hospital administrators are directly blaming their declining patient count on the sorry state of the national economy. It used to be said that health care was a recession-proof industry, but prescription drug purchases and hospital stays have been declining ever so slightly since a peak around 2007, and it seems as if this could be related to the economy. The flurry of hospital building was based on the hope, derived from out-of-date demographic studies, that the retiring baby-boom generation would be spending much of their time in the hospital. Health care administrators and forecasters are coming to accept the thought that the imagined rush of baby boom patients is not on the way, at least not now.

Friday, December 10, 2010

This Week in Bank Failures

Bank of America agreed to pay $137 million to settle a government case in which it was accused of bribing municipal employees to win business in connection with bond issues. In the settlement, the bank did not admit doing anything wrong. Separately, the bank is talking about a TARP exit as early as this month.

There may not have been any breakthroughs in the investigation into foreclosure error in recent weeks, but a steady stream of revelations and court decisions is eroding confidence in the paperwork side of the mortgage business. In particular, more cases are coming to light in which banks filed foreclosures against borrowers who were current in their payments, along with huge numbers of cases cases in which banks, apparently confused about the status of a mortgage, improperly refused payments from borrowers who were otherwise current in their payments.

Two small bank failures were reported tonight: Earthstar Bank in Pennsylvania and Paramount Bank in Michigan. In each case, the bulk of the deposits and assets were transferred to another local bank.

Thursday, December 9, 2010

Solar Prices Fall, Bigger Investment Needed

Solar panel prices haven fallen by a fourth in the last two years. Solar panels compete with grid electricity. Electric prices are trending up in the long run, though they have held steady over the last two years. As solar panel prices fall and electric prices rise, it becomes easier to make the financial case for replacing grid electricity with solar electricity.

At the prices of two years ago, a home solar installation was already a good investment for some people. It worked best in the ideal case, for a household that doesn’t have to borrow the money and expects to live in the same house for the expected life of the solar installation. In other words, if you’re out of debt and saving for retirement, and you’ll be retiring in the same house where you live now, a solar installation is a better investment than adding money to your retirement account. This makes sense if you think of the payoff of lower electric bills throughout your retirement.

With solar prices falling, solar installations are easier to do in less than ideal cases — for example, for people who are not completely out of debt, and people who are likely to sell their houses after ten years. The falling prices don’t really mean you can spend less money on a small home solar installation. The cost of the other components, which synchronize the solar electricity with the grid electricity, haven’t moved much, so the price of a practical entry-level installation is about the same. However, it will generate more electricity than before, resulting in greater savings on the electric bill. As an example, a $3,000 installation in 2010 might generate $37 of electricity per month, instead of $29 per month from a comparable installation in 2008.

This kind of lump-sum investment won’t catch on quickly in a financial culture based on monthly payments, and as long as equipment costs are falling this rapidly, you don’t lose much by holding out and hoping for a lower price next year. Still, this year’s prices are low enough that, as a nation, the United States should be moving much faster with solar installations, in order to reduce the trade deficit caused by energy imports. Price are low enough now for homeowners and other building owners to take action without government subsidies. The U.S. government could well discontinue tax incentives for solar installations at this point and spend the money instead on solar installations for its own buildings.

Wednesday, December 8, 2010

Fragile Financial Networks

A series of events in the past two days serve as reminders that our financial communication networks are not as stable or reliable as we would hope. ATM failure in multiple countries hit at an inauspicious time, on the same day that a French group had called for a run on the banks. It wasn’t really a run on the banks — such things aren’t actually planned weeks in advance — but observers might have gotten that impression in Ireland as Bank of Ireland customers lined up down the street and around the corner to conduct routine banking business. That’s what happens when the ATMs aren’t working.

As I write this, the Mastercard web site is back online, after being down for most of the day. There have been reports of sporadic problems with the Visa web site. These problems could be related to a denial-of-service attack from Wikileaks supporters, but if such an attack exists, it would have to be an impromptu operation on a small scale, peanuts in comparison to what a criminal organization or government could put together.

If these minor episodes are causing spot outages, then we can expect that more significant disruptions in the world, which are bound to occur sooner or later, may take some of the financial networks offline for extended periods. The less stable financial networks will compound the problems that people already face in such a situation.

Tuesday, December 7, 2010

Skiing vs. Obesity

The European Union has released new obesity statistics. Europeans have been gaining weight, and the headline statistic is that more than one half of EU adults are overweight, the first time that has been reported. The obesity rates are between 7.9 and 24.5 percent, depending on the country, which is to say, they are not nearly as bad as the rates in the United States.

I looked through the statistics country by country and saw a correlation between downhill skiing and obesity rates. The six countries in Europe most strongly associated with downhill skiing are Andorra, Austria, France, Germany, Italy, and Switzerland. Five (all but Andorra) are EU member counties, and these five skiing countries of the EU all have obesity rates below the EU average. Switzerland is near the lowest in Europe with an obesity rate of 8.1 percent. Italy, France, Austria, and Germany have higher rates, between 9.9 and 13.6 percent, but still well below the EU average of 15.5 percent. I couldn’t find reliable obesity statistics for Andorra, but news reports suggest that it is near the average for Europe, which would make it something of an exception to the pattern.

This inverse connection between downhill skiing and obesity rates seems to hold elsewhere. I looked specifically at the Scandinavian countries. All four countries have obesity rates near or below the European average, but comparing them to each other, they rank in obesity according to the way they rank in the prevalence of downhill skiing, with Norway having the lowest obesity rate, and Finland, the highest.

The same pattern holds among U.S. states. Colorado is the state most associated with skiing, and is also the only U.S. state with a Europe-like obesity rate. Colorado’s obesity rate is 19.2 percent, and the other skiing states are generally below average in obesity, with the exceptions of West Virginia, Pennsylvania, and Alaska. The three southern Appalachian states known for skiing, Georgia and the Carolinas, are also exceptions. Low obesity rates are also found in the District of Columbia and Hawaii, and in general, political leanings are a better predictor of obesity among U.S. states than skiing is. But it’s worth noting that Utah, very much a skiing state, is the one relatively thin state among the strongly Republican states.

The suggestion that obesity and skiing don’t go together will hardly come as a surprise. Downhill skiing is one of the more physically demanding sports to begin with, and it is safer and more fun when done in a more vigorous style. It’s no secret that vigorous exercise can burn off extra body fat. My guess also is that it is important that skiing is at its peak during the coldest months of the year, when most people are at their most sedentary. If I’m right, going outside and exercising for hours on weekends in January and February may be enough for most people to fend off long-term weight gain. I hope someone eventually can pinpoint the specific fat-burning effects of skiing. For example, which makes a bigger difference: skiing for hours at a time, or in very cold weather? In the meantime, the data is strong enough that I can say that there definitely is some kind of connection between skiing and staying thin.

Monday, December 6, 2010

Retail and the Early December Lull

If Christmas shoppers seem more confident this year, there is good reason for it. Consumers are not as deep in debt as they were at the beginning of the year. Credit card debt, in particular, has fallen by about one eighth, according to one credit industry estimate.

The increased confidence doesn’t mean consumers can spend more, however. Part of the reason credit card debt is down is that so many people have stopped using their credit cards for purchases. Paying cash for Christmas gifts, they won’t be tempted to spend more money than they have.

This may be part of the reason Christmas shopping dropped off so drastically and so immediately after the Black Friday rush. Many workers will get two more paychecks between Black Friday and Christmas, however, so they could return to the stores on any given weekend. That effect was hard for me to see this past weekend, however. I saw plenty of traffic on the highways on Saturday and, especially, Sunday, but I never did figure out where all the cars were going. None of the retail parking lots I saw looked busy.

Retailers may be trying new strategies to counter the newly named “early December lull,” but they are also lowering their expectations. I didn’t see extended hours in any store this past weekend, and if there was extra staff in the store, it wasn’t obvious. It may be now that the Christmas rush consists only of Black Friday itself and the eight days before Christmas. If so, it will also be less wearing on retail workers, who will have two or perhaps three normal weeks to recover from Black Friday.

This also means that the December boost in employment will be disappointing this year, making the seasonally adjusted employment numbers for November look better than they really are and the numbers for December, worse than they really are. We must not be alarmed if the December employment report appears to show an economy in contraction. The trend to notice is not a change in direction for the economy, but a change in the meaning of the seasons.

Sunday, December 5, 2010

A Night Without Spam

I woke up to an empty e-mail inbox yesterday morning. None of the usual spam messages had arrived for more than eight hours. The last time I went for more than an hour without an e-mail message, about seven months ago, it was a mail server failure, and the missing e-mail wasn’t delivered until the business day got going around 9 a.m. This time, though, it was just that no messages had been sent to me for the entire night.

I asked around, and other people were also getting less than the usual volume of spam.

This e-mail silence is apparently the result of the arrest of Oleg Nikolaenko, who the FBI estimates was sending 32 percent of the world’s spam at one point last year. He did this using an outlaw program that security experts identify as Mega-D, which broke into millions of home computers just for the purpose of disguising the origin of e-mail messages. That, of course, is a crime, and if Nikolaenko is guilty and receives a sentence proportionate to the harm caused by his activities, he may never get out of jail. So far, however, he is charged only with a single offense that carries a maximum jail term of three years.

With Nikolaenko in custody, Mega-D is winding down, and it may take a few weeks before the criminal businesses that rely on spam for advertising make deals with other spam vendors. In the meantime, we may have a lighter volume of span for a few days.

The FBI caught up to Nikolaenko by following the money he was collecting. It started when they arrested one of his customers, who was a dealer selling counterfeit watches. After talking to a few more people, they had identified one of Nikolaenko’s e-mail accounts, and with that information, they were able to catch up to him on one of his flights into the United States. Any large-scale enterprise can, eventually, be traced this way, because the money to keep it going has to be coming from somewhere.

Saturday, December 4, 2010

Vitamin D vs. Winter Weight Gain

A kind of nutritional skirmish broke out over vitamin D this week, when a scientific group raised its recommendations for vitamin D, and government authorities in the United States and Canada responded by warning people not to take too much.

People could get the wrong idea from the government statements. Vitamin D is relatively nontoxic compared to other vitamins. Healthy people in scientific studies had to take a week’s worth of vitamin D supplements every day to produce toxic effects, and even then, it took months of this kind of extreme excess before the first symptoms appeared.

I’ve never known anyone to take vitamin D pills one after another. Rather, the situation most people are in, particularly in the northern United States and Canada and particularly at this time of year, is a shortage of vitamin D. The average person needs more, not less. Trying to scare people away from taking vitamin D supplements (and even the dairy products that have vitamin D supplements added) is sending the wrong message.

The recent government statements on vitamin D are misleading in another way. They emphasize bone health, as if the main function of vitamin D was to hold your bones together. The truth is quite otherwise. Vitamin D is tied into thousands of processes in the body, from hormone levels to metabolism. Vitamin D protects against cancer and diabetes, though scientists are still trying to figure out how this works. In long-term studies, people who take vitamin D supplements die 7 percent less often than people who don’t. It’s not just about the bones.

Vitamin D is the one major nutrient that is directly related to the seasons, if you live in a place that has distinct seasons. In late spring and summer you can get all the vitamin D you need from sunshine, and you won’t need to eat any of it. If you are out in the sun with a small fraction of your skin uncovered for an average of several minutes a day, that’s probably enough. The skin synthesizes vitamin D easily in full sunlight. It is a different story in the winter when the sun is not so bright and people are not outside much. That’s why this is the time of year when people should be thinking about vitamin D. It is this situation that the vitamin D guidelines are intended for. The new guidelines recommend 600 IU of vitamin D per day for adults who don’t get any sun, or up to to 4,000 IU. Notice that the recommendation allows for a very wide range, and chances are, you can exceed the maximum by a factor of 10 without any problems as long as you don’t do so day after day. Besides, the maximum isn’t intended as a limit for a person who has a vitamin D deficiency, but as a guideline for people who are passive about their nutrition, to prevent an excess from building up. Still, the lower number, the reference value of 600 IU, is probably all you need.

You need to know about vitamin D if you are overweight and tend to gain weight in the winter. Urban folklore pins the blame for the added weight on holiday meals, but the scientific evidence points more to vitamin D. More recently, scientists have made a link between vitamin D and seasonal depression. It makes sense to me, if you have any kind of problem with winter, to look at vitamin D.

Vitamin D deficiency is surprisingly common. In the United States, nearly 60 percent of people who are tested for vitamin D are deficient. Of course, people with illnesses are more likely to be tested, but still, only about half of U.S. adults have enough vitamin D to be healthy according to medical guidelines. Obviously, if you are not out in the sun regularly and are not taking a vitamin D supplement, the odds that you are getting enough vitamin D are lower.

The simple answer to vitamin D, if you have the kind of deficiency most people seem to have in winter, is to buy the smallest vitamin D supplements you can find (the bottle will say “D3”) and take one per day — or actually, one every four days would probably be enough. Unlike other nutrients, trying to get vitamin D from food is not necessarily the right approach. Most of the vitamin D you find in food is in milk, and this is a supplement added to the milk (that’s why it’s called “vitamin D milk”). You get the same supplement in a vitamin D capsule, and without the health consequences that come with consuming dairy products.

Even better, as soon as weather permits it, get out in the sun for minutes at a time. Where I live in southern Pennsylvania, I only need a vitamin D supplement between November and March.

Vitamin D is fat-soluble, so it doesn’t so much matter how much you get in one day — it’s more a matter of how much you get over the course of a month. All vitamin D supplements contain more than the daily reference amount, so you may not need to take them every day. A 2,000 IU capsule has enough for 3.3 days, so if you want to be conservative about it, take one every 3.3 days, on average. This works out to 27 capsules over the course of the winter, or 60 if you also take them in the fall and early spring. When you look at how little vitamin D costs, you might ask, “Can you really cure seasonal weight gain and seasonal depression for less than $5?” The answer is, “Yes, if vitamin D deficiency is the cause.” And again, about half of people are short of this vitamin.

You can get a blood test for vitamin D, but the scientific test, taking the vitamin and seeing if your condition improves, costs less. With so many people deficient in vitamin D, many experts recommend vitamin D for everyone who isn’t out in the sun, just on the chance that it might help. When you look at the costs of vitamin D compared to the costs of the diseases it helps to prevent — obesity, depression, cancer, diabetes, and others — this is a recommendation that makes a certain kind of sense.

Friday, December 3, 2010

This Week in Bank Failures

Bank holding companies rarely survive when their banks are liquidated, and the old Washington Mutual holding company is not really an exception. It filed for bankruptcy immediately after the bank was seized, and final arguments in the bankruptcy proceeding are scheduled for Monday. The only really valuable asset the holding company has is income tax credits, but it was such a big company that this asset is worth the trouble to hold on to. The bankruptcy court has the option to transfer the tax credits to a successor company, probably a small reinsurance company that the holding company also owned. In essence, this company will be able to operate tax-free until the tax credits expired. However, it is also possible that JPMorgan, which bought the assets of the failed bank, could end up with the tax credits. If that were to happen, the reinsurance company would probably have to be sold to a well-funded buyer to keep it operating. Washington Mutual shares continued to trade at a significant market value even after the bankruptcy on speculation that there would be enough money to pay some out to shareholders, but so far, there is no indication of that.

The Salt Lake Tribune is reporting that Utah’s Far West Bank is likely to be sold next week to an investment company. The bank has been operating this year under an prompt corrective action notice from the FDIC, which encourages the bank to be sold to a well-funded buyer. The buyer in this anticipated sale expects to add $200 million to the bank to restore its depleted capital.

There have been no bank failures reported tonight, possibly because of technical issues at the FDIC. The FDIC web server was mostly shut down for server changes last weekend and is still not fully functional tonight. If the FDIC is experiencing server problems that go deeper than the web servers, that might be reason enough to postpone any planned bank closings until next week.

Thursday, December 2, 2010

Real Estate Investors Holding Back

Everything I’m hearing from the foreclosed real estate market says that that the real estate investors who were buying about a fourth of the foreclosed houses are now holding back, buying much less or hardly anything. The foreclosure market slowed down drastically, people say, between last August and the end of September.

In the foreclosure market, real estate investors are mostly flippers, buying ugly houses, making them look better, and selling them again in less than a year. If they’ve practically stopped buying, it means some combination of:

  • They’ve run out of cash. Maybe an investor had set aside money to buy eight bouses, and bought eight, and doesn’t need any more at this point.
  • They’re holding on to their cash, expecting better deals in the near future.
  • They aren’t confident in selling quickly. It is hard for an investor to make money flipping a house if they hold it for a year or longer.
  • They’re more cautious because they’ve taken losses on some recent houses.

None of this is a favorable sign for housing prices. With fewer buyers, the inventory of unsold foreclosed houses will expand, and selling prices will have to fall.

Wednesday, December 1, 2010

The New Meaning of Credit

Lending and borrowing continue to decline.

  • Loans are harder to get. In reports to regulators, banks say they’ve tightened their underwriting since June. At the same time, banks say customers aren’t seeking to borrow as much or as often as they were earlier in the year.
  • People are borrowing less. According to the New York Fed, total household debt fell again in the 3rd quarter. Household debt has fallen to levels not seen since 2006. It is 7 percent below its 2007 peak.
  • People are using their credit cards less, and even canceling them. The number of consumers with credit cards declined by an estimated 8 million this year. That’s a number that previously had only gone up from year to year. The amount of credit card debt has declined by about one eighth. Credit card debt jumped up at the beginning of the recession, then fell off as consumers became more cautious, but no one in the credit card industry would have imagined this kind of decline even last year.
  • Mortgage applications, which picked up modestly with October’s low interest rates, are falling off with interest rates moving up again.
  • Savings rates have increased from near zero (at mid decade) to about 6 percent. That is still a low level, and the United States promised the G-20 that it would increase its savings rate. Saving can be seen as the opposite of borrowing, as paying off debts is included in saving in economic statistics.

It seems to me that these are signs of a lasting cultural change in the meaning of credit. For a quarter century, many consumer and business decisions were based on the assumption, “You can always get a new loan.” This allowed businesses to proceed with risky and often reckless business plans, with the idea that more money could be borrowed whenever something went wrong. Suze Orman, on her television show, advised people planning their personal finances that they might be able to use a line of credit to cover emergency expenses. That thinking changed around 2007. Business plans now have to be written with an exit plan, and Suze Orman has been cautioning viewers that if a financial emergency comes up, a credit card account or other line of credit might vanish.

At the same time, Apple has grown to be one of the largest businesses in the world with a policy of not borrowing money, while its deep-in-debt competitors stumbled (or disappeared, as most of them have done). In the past, business people scoffed at Apple’s cautious approach to building its business, but now that it is a blue chip stock, it is more likely to be studied and imitated.

In the last four years or so, a person or company that is deep in debt is no longer optimistically described as “high-flying.” Instead, they are “down on their luck,” or “at the mercy of their creditors” — not a position anyone would choose to be in. A more cautious approach associated with an absence of debt is no longer vaguely scandalous, but is now seen as “lucky.”

I think there are two main ideas that are behind the new meaning of credit.

  1. Time pressure. People are under increasing time pressure, and are more aware than before of the time costs that come with borrowing money, and the tight cash management that goes along with this.
  2. Control. For a time, easy access to credit gave people the illusion of being in control of their finances. That illusion is fading, and people are looking to patterns like positive cash flow, paying in cash, and money in the bank as replacements.