Dumber than a box of rocks

My title refers to unknown persons in my state legislature-- but I'll get to that in a minute.

The kids and I visited our local food bank a couple of days ago, on a field trip. The bank receives food from various sources: surplus produce from wholesalers, goods that grocers know they can't sell before the expiration date, surplus food from restaurants, and donations from the community. They also use cash donations to buy certain items in bulk, and last year they dug up a garden plot and produced 20,000 pounds of their own vegetables. All this food is distributed to about 40 food pantries across the county, which pass it along to those in need. In addition, they've worked out some kind of token system with the farmer's market, where needy families can buy units of veggies with their tokens. People are trying really hard to get healthy protein, fruits, and vegetables to these families, since relying on cheap carbs is a sure path to health problems.

The food bank is most definitely a success story, and I was really glad to visit them and have my kids put our donated food onto their shelves. But they are struggling to keep up with a 138% increase in people asking for assistance over the past three years. That's considerably worse than in the country as a whole, where requests have increased 46% over the past three years. (No surprise here-- I live in Michigan.) On top of the rise in people needing help, food costs are going up. Our local food bank now needs three times the budget that it did in 2006.

While I was reading about food banks, I discovered that there are some people in the Michigan legislature who are so disconnected from reality that apparently only the glare of torches in the window is going to wake them up. Quoting from a report from last August (available here as a Word document):

Despite record levels of need, food banks forced to turn away fresh produce from local farmers

LANSING – Due to pending state cuts to a surplus crop donation program, food banks across the state are left with no choice but to turn away fresh produce as Michigan’s bounty of seasonal crops reach their peak.

. . .

Annually, an average of six million pounds of food are distributed to local pantries, soup kitchens and shelters that would otherwise go to waste or end up in a landfill. MASS [Michigan Agricultural Surplus System] stimulates Michigan’s economy by assisting farmers, extending the growing season and adding agricultural-based jobs, while also providing low-income families with nutritious food. The state Legislature has proposed cutting the program for the 2010 budget.

Michigan food banks are seeing up to a 30 percent increase in food distribution so far this year and it is particularly painful for the food banks to know that there is surplus food that can’t be acquired in this time when so many people are struggling financially. For example, Marshall said Michigan’s tart cherry industry is looking at likely producing 100 million more pounds of fruit this year than last year.

“We normally would have funds to get these cherries canned or processed somehow, but not this year,” she said. “Michigan producers are exceedingly generous. They hate to see food go to waste and offer it to us at a very low cost. We have been blessed with this generosity towards our MASS program for 17 years now and it kills us to have to turn down food, especially when the need is so great.”

MASS normally costs the state $635,000 annually and the funding covers the harvesting, packaging and shipping of the produce. The dollar amount is miniscule and only accounts for .05 percent of the total funding cut.

$635,000???? Seriously, they can't swing $635,000?

Food is one of the most basic needs of the citizens. If government is (ostensibly) by the people and for the people (hello!!!), the legislature would never have cut such a no-brainer food program. For 10 cents a pound, we can pay farmers, preserve food, employ workers, and distribute that food to the poor. All for a fricking dime a pound-- and this is where they imagine they see fat that can be cut? This is where they see unnecessary waste?

Fer chrissake, $635,000 is only 5 or 6 high-level school administrators. Guess what happens if you cut school administrators? Fewer meetings, same education. Cry me a river.

But instead they chose, first of all, to take money from farmers. This is typical of our cultural inability to understand what wealth is (i.e. production, food, tangible assets). The Michigan Legislature has a message for us all: If you produce something tangible, then fuck you. If you push paper all day, come see us in Lansing!

And the legislature chose, secondly, to take 6 million pounds of produce out of the mouths of the poor and to dump it into the landfill. They just couldn't manage to find that last 1/20 of a percent of the budget cut amongst the overpaid anti-producers in administrative positions. (And I mean anti-producers, I do not mean non-producers.)

If you're among those in need, the only way a trip to Lansing can help you, apparently, is if you bring along your pitchforks and your torches.

Under the table workers

Something is being left unsaid in reporting about unemployment benefits, Medicaid, food stamps, and other government aid during this burgeoning Depression. Under-the-table workers, who (according to an older article) may make up roughly 10% of the work force, often cannot apply for any of this aid. If you have to bring in official pay stubs and proof of expenses, and your official income can't explain how you pay your bills, then you've just announced to the government that you've been violating tax laws. You might qualify for food stamps even with your undeclared income, but due to the IRS you can't apply. Should you lose your job, you might be desperate to feed your children and avoid homelessness, but there won't be any unemployment benefits available.

People tend to see undeclared workers as strictly an immigrant issue, which isn't right. It's also a poverty issue. I know 7 people who are regularly paid under the table, and none of them is an illegal immigrant. (One of them is an immigrant, but he came to the US many, many years ago.) All of these people are in constant struggle to keep their heads above water.

I'm not saying that everyone working in the black market is poor, but I would venture that the vast majority are in poverty or close to it. A disproportionate number of them would qualify for food stamps or Medicaid, relative to above-board workers. And given that unemployment has hit less educated workers the hardest, I assume that undeclared workers would find themselves out of work disproportionately often.

So when you read statistics like "38 million Americans rely on food stamps" as an indication of poverty in the US, remember that a tenth of all workers (and sometimes their children) are not represented in that calculation, even though they're more likely to be poor enough to qualify. People ask "What are the jobless supposed to do when their emergency benefits run out?" But the other question is, what on earth do the black market workers do when there are no unemployment benefits?

We assume we have safety nets, that there's a government agency or at least a food pantry somewhere that will take care of these unfortunate souls who fall through the holes in the safety net. This is sometimes known as the "bystander effect," when people stand by and watch a tragedy unfolding without thinking to give any help themselves. Partly, people feel disconnected from the emergency, as if they're watching it on TV. And partly, we've all been taught to trust the experts, wait for the experts, leave it to the cops or the social workers or the nurses. And so, even when we're good people, sometimes we see an emergency and do nothing. I hope we can get past that. There are many people the government can't help -- again, maybe a tenth of all workers and some of their dependents -- and they need somebody's help.

One grim thing to keep in mind in the years to come is that nobody dies of poverty, per se. They die because they're 80 and can't afford to run the AC, and die of heart attack. They die because malnutrition leaves them vulnerable to diseases we thought we'd seen the last of after the previous Great Depression. They die because they drink themselves to death or commit suicide. I recently read somewhere (no doubt in something Dmitry Orlov wrote) that in Russia after its collapse, the life expectancy for men fell to 10 years less than for women, largely due to self-destruction and violence. But no institution counts such deaths as being due to poverty, except in some far-distant academic paper which looks back, years later, and estimates the surplus deaths.

The reason I'm being so terribly depressingly (sorry, Mom) is that -- should we go the route Dmitry Orlov imagines -- the little things we can do for each other might actually save lives, when people have come to the end of their rope. Eggs for the kids down the road, poker with the depressed guy across the street, a little help with an electric bill or a heat bill here or there... that stuff might truly make a difference. Read some novels from the 19th century, and you discover that people acted this way all the time. I don't hold myself up as a paragon, I just think that we'll have to make a mental shift toward providing more charity. You know, the strong caring for the least among us. I think some religions used to talk about that, back before charity got replaced by judgment.

Reality returns

Some hideous consumer confidence numbers came out today. For one of the confidence measures, economists had predicted a slight fall from 56.5 55.9 (in January) to 55.0. Instead it fell drastically to 46, and one of its components -- how respondents feel about their present situation -- is at a low point not seen since February 1983. The other measure of confidence also fell, to just a hair above its all-time low, set 24 years ago.

A very famous trader and an expert in gold, Jim Sinclair, sums up the world's economic situation this way:

The media can play all the games they wish. Just keep firmly in mind that:

1. Towns are broke.
2. Cities are broke.
3. States are broke.
4. Main Street is in dire pain.
5. The apparent improvement in the financial industry is accounting smoke and mirrors.
6. Most corporate improvements are not sales driven but cost cutting based. You can also call that "firing the help."

Greece or any state of the United States that goes under must be supported by QE to infinity as a country bankruptcy of the Iceland type will sweep across the Western World faster than Lehman Brothers locked up the credit markets.

QE to infinity means money printing to infinity. Bankers like to call it "Quantitative Easing" so that it's harder for the public to understand what's going on. Destroying the currency also means destroying the debts that are denominated in that currency, so it's like a jubilee, which will wind up being a good thing for some people. On the other hand, it also destroys savings, and much worse than that, the lack of a stable currency means economic activity grinds to a stop. The people who get through it best will be those who "get it" that tangible assets are now far more desirable than paper assets. You don't want more stocks and bonds in your 401k, you want land and non-perishable food and bits of silver.

While all this destruction of currencies is going on, we've still got a decline in economic activity. On the jobs front, this animation about unemployment says it best. Darker colors mean worse unemployment. See the contagion spread over the land....

Where is your money?

Citigroup has recently notified its customers that it might take 7 days to receive withdrawals from checking accounts at their banks. Specifically:

"Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change."

Apparently this only applies to Texas, but was mistakenly sent out to every Citi bank customer nationwide. I'd call that a heck of an error. And it's a convenient mistake, since at least some of their customers (even outside Texas) will be slightly more likely to accept delays in receiving their cash, since they were warned in advance. As I wrote last month, a dollar in hand is worth 20 in the bank.

Meanwhile, Zero Hedge alerts us to other troubles in getting our hands on our own damned money in Expecting A Tax Refund? If You Live In Hawaii Or North Carolina (And Soon New York) You Will Have To Wait:

Two weeks ago we warned readers who wanted to get 2009 tax refunds to file their taxes asap. It appears we were prescient. The state budget crisis is about to hit home. Again. Last year California delayed tax refunds due to simply not having any money which to refund. This year, the first states to announce a hold in refund processing for just the same reason are Hawaii and North Carolina. New York State is also considering a comparable action. If you have delayed filing your taxes, it is high time to do so now regardless of where you live as the same "money-saving" approach of halting refunds is likely about to become prevalent now that "everyone is doing it."

Meanwhile, Illinois has not been making its mandatory payments to schools, universities, and various other agencies. California is likely to run into similar cash flow problems in 2 or 3 months, and perhaps this time they won't even bother with official IOU's, but will simply take the Illinois route and just not make payments. So far, school districts and state universities have juggled funds in order to keep paying their workers, but you can see where this is headed. One day, in some state or another, certain state-employed workers will simply not be paid. The money they have earned under contract will simply not arrive.

Speaking of employment contracts, pension funds are vastly underfunded, and the government entity that is supposed to guarantee pension funds (the Pension Benefit Guaranty Corporation) is... right, utterly underfunded. Social Security is underfunded, and will go into deficit (meaning we can only make payments using borrowed money or by hiking withdrawals) this year. And our own, private retirement funds are in danger of being stolen over the long term, as I wrote about in Nationalizing our 401k's.

Are you beginning to see a pattern? You might be worth a certain amount on paper, but what do you have in hand? What money or assets do you have in your house, in a safe, squirreled away at a relative's house, or whatever? What have you actually got in hand?

And now for the ultimate question: what have you got in hand that doesn't depend on the value of the dollar? What do you have that is not denominated in Federal Reserve Notes? Because a couple of years from now, the value of all that green cotton/linen blend could be dwindling fast. Or even sooner than a couple of years.

It's time to think 19th century for at least some of your wealth (should you still be so lucky as to have any wealth). You know: Land, tools, wheat and rice, salt and sugar, firewood, silver and gold, the family jewels (in the literal sense), cows, pigs, chickens. More people would see this if they weren't blinded by a knee-jerk disdain of "survivalists," and by the "Everything Is Normal" meta-message of television.