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A Tale Of Two Recessions: One Excellent, One Tumultuous

A Tale Of Two Recessions: One Excellent, One Tumultuous

Authored by Charles Hugh Smith via OfTwoMinds blog,

Events may show that there are…

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A Tale Of Two Recessions: One Excellent, One Tumultuous

Authored by Charles Hugh Smith via OfTwoMinds blog,

Events may show that there are no winners, only survivors and those who failed to adapt.

Some recessions are brief, necessary cleansings in which extremes of leverage and speculation are unwound via painful defaults, reductions of risk and bear markets.

Some are reactions to exogenous shocks such as war or pandemic. The uncertainty triggers a mass reduction of risk which recedes once the worst is known and priced in.

Far less frequently, structural recessions are lengthy, tumultuous upheavals that can set the stage for excellent long-term expansion or unraveling and collapse. In these structural recessions, 10% to 20% of the workforce loses their jobs as entire sectors are obsoleted and jobs that depend on excesses of debt and speculation go away.

In the U.S. economy of today, this would translate into a minimum of 14 million jobs vanishing, never to return in their previous form and compensation.

The old jobs don't come back and new jobs demand different enterprises, training and skills. Unemployment remains elevated, spending is weak and productivity is low for years as enterprises and workers have to adjust to radically different conditions. If the economy and society persevere through this transition, the stage is set for the reworked economy to enjoy an era of renewed prosperity and opportunity.

If an economy and society can't complete this transition, stagnation decays into collapse.

I've annotated a St. Louis Federal Reserve chart of U.S. recessions since 1970 to show the taxonomy described above. The stagflationary 1970s / early 1980s were a lengthy, tumultuous structural upheaval; the 1990-91 recession was triggered by the First Gulf War; the Dot-Com Bust in 2000-2002 was largely the unwinding of speculative excesses in the technology sectors (similar to the radio-technology bubble of the 1920s); the Global Financial Meltdown (aka the Global Financial Crisis) was the structural reckoning of unregulated global financialization excesses, and the 2020 recession was the result of policy responses to the Covid pandemic.

Chart courtesy of St. Louis Federal Reserve Database (FRED)

Each of these resulted in a multi-quarter decline in GDP, the classic (though flawed) definition of recession.

Recessions that cleanse the system of financial deadwood are necessary and yield excellent results. Per the Yellowstone Analogy ( The Yellowstone Analogy and The Crisis of Neoliberal Capitalism (May 18, 2009) and No Recession Ever Again? The Yellowstone Analogy (November 8, 2019), the deadwood of excessive speculation, leverage, fraud and debt issued to poor credit risks must be burned off lest the deadwood pile up and consume the entire forest in a conflagration of the sort that was narrowly averted in 2008-09 when fraud and risk-taking had reached systemically destructive extremes.

The problem with letting deadwood pile up so it threatens the entire forest is the policy reaction creates its own extremes. The coordinated central bank policies unleashed in 2008 and beyond established new and unhealthy expectations and norms, the equivalent of counting on central bank water tankers to fly over and extinguish every firestorm of excessive risk-taking and fraud.

Those emergency measures create their own deadwood, distortions and risk, and are not a replacement for prudent forest management, i.e. maintaining a transparent market where excessive risk is continually reduced to ashes in semi-controlled burns.

When systemic changes in the economy and society demand structural transitions, the resulting tumult can either creatively rework entire sectors, weeding out what no longer works in favor of new methods and processes, or those benefiting most from the old structure can thwart desperately needed evolution to protect their gravy trains.

If change is stifled as a threat, the entire economy enters a death-spiral to collapse. Some eras present an economy with a stark choice: adapt or die. Adaptation in inherently messy, as new approaches are tried in a trial-and-error fashion and improvements are costly as the learning curve is steep.

Sacrifices must be made to achieve greater goals. as I outlined yesterday in A Most Peculiar Recession, in the 1970s the U.S. economy was forced to adapt to three simultaneous structural changes:

1. The peak of U.S. oil production and the dramatic repricing of oil globally by newly empowered OPEC oil exporters.

2. The pressing need to reconfigure the vast U.S. industrial base to limit pollution and clean up decades of environmental damage and become more efficient in response to higher energy prices.

3. The national security / geopolitical need to encourage the first wave of Globalization in the 1960s and 1970s to support the mercantilist economies of America's European and Asian allies to counter Soviet influence.

Coincidentally, this last goal required the U.S. expand the exorbitant privilege of the U.S. dollar, the primary reserve currency by exporting dollars to fund overseas expansion of U.S. allies like Japan and Germany and running permanent trade deficits to benefit mercantilist allies.

These measures created their own distortions which led to the Plaza Accord in 1985 and other structural adjustments. Ultimately, the U.S. managed to adapt to a knowledge economy (Peter Drucker's phrase) and a more efficient means of production, resulting in a much cleaner environment and a leaner, more adaptable economy.

The deadwood of hyper-financialization and the distortions of hyper-globalization have now piled up so high that they threaten the entire global economy. Those who have feasted most freely on hyper-financialization and hyper-globalization must now pay the heavy price of adjusting to definancialization and deglobalization.

Those who have been living on expanding debt and soaring exports are in for a drawn-out, wrenching structural adjustment to the reversal of these trends and the fires sweeping through the deadwood that's piled up for the past two decades.

There will winners and losers in this global structural upheaval. Mercantilist economies that feasted on 60 years of export expansion will be losers because there is no domestic sector large enough to absorb their excess production, and those who feasted on the expansion of debt to inflate asset bubbles will find their reluctance to conduct controlled burns of their speculative debt-laden deadwood will exact a devastating price when their entire financial system burns down.

Those who didn't rely on exports for growth will find the transition much less traumatic, as will those who maintained a regulated, transparent market for credit that limited excesses of leverage and high-risk debt.

Those who adjust to structurally higher energy costs by becoming more efficient and limiting waste via Degrowth will prosper, all others will sag under the crushing weight of waste is growth Landfill Economies. I explain why this is so in my new book Global Crisis, National Renewal.

Recessions which are allowed to clear the deadwood and encourage adaptation yield excellent results. Those which don't lead to the entire forest burning down. Economies optimized for graft, corruption, opacity and benefiting insiders will burn down, along with those that optimized speculative extremes of debt and those too rigid and rigged to allow any creative destruction of insiders' skims and scams.

Events may show that there are no winners, only survivors and those who failed to adapt and slid into the dustbin of history.

*  *  *

My new book is now available at a 10% discount this month: When You Can't Go On: Burnout, Reckoning and Renewal. If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

Tyler Durden Fri, 08/12/2022 - 12:20

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Economics

Here’s Why Your Boss May Reject Your Business Travel Request

People are taking vacations again, but a once dominant travel sector is struggling to recover.

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People are taking vacations again, but a once dominant travel sector is struggling to recover.

Now that vaccines are readily available and President Joe Biden has declared that the pandemic is officially over, people are flying again. But they’re really not happy about it.

The research firm J.D. Power found that last year, when the airline industry first started to cautiously rebound, consumer satisfaction with airports reached an all-time high. But this was very likely both because of a relatively smaller sample size and that so many people were happy to fly again that they were willing to overlook a lot of what has become headache-inducing about modern airfare travel.

J.D. Power  (JD) - Get JD.com Inc. Report has found that this year, global passenger levels are nearly back up to 91% of pre-pandemic levels. 

Customer satisfaction has dropped sharply, 25 points on a 1,000-point scale, to 777, as more people have returned to airports, for reasons ranging from an increase in flight cancellations and delays to inflation-driven increases in the cost of airport food.

But while airlines are aware that customers aren’t happy, and that the Biden Administration might try to right the ship with proposals that airlines likely won’t care for, at least people are flying again.

But an additional survey by J.D. Power has revealed that while people are flying again, traveling for business (be it for in-person meetings or industry conferences), has been lagging behind and recovering at nearly the rate of traveling for pleasure. 

Is Traveling for Business on the Way Out?

J.D. Power’s research has found that many travelers doubt that travel levels will increase dramatically from where they are now, and that “a strong majority of executives believe their companies will spend less in the next six months compared to the same period in 2019, for instance, due to things like fewer trips overall or fewer employees sent when there is a trip scheduled,” according to their data.

Overall, business travel has returned to “about 81% of 2019 levels,” notes Managing Director Michael Taylor. “83% was our prediction for this quarter, we’ll see how well we did in a few weeks and add a predication for Q4.”

J.D. Power

Fears of recession and the rising costs of air tickets from inflation play a factor in the decline of business travel. But overall, the main reason is that many of us have gotten so used to working at home that two-thirds of employees would rather find a new job than go back to the pre-pandemic status quo. If employees feel they can get work done from home and don’t feel like braving traffic to return to the office, why would they feel they need to get on a plane?

So have services like Zoom (ZM) - Get Zoom Video Communications Inc. Report and Slack made the business trip redundant? Taylor has his doubts.

“But will people be meeting exclusively in the 'Metaverse' rather than in person? I do not think that will happen,” he says. “There is too much information to be gathered in face-to-face meetings, spoken and unspoken, to be replaced completely by virtual ‘reality.’”

Getty Images

So is This It for Business Travel?

Back in the heady pre-pandemic days three years ago, airlines could rely on the extra income from people whose jobs entailed a great deal of travel, and who had come to the realization that if they were going to spend a chunk of their lives on the road, they could splurge to make it a more comfortable experience. 

But if airlines want this sector to return, Taylor thinks it’s their duty to make it a more appealing option, because frequent delays and other headaches are enough to make anyone stick to Zoom.

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Airlines, Taylor says, must “create more of a “living room” experience for travelers, one that “makes travelers feel valued as patrons of the airlines, and makes people feel like individuals rather than cattle.”

Because while it’s hard to argue with the convenience, Taylor insists there is still something to be said for the occasional in-person meeting. 

“Millenia of evolution in mankind has created an awareness that can’t be described with words on a page or pixels on a screen,” he says. “People will still find advantages in meeting in-person rather than online.”

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Economics

BOEHRINGER INGELHEIM DONATES NEARLY 100,000 PET VACCINE DOSES TO HELP ELIMINATE RABIES AROUND THE WORLD WITH RELAUNCH OF SHOTS FOR GOOD(SM) INITIATIVE

BOEHRINGER INGELHEIM DONATES NEARLY 100,000 PET VACCINE DOSES TO HELP ELIMINATE RABIES AROUND THE WORLD WITH RELAUNCH OF SHOTS FOR GOOD(SM) INITIATIVE
PR Newswire
DULUTH, Ga., Sept. 28, 2022

In recognition of World Rabies Day on September 28, the d…

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BOEHRINGER INGELHEIM DONATES NEARLY 100,000 PET VACCINE DOSES TO HELP ELIMINATE RABIES AROUND THE WORLD WITH RELAUNCH OF SHOTS FOR GOOD(SM) INITIATIVE

PR Newswire

In recognition of World Rabies Day on September 28, the donation is for use on tribal lands and underserved communities in collaboration with Greater Good Charities

DULUTH, Ga., Sept. 28, 2022 /PRNewswire/ -- Boehringer Ingelheim, a global leader in veterinary rabies vaccines, has expanded its commitment to help prevent rabies in dogs by donating nearly 100,000 doses of rabies vaccine. The donation is part of the relaunched SHOTS FOR GOOD℠ program and will be used on tribal lands and in underserved communities across the United States.

Rabies is a zoonotic, viral disease, which can be transmitted through wild animals and pets. Once clinical symptoms appear, rabies is virtually 100% fatali. Even though it is vaccine-preventable, around 59,000 people still die from rabies every year globallyii. Rabies is present on all continents, except Antarctica, with over 95% of human deaths occurring in the Asia and Africa regionsiii. It can pose a significant risk anywhere if dogs are not vaccinated. Dogs are the main source of human rabies deaths, contributing up to 99% of all rabies transmissions to humansiv.

"Boehringer Ingelheim fervently believes no animal should suffer from a preventable disease," said Dr. Julie Ryan-Johnson, head veterinarian for shelters at Boehringer Ingelheim and board vice chair for Greater Good Charities. "Together with Greater Good Charities we can fight the presence of rabies on tribal lands and in underserved communities to keep pets healthier and happier for longer."

Boehringer Ingelheim Animal Health established the SHOTS FOR GOOD initiative in 2019 in Puerto Rico and underserved communities in California, Nevada, Oklahoma, Texas, North Carolina, Louisiana, Mississippi, and Florida. However, in 2020, the initiative was suspended due to global pandemic restrictions.

Since relaunching the program earlier this year, and in collaboration with the global nonprofit, Greater Good Charities, the program has enabled vaccination clinics throughout tribal lands in Alaska, Arizona, Colorado, Montana, and Utah. Additional vaccines have been utilized in Hawaii as part of Greater Good Charities' Good Fix program which offers high-quality, high-volume spay/neuter to help control pet overpopulation in underserved communities.

"In observance of World Rabies Day, we recognize the positive impact of vaccination events to raise awareness about rabies and how to prevent this deadly disease," said Denise Bash, vice president at Greater Good Charities. "The generous vaccine donations from Boehringer Ingelheim Animal Health and the Shots for Good initiative helps to protect pets while making this important effort possible."

About World Rabies Day

World Rabies Day, held every year on September 28, is observed by the United Nations as an International Day. Coordinated by the Global Alliance for Rabies Control, it is a day to raise awareness about rabies and how to prevent this deadly disease. Hundreds of events are held by organizations and individuals around the world in recognition of this day.

About Boehringer Ingelheim

Boehringer Ingelheim Animal Health is working on first-in-class innovation for the prediction, prevention, and treatment of diseases in animals. For veterinarians, pet owners, farmers, and governments in more than 150 countries, we offer a large and innovative portfolio of products and services to improve the health and well-being of companion animals and livestock. As a global leader in the animal health industry and as part of family-owned Boehringer Ingelheim, we take a long-term perspective. The lives of animals and humans are interconnected in deep and complex ways. We know that when animals are healthy, humans are healthier too. By using the synergies between our Animal Health and Human Pharma businesses and by delivering value through innovation, we enhance the health and well-being of both.

Learn more about Boehringer Ingelheim Animal Health USA Inc. at bi-animalhealth.com  

About Greater Good Charities

Greater Good Charities is a 501(c)(3) global nonprofit organization that works to help people, pets, and the planet by mobilizing in response to need and amplifying the good. Greater Good Charities, with a 100/100 rating on Charity Navigator, has provided more than $475 million in impact, including cash grants, in-kind supplies, and programmatic support, to charitable partners in 121 countries since 2007. To learn more about how Greater Good Charities amplifies the good across the globe, please visit greatergood.org.

Media Contact:
Chrissy Jones
Boehringer Ingelheim Animal Health
U.S. Communications
(516) 527-5456
christine.jones@boehringer-ingelheim.com 

REFERENCES

i World Health Organization: Rabies (who.int) (downloaded: April 1, 2022)
ii World Health Organization: Oral rabies vaccine: a new strategy in the fight against rabies deaths (who.int) (downloaded: April 1, 2022)
iii World Health Organization: Rabies (who.int) (downloaded: April 1, 2022)
iv World Health Organization: Rabies (who.int) (downloaded: April 1, 2022)

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SOURCE Boehringer Ingelheim

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Economics

Cambridge Bancorp Announces Receipt of Regulatory Approvals to Merge with Northmark Bank and Anticipated Closing Date

Cambridge Bancorp Announces Receipt of Regulatory Approvals to Merge with Northmark Bank and Anticipated Closing Date
PR Newswire
CAMBRIDGE, Mass., Sept. 28, 2022

CAMBRIDGE, Mass., Sept. 28, 2022 /PRNewswire/ — Cambridge Bancorp (NASDAQ: CATC), th…

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Cambridge Bancorp Announces Receipt of Regulatory Approvals to Merge with Northmark Bank and Anticipated Closing Date

PR Newswire

CAMBRIDGE, Mass., Sept. 28, 2022 /PRNewswire/ -- Cambridge Bancorp (NASDAQ: CATC), the parent company for Cambridge Trust Company ("Cambridge Trust"), today announced all regulatory approvals relating to the proposed merger between Cambridge Trust and Northmark Bank have been received. The shareholders of Northmark Bank approved the merger at a special meeting held on August 31, 2022.  The anticipated closing date of the merger is October 1, 2022, subject to the satisfaction of other closing conditions.

About Cambridge Bancorp

Cambridge Bancorp, the parent company of Cambridge Trust Company, is based in Cambridge, Massachusetts. Cambridge Trust Company is a 132-year-old Massachusetts chartered commercial bank with approximately $5.1 billion in assets at June 30, 2022, and a total of 19 Massachusetts and New Hampshire locations. Cambridge Trust Company is one of New England's leaders in private banking and wealth management with $4.0 billion in client assets under management and administration at June 30, 2022. The Wealth Management group maintains offices in Boston and Wellesley, Massachusetts and Concord, Manchester, and Portsmouth, New Hampshire.

Forward-looking Statements 

Certain statements herein may constitute "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements about the Company and its industry involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company's future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, the impact of any laws or regulations applicable to the Company, and measures being taken in response to the COVID-19 pandemic and the impact of the COVID-19 pandemic on the Company's business are forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "plans," "projects," "may," "will," "should," and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following: the businesses of Cambridge and Northmark may not be combined successfully, or such combination may take longer to accomplish than expected; the cost savings from the merger may not be fully realized or may take longer to realize than expected; operating costs, customer loss and business disruption following the merger, including adverse effects on relationships with employees, may be greater than expected; changes to interest rates; the ability to control costs and expenses; the current global economic uncertainty and economic conditions being less favorable than expected; disruptions to the credit and financial markets; changes in the Company's accounting policies or in accounting standards; weakness in the real estate market; legislative, regulatory, or accounting changes that adversely affect the Company's business and/or competitive position; the Dodd-Frank Act's consumer protection regulations; the duration and scope of the COVID-19 pandemic and its impact on levels of consumer confidence; actions that governments, businesses and individuals take in response to the COVID-19 pandemic; the impact of the COVID-19 pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; a prolonged resurgence in the severity of the COVID-19 pandemic due to variants and mutations of the virus; the pace of recovery when the COVID-19 pandemic subsides; disruptions in the Company's ability to access the capital markets; and other factors that are described in the Company's filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year end December 31, 2021, which the Company filed on March 14, 2022. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. You are cautioned not to place undue reliance on these forward-looking statements.

CONTACT:
Cambridge Bancorp
Michael F. Carotenuto
Chief Financial Officer
617-520-5520

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SOURCE Cambridge Bancorp

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