Briefly, it looks like several petitions to the California Supreme Court may, indeed, raise a valid argument against the constitutionality of the measure:

Opponents of Proposition 8 argue that it was a sweeping constitutional revision, which can be put on the ballot only by the Legislature, instead of a more limited constitutional amendment, as supporters contend.

We live in a democracy, of course, and if the courts decide that the measure was correctly submitted, well… Whether I like the result or not—and whether I think it’s utterly absurd that 52% of a state’s voting populace can amend that state’s constitution (try 75% for a more reasonable voting minimum for that kind of amendment)—the people will have spoken.

While personally I hope this amendment is thrown out on constitutional grounds, I think it’s important here that California in particular—but all states with similar methods of constitutional amendment, by extension—to really examine what the hell happened here: A religious institution spent more than $20Million to interfere with governance and arrive at a bigoted law. First of all, if a political candidate has maximum individual contributions they’re allowed to accept, why the hell aren’t similar limits in place on amendments? Secondly, am I crazy, or isn’t this a blatant violation of the Separation of Church and State?

Let’s call a spade a spade, people. The Mormon Church explicitly and blatantly showed contempted for the US Constitution, violated separation of church and state by advancing and financing legislation, pushed forward an ethically reprehensible amendment that denies people rights under the auspices of “defending the rights” of others, and exploited a fucking legal loophole to do it. At the very least, a national Supreme Court case needs to be had on the subject, and the Mormon Church needs to be admonished for overstepping it’s bounds and its moral authority wholly and publicly rebuked. They should also have their tax exempt status revoked. But that one is a personal opinion.

So much forecasting is going on right now, people are generally forgetting to compare what’s happening right now to what was forcast a month ago, a quarter ago, and a year ago.

The forecasts got it all wrong. All of it. They either didn’t catch it, or they grossly underestimated the severity of what’s been happening. That trend of underestimation continues.

A sizable part of what got us into this mess is economists’ and CEOs’ and politicians’ belief that these models are infallable. Accordingly, they place their trust in these models even when the evidence is screaming at them not to.

I’m no rocket scientist, yet I’ve called all of this. How? I’ve been asked. It’s elementary, Watson.

I’m not at all gloating when I say this, but it was really quite easy to predict this. If you could step outside of the priveleged envelope of American luxury and look at the financial state of this country with an open-minded curiosity, a willingness to do some simple math, and familiarity with Sociology 101 and 102 from your freshman year of College—which are exactly the resources I used—this crash was entirely self-evident three years ago. My more specific predictions in the last few months—quarterly earnings, unemployment, etc.—comes from more direct experience with economics and finance gained from spending 10 years in the industry (though really only paying attention to it for 4 of those). It was the sociology, outside of the math, that was most helpful to me: Knowning how people generally will behave—particularly in a crisis and during an election season—makes understanding the choices they’ll inevitably make much, much easier.

So, here’s today’s point: Economists, newspaper reporters, and politicians need to dump the economic models and classroom theories—_they’re not working_—and they need to embrace common sense and sociology. The problems with our economy become totally clear and evident at that point, and predicting what happens next becomes a lot more reliable.

~

Most of NPR’s PlanetMoney podcasts are closed with an add from the University of Chicago’s School of Business, which claims to be “revolutionizing the business world by asking the question, ‘What were you thinking?’” Aside from the fact that it’s wholly shameful that men and women in such positions of power need to be asked or ask themselves that question at all, the answer was a simple one: They were making assumptions and presumptions based on models and on the status quo. Common sense and history were flung out the window. The models are failing—they won’t recover—and a new world is dawning. We need to give up on those junk models, get down to the business of thinking for ourselves and coming to our own goddamned conclusions about what’s really going on here.

Remember my predictions about third quarter losses and unemployment – the ones I made in September and reposted yesterday? Well, unemployment figures are already in, and it looks like my predictions there were spot-on there. Circuit City led the charge on retail casualties based on crumby 2008 sales, culminating with it’s poor third quarter performance. Now this morning comes word of quite a few more big hits – both fitting with my predictions.

First, credit cards: American Express – crushed by defaults – seeks Federal Bailout Monies

From Bloomberg yesterday:
American Express Co., the credit-card company most dependent on capital markets for fundraising, fell 6.6 percent in New York trading on concern that converting to a bank to gain deposits won’t protect it from rising credit losses. [The stock decline] is an ominous sign that either things are a lot worse than AmEx described in its recent third- quarter earnings, or that AmEx sees the writing on the wall and recognizes that a Federal fund infusion is its only path to survival.

And, per the WSJ this morning:
American Express Co. which is being hit by slowing consumer spending and rising defaults, is seeking roughly $3.5 billion in taxpayer-funded capital from the federal government, according to people familiar with the situation.

Next up, more retail woes: Best Buy, Macy’s post significant losses

Best Buy, From Bloomberg this morning:
Best Buy revised it’s earnings forcasts based on awful 2008 sales, and anticipates a 15% decline in sales over the next four months. (brandonian.net readers will take note here: I expect this to be an underestimation. As jobs continue to be shed and consumers have nothing to spend with in the wake of frozen credit markets, normal sales prediction models need to be thrown out the window. All retailers will face extraordinary sales declines this holiday season.) “Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we’ve ever seen,’‘ Chief Executive Officer Brad Anderson said in the statement. “Best Buy simply can’t adjust fast enough to maintain our earnings momentum for this year.” Best Buy’s forecast signals consumers grappling with rising jobless rates and declining home values have stopped buying non- necessities as the holidays approach.

Macy’s posts some good bad news – lower losses than expected. From Bloomber this morning:
Macy’s Inc., the second-biggest U.S. department-store chain, posted a third-quarter loss that was smaller than analysts estimated after it reined in markdowns. The net loss was $44 million, or 10 cents a share, compared with net income of $33 million, or 8 cents, a year earlier. Revenue declined 7 percent to $5.5 billion in the three months ended Nov. 1, the company said. But, The current three-month period will be crucial for the retailer, since it accounted for 84 percent of its annual profit last year. current three-month period will be crucial for the retailer, since it accounted for 84 percent of its annual profit last year.

Advanced word is that Nordstrom is not looking so hot, either – see the Best Buy article…

Of course, we all know about GM – who knows what will happen there. As for if it should, I think jobs are the single most important priority any administration should have right now. As far as I’m concerned, keeping GM and Ford solvent is a good thing – rather than bail out banks and credit card companies, the US should be focusing on keeping American job-horses afloat and paying their employees. The smartest thing we can do with GM and Ford is nationalize them, consolidate them into one auto manufacturer, and completely and quickly retool their product line to offer an array of affordable green automobiles and affordable green retrofitting services for autos already on the road.

Finally, it would seem that the Treasury is finally starting to catch on as to the actual whereabouts of this crisis:

From Bloomberg this morning:
U.S. Secretary Henry Paulson plans to use the second half of the $700 billion financial rescue program to help relieve pressures on consumer credit, scrapping an effort to buy devalued mortgage assets. “Illiquidity in this sector is raising the cost and reducing the availability of car loans, student loans and credit cards,’‘ Paulson said today in a speech at the Treasury in Washington. “This is creating a heavy burden on the American people and reducing the number of jobs in our economy.’‘ Paulson’s remarks are an acknowledgement that the centerpiece of the $700 billion bailout request to lawmakers was ill-conceived. Neel Kashkari, the Treasury official who heads the rescue program, told legislators last month that officials shifted to buying stakes in banks because it was a faster way revive capital markets and the economy.

Sadly, Paulson’s got the diagnosis mostly right, the cure totally wrong. The bailout, at this point, should be used to de-leverage consumers – the very tax payers financing the thing. Widespread debt relief is what’s needed right now – and some kind of restoration for retirees’ investments that have lost most of their value. (How else will grandma and grandpa lavish the kids with Christmas presents this year?) The Treasury and Fed should give relief grants to debtors to reduce their total debt load to something that is more manageable under their current incomes.

But who listens to me, anyway?

Actually, if you like my blog and find it helpful in these troubled times, please pass it along to friends and family.

New unemployment stats are out this morning and the findings are grim. A quarter million jobs were shed in October, bringing the total number of lost jobs for 2008 to 1.2million. The government is reporting unemployment at 6.5% – a 14 year high. This number is deeply concerning to me, though not solely for its obvious somber bearing on the economy and on the qualities of life for those who are out jobs.

Firstly, a reality check: The federal unemployment statistic generally includes only jobs corporations have reported as shed and those who are using government tools to look for new employment. If you’re, say, a freelancer looking for hours, or someone who hasn’t had a job in years and has went through Monster or similar job-sites looking for work, you’re not counted in that number. I’d argue the actual jobless number in the country today is above 7%. It would appear that, per Planet Money’s David Kestenbaum, my understanding of the unemployment number was incorrect. Here’s his explanation:

The unemployment rate figures that are published on a monthly basis are actually derived from a monthly survey of 60,000 households in the United States known as the Current Population Survey.

So, my first point may is not the reality check I’d thought it was. The question I have now, though, is “What reality is the census bureau checking?” I.e., exactly whom is counted in that 60,000 households? (updated 11/10/08 —bh)

Secondly, 6.5%-to-7+% is a grim statistic indeed, and if these numbers were reported after a weak Christmas sales season, I’d feel okay about our fortunes and concur with the “recession” label economists and politicians are trying to stick to this sinking ship. The fact of the matter is that these jobs have been lost going into the Christmas shopping season – while food prices continue to rise and energy prices fluctuate wildly. Far fewer people are going to be shopping – for many because unemployment has drained them of disposable income, and for most because it has become all too apparent that conservative spending practices are the order of the day going forward. Economists predict the unemployment rate will grow to 8% at least by mid-2009, but I’m confident this is a grossly and irresponsibly conservative number. Yet economists working up to and through this crisis have been nothing if not consistently grossly conservative in their estimates… I expect unemployment to climb into the mid-teens by mid-January as retailers shed jobs, or even close their doors, in the wake of a crushingly weak Christmas shopping season. US retailers in this country count on Christmas sales to finance their operations the rest of the year. For the box retailers of the nation – Walmarts and Targets – these sales account for roughly a third of their yearly income. For other retailers, that number is much, much higher – particularly for entrepreneurial boutique shops catering to niche markets. Everyone from Williams-Sonoma to the hipster purse shoppe and the Hallmark Christmas ornament shop down the street will be hit very, very hard indeed.

Make no mistake, this is where the new century’s Great Depression begins. As I’ve been writing, everything that’s happened in the finance-o-sphere – Wall Street’s ecstatic upper echelons – will pale before what is happening on Main Street now, and what is going to happen on Main Street in just a few months. We’ve entered a downward spiral of tightening credit, stagnant wages, declining consumer spending, and increasing job losses – all of these factors feeding one another and spiraling ever downward until the breaks are put on. (Certainly, investments will be shattered as company sales plummet and more and more homeowners and credit card holders and student loan payees default on their debts, but the government will – at last – cease in its efforts to save the economy from the top down because the collapse of the real economy – you and me – will be the only place the economy really can be saved.) What those breaks are – either a shattered economy that, with a 25% unemployment rate, simply can’t shed any more jobs or some kind of federal initiative to shore up employers and thereby shore up employment – I can’t be certain. The fact of the matter is unemployment will be the single most important domestic concern of the first year of the Obama Administration, and by January the word “recession” will seem a paltry descriptor for the crushing reality of 2009’s wretched economy.

A Depression is a tragedy, one that is now entirely unavoidable, but it must also be seen for what it is: A reconciling of our debts, of our appetites, and of our avarice to the limits of reality. The national discussion will change – with great fervor – as citizens demand more social services and fewer corporate bail-outs, and in so doing we will revisit the ideals of FDR’s New Deal, and perhaps even contemplate comprehensive nationalization of many industries. There is hope: Healthcare, Green Technology, and even reinvention of the American automotive industry have great potential to create new jobs around new core values to build a renewed economy and society on. There is also great concern, though: Our resources are stretched too thin already, and turmoil with Iran, Russia, North Korea, or China could put crushing strain upon us. What we need is clarity and peace to regroup – not more military conflicts to distract our focus. The potential blessing here is that the whole world will feel the crunch – the whole world will be depressed with us. Hopefully our antagonists are as constricted by this as we will undoubtedly be.

Be prepared to know and help thy neighbor. And be patient: You’ve elected the best possible leadership for this job, and we will get through this – and emerge a newer, better country. But we must endure great hardship and account for the debts of our gross overconsumptions first.

I’ve been quiet on this front, largely at JHW’s behest. My doomsaying – on the blog and at home – were driving us both batty. That said, current reports bare out my predictions:

The declines follow a weak September and foretell a holiday shopping season that many are characterizing as grim at best. Consumer spending over all fell 3.1 percent in the third quarter, its first decline in 17 years and the steepest fall since 1980. And the news is not likely to improve soon. On Friday, the Labor Department is expected to report that employers cut hundreds of thousands more jobs last month.
—New York Times, 2008-11-06

On an odd note, Neiman Marcus’s same store sales are down 27.6% from this time last year. Aside from being an atrocious sales decline that’ll certainly shake the luxury retailer to her core, one wonders how much worse the decline would’ve been if Sarah Palin hadn’t bucked ‘em up with RNC money? not to mention her own staffers’ credit card money?

Joking aside, I reiterate: We’re not out of the woods, and by January, unemployment will have skyrocketed, the economy will have collapsed, and “depression” won’t even be debatable.

At least Obama is the right guy for the job…