Posts Tagged ‘Financial Crisis’
The Barbeque Nazi, credit card declines and other stories from a depressed country. October 15th, 2008
Haslet, Texas.
Around here, they call Lee the Barbeque Nazi. He is Haslet’s version of the ‘Soup Nazi’, the cult Seinfeld character who had (the best) soup stall in New York, and also grabbed bowls back from paying customers barking ‘No soup for you!’ because they didn’t follow the house rules while ordering. Rule 1, was that you do not protest any of the soup vendors actions–your job is to pay, receive your soup exactly as it is served, eat, and get out. Deviant behaviour had a terrible consequence: denial of soup.
That man–and there is real man, Al Yeganeh–shut his place in midtown Manhattan in 2005, hoping to open a soup stall chain. But Lee has no such plans. Also, he doesn’t say ‘No barbeque for you!’ to his patrons.
On the other hand, no one who comes into Lee’s seems to fall foul of the unspoken laws that have been laid down. It seems like the house rules get magically hardwired into the brains of customers. So he hasn’t been tested…
He is 6′5″, 250 pounds and supremely confident that anyone who comes in is there because they desperately seek his hickory smoked meat. He is not far off: give it a shot, but you will not get a better meal for $10 anywhere in Texas. That is why his customers stand in orderly queues watching him slice meat, dice potatoes and pour sauce for those ahead of them. He works alone and does not multi-task: it’s one order at a time. When, and only when, he gives you a nod and makes eye contact, is it time for you to swallow the juices playing high-tide low-tide inside your mouth and place your order, coherently. And then you wait.
‘You want fries with that?’
‘Yes’.
Now he gets a potato and starts hand-cutting it. (This is a rare and delicious, but if you ask the guy who’s in queue behind a guy that just ordered 11 portions, it can be very, very, frustrating). But Lee won’t do it any other way: ‘They don’t sit very well, so you need to make them fresh.’
Every afternoon, his daughter 10-year-old daughter Chloe will be in the restaurant doing her homework as a snowy television set plays in the background as customers come and go–at Lee’s pace, not theirs.
You would think that this is hardly the way to run a business in these blighted times. But this is not true of Lee’s. He’s been in the business about 20 years and he’s done it exactly his way. And his place–which is a little more than a shed somewhere on the Texas plains–grosses $1,60,000 a year.
But of late, while his business isn’t hit as yet, he’s noticed some changes at the till: more credit cards are being declined. His reaction is consistent. “I don’t say anything. I just show them the slip.” It worries him.
As far as you can imagine from Lee’s, is the Chicago restaurant Alinea, a short walk from t. It’s considered one of the best in America, and a meal here costs between $200 and $300 a head. It is an elaborate 12 to 24 course experience which patrons book 45-60 days in advance (patrons are ‘pre-googled’ and their credit cards usually work, too), so Nick Kokonas, one of the owners says they will feel the financial crisis with a lag. “Who knows what will happen, but as of now, the bookings aren’t any different.”
Alinea is walking distance from the Steppenwolf Theatre, base of the Tony award-winning company, in a neighbourhood that gets a tony award for the kind of people who live there as well. It seems the restaurant is insulated from all the “blight and collapse” (as Kokonas puts it) all around.
Lee’s and Alinea are good test sites for the American theory that prosperity trickles down from top to bottom. (It does not.) What they prove, as smaller shops shut down, is that poverty moves bottom upwards. (It does. Wait and see.)
Tags: Barbeque Nazi, Financial Crisis, Haslet Texas, Seinfeld, US Elections 2008
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Wear a smilette, happy days are ahead… but when? October 8th, 2008
Roanoke, Texas
There’s an uncanny similarity between the great depression and the present crisis, not just in the events but in Washington’s response. The republican president at the time, Herbert Hoover woke up late, as did the American people. They bought his line of ‘a chicken in every pot and a car in every garage’ (now they’re talking cycles!), electing him in 1928 only to quickly turn him into a universal hate figure (like Dubya, in the current polls).
But republicans carried on gamely at that time, trying to spread a message of hope and exhorting people to take responsibility. Much the way Sarah Palin did in the vice-presidential debate–even though she seems to know as much about the economy as she does about Alaska-Russia relations.
One of the better ripostes to this ‘hope; spend within your means’ line, appeared in a 1930s cartoon which said that prosperity was around the corner and if you cannot afford a smile, if you should wear a ’smilette’. This is precisely what kitchen table republicans are now advocating, though we are short of a good cartoon in response.
I met someone who lost his job last month. He would have been okay about wearing a ’smilette’. I suspect the disincentive is that if you wore it too long, you’d end up looking like a stewardess on a micro-light aircraft.
The ‘new direction’ that Washington is talking about has a word in common with FDR’s 1932 ‘new deal’ in the literal sense, but really, the steps being proposed are very much like the ones in the 30s. At a fundamental level will take taxpayers’ money. This is difficult to sell, politically, which is why the first attempt at getting the bill passed in the Congress failed.
FDR’s plans kicked in when unemployment was breaking America’s back and included things like soup kitchens, and (generally non-productive) government employment schemes. But he also set up the Home Owners Loan Corporation which lent money to about a million possible defaulters. This is very much on the table now, because apart from the from all the foreclosures, there are between 6 and 10 million people who have an incentive to walk away from their mortgage payments.
The most important response common to that time and now, however, is more regulation. The Securities Exchange Commission was set up in 1934 to prevent a repeat of 1929. One of the main changes it made was to stop margin buying. If you wanted a stock, you had to show about half the money.
In the present scenario, the financial markets will have to say goodbye to many of its unsupervised activities. The first in line will probably be the clandestine, and catastrophic, credit swaps (I lend you money, and then insure myself against a default with a third person, because i know you cannot repay; if, as i expect, you don’t pay me, he has to. this was the baby AIG was left holding.)
Regulation has been a bad word in America for the longest time, and the changes in the offing are likely to be profound: there’s a realisation that America has been a little too free and much too brave for its own good. Republican or democrat, this translates to ‘we always sort of knew that the market couldn’t take care of all our problems, but now we’re willing to admit it and do something about it’.
Deeper down, the crisis doesn’t just affect main street, or John McCain road. During the Great Depression, it entered people’s homes. in 1940, 14 years after the realty bubble burst in Florida and and pinged America into a downward spiral, a survey found that 1.5 million jobless, depressed, American men had abandoned their families.
The first reports of marriages breaking up over who’ll pay the mortgage bill are already coming in this year.
Tags: Barack Obama, Depression, FDR, Financial Crisis, John McCain, Main Street, Marraiges breaking up, Regulation, Roanoke Texas, Sarah Palin, Sub prime crisis, US Elections 2008
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So, how will the bailout affect cabinet makers on John McCain Road … October 8th, 2008
Roanoke, Texas
A little after noon on Friday, the House of Representatives passed the bill that Washington believes will bail out the U.S. economy. The bill makes Puerto Rican rum cheaper (taxpayers pay $192 million for this); allows ‘arrows used by child archers’ more affordable ($2 million); and with unmissable, if unintended, irony reflects the slowdown in the economy literally with another minor measure: the country that uses a quarter of the world’s oil, will now help employers buy and maintain bicycles for those who cycle to work ($10 million).
Nobody in Roanoake will likely take advantage of the last two. Cheaper beer, in addition to cheaper rum, would probably have been more welcome. And no one goes to work on a bicycle. All the way to the horizon, are grazing grounds lightly peppered by clusters of habitation connected by roads you cannot cross on foot. Cheap rum is welcome, in these parts, because it could be 20 miles to the nearest liquor store.
But with all this talk of the crisis moving from Wall Street to Main street, the question around Roanoke is how the more substantial measures in the bailout bill will affect, say, the kitchen cabinet makers on John McCain road in closeby Colleyville. In order that Joe Biden or Sarah Palin can talk around the kitchen table (which they both say they do a lot) someone needs to make them. The guys on John McCain road do just this.
They are pretty far from main street, but connected, one is told, by a spaghetti-like network of financial alleys.
Perhaps they’ll benefit by getting better deals on cars, thanks to the sweet loans that U.S. car makers will get off the bailout. But they already have cars. Besides, there’s the price of gas to consider ($4 a gallon or thereabouts, up from the two dollar something only a year back–and this is Texas, one of the states where gas is the cheapest).
So maybe there aren’t any direct benefits, and it will be pretty much a grin and bear it situation. But for how long?
At least a decade: the bill says so because taxpayer will pay for the rum and the cycles and the arrows over that time.
It could take much longer. The situation America has landed itself in And second, bears an eery resemblance to the Wall Street crash and the Great Depression of the late 20s. That took twice the time to go away. Wall Street, main street and everybody else seems to recognise that shit creek is the deepest, longest and widest it has been in a very long time. And the U.S. is in it with just a $700 billion paddle.
In the 20s, just like now, real estate was at the root of it. In 1926, well before the crash of 1929, there was such a scramble to buy property in Florida, purely to resell quickly at a profit, that people didn’t care they were buying worthless plots on the swamp at massive cost. They just bet on prices rising even further, as did banks who gave them loans readily. Prices rose dramatically, but the bubble burst soon enough (helped by two hurricanes). Buyers, builders and banks, everyone was busted.
Yet the stock market was still doing well. So thousands of Americans dug deeper into their savings or went deeper into debt to finance a gambling spree that would only end three years later. In October 1929, when shares became worthless, the dominos began falling one after the other.
Individuals who had borrowed money could not repay their loans, so banks went down. This meant that ‘main street folks’ who had stayed away from the speculation and saved conservatively with the banks, lost their deposits. And businesses couldn’t get credit to meet payroll requirements so they were forced to shut. Sound familiar?
This resulted in unemployment, so people had less to spend, therefore they bought fewer goods, forcing even more businesses to shut and creating even more unemployment.
That was in the 30s. Government figures just released show 1,59,000 Americans lost their jobs last month, the worst month of retrenchments in five years. The pain may just be beginning.
The modern day crisis is different in some respects, however. For instance, in 1929, when his company’s shares plummeted to $4 from $113, the president of Union Cigar, jumped from a window (he died). Now, the CEOs use a golden parachute (they live, rather comfortably).
Tags: Barack Obama, Financial Crisis, John McCain, Main Street, US Elections 2008, Wall Street
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