Bend Godfather: "Doctrine of Bend Exceptionalism, Dead"

I think Bend reached a seminal point in it's collapse last week.

One of the Boss Hogg's of Bend, if not The Boss Hogg, declared Bend non-Exceptional.

Through the Looking Glass With John and Bill

In his Sunday column, Bulletin Editor John Costa talks to three of Bend’s biggest movers and shakers to find out why the Bend real estate market went belly-up and how to keep it from happening again. They offer a number of ideas. Some of them make sense; one is just crazy.

Developer Mike Hollern blames the Doctrine of Bend Exceptionalism – the peculiar notion that Bend is so special that it’s immune to outside economic forces. “We were overwhelmed by the amount of money pouring in,” Hollern told Costa. “We thought that we were different from the rest of the country. It turned out that we are not so much [different].”

This really is astounding. It's more or less a declaration that all we have done, all that we have thrown our energy, time, and vast, Vast quantities of money at all these years, is actually Harming Us.

The PR & Marketing Industrial Complex of Bend is Dead.

Now I don't want to say that I originated the idea that holding ourselves above all others was a bad Idea, but I'll admit that I mentioned it once or twice:

A Prayer for Bend

And speaking of bullshit pieces, thank you Baby Jeebus for the Bulletin piece basically printing that this place is a deluded bunch of drug-addicts, by printing this quote from Sandy Henderson, new head of the perennial money-losing BendFilm: 'You know what, there’s got to be Prozac or something in the water, because everybody is happy.’

It's called KOOL-AID Sandy, and it will soon render your mind whithered & useless...

Take off the Beer Goggles, and Start ta Chewin'

The Bulletin is a prime conspirator in Boss Hogg's little pump-n-dump scheme, but sadly it is too late for that, as the idiotic RiverWild "auction" proved.

NO ONE is buying the Kool-Aid anymore.

The ass-ugly imploding nature of Bend's RE market is clearly visible in high-relief for all to see, and no amount of bullshit shoveled into the locals gullets will change that.

They've done it a million times before to good effect, and the Bulletin still believes that we can "market our way out of anything", but obviously we cannot.

IT IS OVER.

Bends Mayor Arrested and Jailed For Embezzlement

"The softness in our real estate markets has worsened in the past quarter, putting increased pressure on cash flows of developers and builders of new homes and subdivisions," said Patricia L. Moss, CEO.

"While we are disappointed in reporting this action, we feel strongly that it is prudent to be assertive in recognizing the heightened risk in this segment of our loan portfolio."

She added, "Despite the immediate cost of these steps, Cascade remains a solidly profitable and well-capitalized institution serving some of the best growth markets in the nation.

I am confident that the long-term strength of our markets and our experienced management team will enable us to effectively navigate this downturn in the real estate cycle."

You see Moss, despite being slapped upside the head with Reality, is still is bobbing for apples in the Kool-Aid vat.

Extinct Species Found In Bend Oregon

Local banks, that only months ago declared themselves fit as a fiddle financially & almost completely IMMUNE from the collapse... LIED. They were firmly planted in some Kool-Aid fueled hallucination where they were exempt from reality.

The Cult of Bend

You hold an auction, that gets press coverage FAR & WIDE, you actually get a hard-core contingent of buyers to show up, they actually BID on these shithole, shoddy tubs of shit you call "homes", and you say they are trying to STEAL THEM?

This comes back to a point I've written about several times on here, despite it's unpopularity, the idea that Bend is a town that has been indoctrinated & brainwashed into thinking that WE ARE GOD'S CHOSEN PEOPLE.

Not the "Jew Thing", but that as a town we are better than "The Rest". We deserve better. Hell, we deserve THE BEST, and by God, we'll wait until our dying day to get it.

This is a mindset cultivated DAILY by ALL BEND MEDIA.

EVERYTHING IS BETTER IN BEND. ESPECIALLY THE PEOPLE. AND IF WE ARE GREAT, SO ARE OUR HOMES, AND THUSLY THEY CANNOT & WILL NOT GO DOWN IN PRICE. PERIOD.

Q1 2007 Numbers
There's also the acknowledgment that Bend is 75% overvalued... BUT, there's also floated the idea that What Applies To The Rest Of The Country Does Not Apply To Bend.

This is my Gods Chosen People thesis, an attitude reflected in Jonestown before they all killed themselves by pounding down a little Kool-Aid with an arsenic chaser.

So, yes, I think I may have mentioned it once or twice, that the worst thing that could happen to this place was this carefully cultivated & continuously reinforced idea that Bend Is Better. I, and others on this blog, have repeatedly said that Bend Is Not Better.

Bend is Not A Flint, MI. It's Not Cleveland. But neither is it Aspen.

Bend is a regular place. With regular people. Regular, if not low-paying, jobs. Regular.

But we were fed the Kool-Aid, and were made to think we were God's Chosen People, and what applied elsewhere, did not apply here.

And the Boss Hogg's, like Hollern & Smith, as well as all of Bend media did all in their power to perpetuate this myth, that we are better, that we deserve The Best.

And they accomplished this to fantastic effect. The Kool-Aid was drunk far & wide, and almost no one is immune.

So why is Hollern turning on his own?

He's turning on the very PR/Marketing Industrial Complex that he & other God Fathers of Bend helped establish. Why is he turning on COVA, Costa, the Bend Visitors Bureau, EDCO, Roger Lee, Alana Audette, and the vast hordes of minions that run this factory, all to the assumed benefit of him & others like him? Why?

Because, as I suggested 2 years ago, it is Killing Bend. It's killing this town. It's killing Hollern. It's killing his business. It's killing everything.

The Doctrine of Bend Exceptionalism is the worst man-made disaster that will ever afflict this town.

And Hollern is 100% responsible.

Well, that's not true. Costa is also responsible. The Incredible Hulce is responsible.

No. That's not true. The Incredible Hulce is actually retarded, and cannot be held accountable for her actions.

No, the blame lies with the vast hordes of Realtors, Hometown Newspaper Editors, RE developers, contractors, builder associations, and everyone else who lied to line their own pockets. And in this place, 2-3 years ago, that was almost everyone.

But Hollern has seen the light. Maybe he's seen this blog, who knows. But Yarrow & Ironhorse have to be some pretty unmistakable thorns in his side, that Exceptionalism does Not Sell Houses. Not in a downturn. Exceptionalism actually grinds the gears of industry to a halt.

Look at all the listings in Bend: Most are still Wildly Overpriced. Nothing is moving when credit goes away, and you then have to rely on local incomes to actually move product. And Bend has lousy incomes.

Bend IS Exceptional!

Look at these 2 graphs of national housing stats, and you see that Bend is exceptional: We are still Wildly Overvalued.

Nationally, prices have fallen back to 120 months of rent. I know that most Eastside Bend STD's are still well above 200X rent!

Nationally, prices have fallen to 3.2X median incomes. Even after the incredible 40+% plunge in local medians, homes in Bend are still almost 4X median family incomes, a level that was just barely hit nationally at the absolute top of the housing bubble.

In Bend, we'll probably fall back to 80-100X rent for homes. That means medians on the Eastside may go below $100K.

If we go back to 2.4X median family income, and incomes remain constant (a fairly dubious assumption), then Bend medians will fall to around $140K.

The End of an Era. The End of Exceptionalism.

To that end, here are the hard numbers:

National recession takes its toll locally

Some parts of the regional economy are stabilizing; others are not

By Jeff McDonald / The Bulletin
Published: February 22. 2009 4:00AM PST

Central Oregon’s economy took a severe hit from the national economic collapse in the fourth quarter of 2008, and as it moves forward there is no single remedy for recovery, according to a University of Oregon economist who authors a quarterly business index for The Bulletin.

The national recession hit Central Oregon in the form of skyrocketing unemployment claims, continued weakness in housing and depressed visitor activity, said Timothy Duy, adjunct professor of economics who authors the Central Oregon Business Index.

The index provides a seasonally adjusted look at the region’s economy based on nine economic variables, including Deschutes County building permits and Central Oregon housing units sold, Bend lodging tax revenue and unemployment claims.

The index dropped to 145, down 1.8 percent from the previous quarter and 7.2 percent from the same quarter in 2007, according to the report. It is the fifth consecutive quarter the index has declined.

The trajectory of the index, rather than its numeric value, is more important for understanding the health of the economy, Duy said.

Already, the last five quarters are showing a steeper decline than the recession at the beginning of the decade, he said.

The index weighs data from Central Oregon’s economy dating back to 1997. “Some things are stabilizing because they couldn’t get any worse,” Duy said.

“But I don’t think the employment outlook is stabilizing. I don’t think the forces of the national picture are stabilizing. I don’t think foreclosures are stabilizing.”

Tourism and the region’s employment were especially hard hit in the fourth quarter, bringing home to Central Oregon a national economic crisis that froze credit and tightened consumer spending.

Lodging revenues, adjusted for inflation, contracted to levels last seen in 2004, Duy said. Home sales appear to have stabilized at around the 200-homes-sold-per-month mark with 183 homes sold in Deschutes County on a monthly, seasonally adjusted basis during the quarter.

By comparison, there were roughly 250 monthly sales in the preboom era and a bubble high of 560 monthly sales in second and third quarter 2005, according to the report. Building permits remained depressed.

A monthly average of 56 permits were issued during the quarter, according to the data. “If you are an economy that is geared to build 600 homes per month and you are only building 50, you are essentially at zero,” Duy said.

On a brighter note, median days on the market declined significantly, likely a result of falling housing prices, he said.

“There is some evidence that home sales have stabilized at relatively low levels,” he said. “This suggests the possibility that some bottoming is occurring.

However, the reason that home sales are stabilizing is that prices are coming down to realistic levels.”

Also clouding Central Oregon’s economy was an increasingly bleak jobs picture.

Deschutes, Crook and Jefferson counties posted monthly unemployment rates that were among the state’s highest in the fourth quarter.

Deschutes, Jefferson and Crook counties reported 11.3 percent, 13.3 percent and 14 percent unemployment, respectively, in December, according to the Oregon Employment Department.

Unemployment claims for Deschutes County shot up to a seasonally adjusted average of 4,133 per month in the fourth quarter from 3,032 in the third quarter, according to Duy’s data.

Nonfarm payrolls, meanwhile, remained steady, which is unlikely to continue in the first quarter of 2009 due to the high number of jobless claims, Duy said.

Duy’s report was completed before revised data was released earlier this month by the Oregon Employment Department that showed a much gloomier picture of job growth in the region.

In previous reports, Deschutes County’s employment picture remained soft, with 0.9 percent job growth in 2008. But the revised data posted Feb. 12 on the agency’s Web site, www.qualityinfo.org, showed a 3.9 percent job loss in the county and monthly job losses dating back to December 2007, said Stephen Williams, the region’s economist and a Salem-based usability analyst for the Employment Department.

December 2007 marked the official start of the recession, according to the National Bureau of Economic Research.

Almost every industry in the county lost jobs in 2008, Williams said. “It shows the picture that people are feeling,” Williams said.

“This finally reflects the sense of what’s going on in the community.”

Construction was hardest hit in the county, losing 2,000 jobs in 2008.

The job losses brought the county’s construction employment down 25 percent, or down to 6,070 jobs, about equal with its 2004 numbers, Williams said.

Manufacturing lost 240, or 9.6 percent of its jobs, in 2008, while professional and business services lost 300 jobs, or 3.9 percent.

The only sectors to gain jobs were education and health services, leisure and hospitality, and government, Williams said.

The new data was “astonishing,” said Roger Lee, executive director of Economic Development for Central Oregon, which promotes business recruitment and retention.

He was skeptical about the state’s employment data, which changed from only one month of job declines in 2008 to every month showing job declines back to December 2007.

“When you go from modestly positive numbers to fairly severe ones, that’s a shock,” said Lee, who called the fourth-quarter economic collapse “historic” in its scope.

“It came down to the collapse of the credit markets, which trickled down locally to the aircraft industry,” he said, referring to layoffs locally at Cessna Aircraft Co. , which started to take effect in January.

“We had been projecting growth for 2009. But all of a sudden the credit crunch came along and Wall Street had its issues.

People did not feel nearly as wealthy as they once did.

Overall, the wealth of the nation has taken a … dive.”

Lee predicted a slow recovery, contingent upon a revival of the credit markets. “2009 is going to be largely a contractionary year,” he said. “But I think the region will start to emerge in 2010.”

Duy was not surprised by the revised data, saying job losses would be reflected in declining payrolls in the next index.

The region’s economy will stabilize with small increases of activity across multiple industries, he said. “There is no magic bullet for the region’s recovery.”

December was an “absolutely brutal month” for Central Oregon tourism, said Alana Audette, president and CEO of Central Oregon Visitors Association, which promotes tourism for the region.

Room-tax collections for the city of Bend and Deschutes County dropped 28.6 percent and 18.6 percent, respectively.

It was a wake-up call for the industry, which expected bad but got much worse, Audette said.

“We were doing OK and it’s not that we didn’t see it coming,” she said. “But December was the month where we learned that weather plays a tremendous role in our success as a visitor destination. The state was seeing a lot of layoffs, and combine that with brutal weather conditions … that made accessing our destination very difficult.”

Realtors are hopeful the region hit bottom in the fourth quarter.

2008 was a painful year for the region’s Realtors, builders and mortgage professionals and has resulted in a thinning of the ranks of real estate brokers, said Wendy Adkisson, principal broker with The Garner Group Realtors and Development LLC, in Bend.

Adkisson is on the Central Oregon Association of Realtors board.

The number of licensed Realtors in Central Oregon dropped from about 2,129 in January 2008 to 1,477 on Feb. 19, a 30.6 percent decline, according to Central Oregon Association of Realtors.

Those brokers who are still active are seeing sales pick up as prices decline.

The first quarter of 2009 is on pace to match the first quarter of 2008 in sales, Adkisson said. “We’re just excited to be even.”

Median sales prices, which were $396,000 in Bend in May 2007, have fallen to $227,500 in the first 1½ months of 2009, according to data from the Central Oregon Association of Realtors. That’s a decline of 42.5 percent.

“The truth is we have taken a huge hit from our highest price point,” she said. “I wouldn’t want to swear that we are at the bottom, but I think we’re at a trough.”

At least half the 2009 sales have either been short sales, in which a home is sold for less than the amount owed on it, or sales of bank-owned property, Adkisson said.

“We’re down inventory-wise because for the most part we’ve got sellers who are realistic about where they need to be if they want to sell,” she said.

“You can buy a nice house for $150,000. That may be a blessing for all of us.”

After the downturn, Central Oregon — and the rest of the country — will emerge looking very different, Duy said.

“There is a tendency for people to think that their boom was somehow unique, but the growth that occurred the last five to six years was fueled by credit intertwined with an asset bubble,” Duy said.

“We’re moving to the other side of that. You have to think what the world’s going to look like in the absence of that credit growth. Even when you get to the other side of this, you won’t have the factors that were responsible for this surge in consumer spending.”

Jeff McDonald can be reached at 541-383-0323 or at jmcdonald@bendbulletin.com.

The End of an Era

Pretty bleak.

But what's funny, is you can still smell a whiff of hope there. A whiff of, "We'll be back to bubble times again, if we just believe!"

Of course that's ludicrous. And Duy, for once, hit's the nail on the head in his final sentence: We're in uncharted waters here. Bend has Never, in modern history, faced an economic climate like it does now.

You can see why Hollern sees Bend Exceptionalism as the New Enemy. Exceptionalism doesn't sell houses. Exceptionalism doesn't sell anything. We're looking at the complete destruction & meltdown of this place, and The Doctrine of Bend Exceptionalism (ie Drinking The Kool Aid, We Are God's Chosen People) is the root primary cause.

RIP: The Doctrine of Bend Exceptionalism.

OK, some final ideas. I find myself over at Jesse Felders My Back Pages blog fairly often, and I think it's fair to say that he is Up on the stock market.

And maybe for good reason. For the First Time In Modern History, the DJIA is DOWN over 50% from it's peak. We came close in the 70's. But I don't think we made it to -50%.

Even some unquestioned dogma is starting to look shaky:

A Bigger Bargain Than Buffett Bought

One of the complaints people made about Warren Buffett's investments in financial companies last year was that regular investors weren't able to secure similar terms for their own portfolios.

In 2008, Buffett invested in companies like Goldman Sachs and General Electric receiving preferred stock that pays a dividend of 10% and warrants to purchase common stock at a set price. Well those people should take a second look. Right now, regular investors can secure terms even better than the Oracle of Omaha.

GE common stock currently trades at a 50% discount to the strike price on Buffett's warrants AND currently pays a dividend yield significantly greater than 10% (this may be reduced in the near future, however, to help maintain GE's AAA credit rating).

People are starting to question Buffett and whether he's lost his touch.

People are starting to question "Buy & Hold" as a philosophy.

This only happens after severe losses. And it has ALWAYS been a Great Harbinger of a Time To Buy.

And I largely agree with Jesse on a lot of points, and I actually do think that stocks can & will represent value someday.

But I'm starting to wonder just how long that will be. I think I'm a lot like Felder, in that I and much of the Vast Contrarian Stock Buying Contingent in this country, people that think they're smarter than the herd, just may have it wrong. Terribly Wrong.

I know I have. My IRA is a shriveling prune of investment crap at this point. And I bought well off the highs.

I think we're looking at our Black Swan moment. The time when we say It's Different, and unlike the past 20X when the herd all said this, this time it actually IS DIFFERENT.

Look at Japan. After topping out near 40K, the Nikkei today sits near 7,400, or down 81%.

Sometimes IT IS DIFFERENT. Sometimes Buy On The Dip is a TERRIBLE IDEA. Even when it's a historic dip. Even when it's a down 50% dip. Buying the Nikkei at 20K, 50% off the top, would have been buying a historic dip... and a TERRIBLE IDEA.

I'm wondering if my own predilection to buy in the DJIA 5,000's will be usher in yet another round of punishment. Because I agree with Felder: When compared to historical markers of value, the US Stock Market is plumbing historic lows.

But that's exactly the nature of Black Swan events: They blow away historic expectation. They're something you've never seen before.

And I've said it before: This will end worse than anyone thought possible, even me.

OK, I'll leave it on an Up Note, as always!

I believe in Exceptionalism!

Barack "100 cents on the Dollar" Obama Will Save Us All

Sometimes it's good to remember how something Bad Got Started, so you can figure out how to stop it.

At some point, back in the 70's (80's?, 60's?), we started getting little applications in the mail. It was actually the norm to have only one credit card way back when, like it was the norm to have 1 TV or 1 car or 1 house.

Then people started applying for another. And things still seemed OK. You could get more stuff, and paying 3% on 2 cards with $1,000/ea was not the end of the World. It was actually nice, you didn't have such a rigid connection between earning & spending. People could bridge the gap on the odd occasion when they actually lost their job.

But saving became a little less important. And there was this strange creeping feeling that we weren't spending real money. I got my first credit card when I was fairly young, and I certainly remember that feeling.

Pretty soon though, the urge to save pretty much went away. The urge to spend increased with each new application filled out, and new plastic arriving in the mail became something of an expected ritual. In fact, those applications started to feel like income.

And things NEVER got worse because of this. People seemed happier. In fact a whole generation of people base their happiness on consumption. They don't even know it. I'll show an illustration in a bit.

So things seemed to get eternally better. More jobs. More income. More stuff. Every indulgence indulged, every craving sated.

Then, round about 5-10 years ago this credit-fueled industrial complex began engaging in some practices that seemed great, but they ultimately sowed the seeds of economic destruction:

• We started putting unqualified borrowers in homes.
• We started accepting nothing down on a home.
• We started lying to put them in a home.

See, we did this with those credit card app's, right? Sure! Who hasn't hit hard times, got a CC app, and lied to get one, and bridge the gap? Or, maybe you just wanted another card, because you could get money at near 0%, and if you inflated your income, you'll be eligible for a buttload of extra cards, right? And the credit card companies NEVER CHECKED!

It was become standard issue to LIE on credit applications. So when they began Securitizing Mortgage Loans, it became OK TO LIE. Why not? They were going to sell the loan to someone, who was going to sell it again, ad nauseum. And this scheme was working out great! Everyone got a little slice of the action, and foreclosures, price declines, joblessness, and other such nasties had Never Been A Problem Before.

So we had historical evidence on our side. We had a booming economy on our side. We had rock-bottom defaults validating these practices. Everything was peachy.

So what did we have, circa 2005-2006? We had an incredible over-abundance of homes. An overabundance of cars. Overabundance of clothing, computers, food, carpet, factories, businesses. An over-abundance of JOBS. Yes. Most of the jobs created in the 5-10 years prior to The Boom, are artificial. They really are not meant to be.

The credit was not meant to be. The consuming was not meant to be. So the jobs & businesses behind them are not meant to be. We've had quite artificially low unemployment for a good decade. Go to Wal-Mart: Look at the troglodytes working & shopping there; those people should be kept in trailer parks, away from the rest of humanity.

And Yes,I went there yesterday. And on a Sat afternoon, I have never seen the parking lot so empty. EVER.

So lots of the stuff lying around you right now, is probably from a place whose existence is predicated on demand about 30% higher than it is right now.

So the upshot is that demand & spending need to crash for equilibrium to be reached. Unemployment goes way up. Lots of factories shut down. Demand just goes away, and simple economics of supply & demand reassert themselves, and prices fall.

As I said Long Long Ago: The only way to pay off debts is to sell stuff or make more money.

The "make more money" option is being lost at a clip of about 50,000 jobs/day. That leaves Selling Stuff.

Selling houses. Selling toys. Selling cars. Selling computers. Selling everything. And not just re-selling house, or re-selling computers: Builders have crushing debts & need to build & sell more homes. Dell has factory capacity that costs them when idle. Airlines. Flea markets. Garage sales. GM. Banks. Home sellers. All have product that must go.

We have a FLOOD of stuff from ALL CORNERS... and no one can buy it.

So along comes The Stimulus Package. That'll set it right... right?

Well, the first slug of the bank bailout billions is out there, and guess what? The Banks Are Not Loaning. Gee, I wonder Why?

Oh....right, right, right, right, right. Cuz they have TRILLIONS in bad loans on their books. Now they can do one of a few things.

They can go into the Free Market and SELL THESE LOANS, and realize essentially that they are insolvent. The banking system in the USA is technically INSOLVENT RIGHT NOW. If they realized the losses, the CEO-pay gravy train is over & Disgraced Idiot Era begins. Is it any wonder they are not doing this?

And really, why do this, when Obama, Our Lord & Savior, Has Promised that he'll Make It Right.

Father Barack "100 Cents on the Dollar" Obama

This brings up Option 2: Wait to be bailed out. Wait for TARP money that you can stick in the vault. Don't even have to worry about bad loans, or realizing the losses, cuz Barack gonna make it all all right.

"We gonna get that TARP money!"

So the bailout, and it's promise of making us all whole again, has actually exacerbated & prolonged the problem. Every bank in the country is waiting to accept & BANK their piece of the trillions. Ain't gonna lend it, that's for damn sure. Fool me once...

So we are caught in a deflationary spiral. Lots of people are looking out the Side Window, and telling us, "NO! We're Not In A Depression! Now Deflation seems to precede, cause & exacerbate a Depression, but we ain't in a Depression. Look. Out the side window. We're just in a rapidly deteriorating Deflation. There's really No Way To Know what lies ahead. Sure, about 99.9999999% of the time, deflation leads to Implosion, but we can't be sure! So all we can really do is Hope For The Best. And plan for the best. And start that new handbag store, despite the complete failure of the last one".

Stock slaughter

For equities, a sustained period of deflation is widely seen as a disaster By Alistair Barr, MarketWatch

SAN FRANCISCO (MarketWatch) -- As 2009 began, U.S. dairy farmers slaughtered more than 70,000 cows in one week to fight slumping prices.

Herds are being culled at the fastest rate in almost two decades as the recession withers away consumers' demand for everything from frothy cappuccinos at Starbucks.

In January alone, milk and cheese prices plunged by at least one-third. Similarly painful adjustments are playing out around the world as companies try to slash production and cut jobs in the face of falling demand and waning pricing power.

The problem is that, as more companies hunker down, demand may weaken further, spurring another wave of downward pressure on prices that would usher in a prolonged period of deflation.

"The combination of credit-crunch deflation and recession is forcing companies to conserve cash by firing workers and slashing capital spending," said investment strategist Ed Yardeni. "That should work for one company, but when they all do it, it just exacerbates the situation by cutting demand all over again."

Many investors believe that a lengthy bout of deflation is unlikely.

But if consumer prices do indeed fall for a long time, the result is likely to be a disaster for much of the stock market, investment professionals say.

Investors could minimize their losses in stocks -- and maybe even capitalize a little on the situation -- by paring their portfolios of the most vulnerable assets while steering toward sectors that are more resilient to a deflation wave.

Companies that may suffer less include those with costs that fall more than the price of their products, such as Dean Foods, and firms that help consumers save money, like Wal-Mart Stores and McDonald's Corp. But many sectors including banks, metals companies, retailers and manufacturers would likely be crushed by sustained deflation. "Sometimes an entire asset class is not a good idea," said Kevin Harrington, chief economist at San Francisco-based Clarium Capital.

Clarium, which runs a $2.24 billion global macro hedge fund, is avoiding stocks, while betting on gains in the U.S. dollar, which Harrington describes as "implicitly a deflationary trade."

No global macro hedge funds were bullish on U.S. equities, according to a survey in early February by consulting firm Greenwich Associates.

That was down from 46% in January and 62% in December. The lowest level of interest in U.S. stocks before that was 8% in October 2007, just before the Standard & Poor's 500 index began a 45% slump.

"It's not a question of if. Deflation is upon us," said John Brynjolfsson, chief investment officer at Armored Wolf LLC, a global macro hedge fund in Aliso Viejo, Calif. "It's a question of how bad it will get."

Steven Bell, a former Deutsche Bank economist who runs a global macro hedge fund at London-based GLC Ltd., has been betting against, European and Japanese stocks, while buying two-year German government bonds.

"Deflation is a serious threat," he said. "You have to say that all companies would lose in such an environment, but some would lose less than others."

In contrast to equities, deflation typically boosts long-term government bonds because their fixed payments become more valuable as the price of goods and services fall. See feature on deflation and the bond market.

Japan

When Japan suffered its most severe bout of deflation, from October 2000 through January 2003, only one sector of the nation's stock market -- electric power and gas shares -- posted gains, according to Morgan Stanley.

Shares of non-ferrous metals producers, communications, banks and services companies dropped more than 60% during the period. And there's a worrying difference between Japan's experience and the current predicament of the U.S.: The Japanese had lots of savings when the country descended into its deflationary recession, but U.S. consumers are now mired in debt.

"The societal effects were not nearly as dramatic as we're experiencing now in the U.S.," said Brian McAuley, chief investment officer at Sitka Pacific Capital Management LLC. "People had much more to fall back on in Japan, while our consumption is falling dramatically."

McAuley is investing in gold and gold mining companies, while keeping his clients' equity exposure at zero.

He's expecting more stock market losses, with the Standard & Poor's 500 index possibly falling to 650 points, more than 20% below current levels.

Deflation scare trades

Morgan Stanley strategist Ronan Carr recently advised investors to keep most of their money in cash and gold. Gold is usually considered a good hedge against inflation, rather than deflation.

However, Carr said the precious metal would likely provide protection in either scenario. Banks should be avoided, partly because deflation increases borrowers' debt in real terms, making it harder for them to repay loans, Carr explained.

Bank stocks in Japan slumped 91% during its long fight with deflation and slumping real estate, according to Goldman Sachs. The KBW Bank Index, which tracks the largest U.S. banks, has dropped roughly 77% since the housing bust began two years ago.

That suggests, in a worst-case scenario, U.S bank shares have another 60% to fall, Goldman analysts warned this week.

Mining companies carrying lots of debt, such as Xstrata , may also be losers because the real value of their interest payments would rise while the prices they can charge for the metals they produce falls, Carr said.

Other so-called cyclical stocks, such as carmakers, should also be avoided, he added. Relative winners include companies that generate strong cash flow and have little debt.

Industries that have pricing power and are protected from new competition could also survive better. Tobacco companies, drug makers and property and casualty insurers fit those criteria, Carr says.

Already declining

While debate swirls over whether deflation or inflation will emerge over the long term, prices are already falling in the U.S.

The consumer price index fell 1% in October, the most since the Bureau of Labor Statistics began publishing seasonally adjusted prices in 1947. The CPI slumped 1.7% in November, another record, and 0.7% in December.

Morgan Stanley estimates that by July, U.S. consumer prices will have fallen 3% from a year earlier.

Merrill Lynch sees the CPI down by the same amount by the third quarter. Once falling prices form a trend, it's difficult to reverse, partly because consumers are encouraged to save rather than buy.

That dents demand and sales, potentially inflating companies' inventories and triggering more discounts. "

Potential buyers realize that they can negotiate even lower prices simply by waiting," Brynjolfsson said.

Fixed debt payments get larger in real terms, which means any credit problems impacting the financial system only get worse, he added.

The auto industry has already been buffeted by deflationary winds. Most new car purchases are at least partly paid for with loans.

The transaction results in two costs for consumers -- the extra money for the loan and the impact of an asset that begins to lose value the moment it's driven off the lot.

But in a period of deflation, the cost of the loan increases because the debt payments rise in real terms.

The result has been a plunge in new car sales which has pushed U.S. automakers General Motors, Chrysler and maybe even Ford to the brink of bankruptcy.

One carmaker, South Korea's Hyundai, is trying to tackle the problem by letting buyers return vehicles, at no cost in most cases and with no dent on their credit rating, if they lose their job or income within a year.

"That's a direct response to the deflationary psyche of buyers," Brynjolfsson said. Cutting capacity Airlines performed relatively well last year when their costs fell as oil prices slumped. However, demand for flights started dropping too, pushing ticket prices down 11% from their August high, according to Yardeni Research. "

Airlines benefit when oil prices decline, but they lose if conditions are such that no investment bankers are flying to see their clients," GLC's Bell said. "Space in first class and business class has been dramatically reduced."

Bell was speaking from Kuwait, an oil-rich country which only a year ago was dogged by inflation concerns. "January is usually very busy, but the Middle East is much quieter this year," he said.

"The hotels are empty and flights are not full." The parent companies of American Airlines and United Airlines said in January that they would cut capacity further this year to try to halt the decline in airfares.

The retail sector has been particularly hard hit as slumping demand forced many companies to slash prices to whittle down ballooning inventories.

Costco Wholesale Corp., one of the world's largest retailers, sent a shudder through the industry in early February when it issued a big profit warning.

The company said it cut prices aggressively to drive sales, but that took a chunk out of margins. Eggs and butter prices were chopped 10% to 20% and milk prices were slashed more than 20%, Chief Financial Officer Richard Galanti said. "

Arguably, a good chunk of that is short-term, as long as we don't live in a recession forever and as long as we don't see huge deflation," he added, during a conference call with analysts. Even luxury retailers have slashed prices.

Saks Inc. cut designer-clothes prices by 70% before the holiday shopping season. Still, the department store operator reported a 24% slump in January sales, partly because shoppers continued to buy sale items, rather than regular-priced merchandise.

"What the sector will have a tough time doing is returning to full-priced business," said Brian Sozzi, an analyst at Wall Street Strategies.

"Consumers are now trained to expect discounts." Nuts and chips Other companies traditionally considered resilient in recessions have also been hit by deflationary troubles recently.

Kraft Foods, the world's No. 2 food maker, reported a 72% drop in fourth-quarter profit as it struggled to deal with declining food prices.

In January, Kraft was forced to cut prices on its Planters nut snacks after it lost market share. When Kraft raised prices last fall, its rivals didn't.

Technology companies are used to falling prices, but the recent drop in chip prices has been so severe that several companies have suffered.

The price of DRAM, a memory chip commonly used in personal computers, slumped 77% from May to December last year. NAND flash chips, used in cell phones and digital cameras, have fallen 62% in price during the same period, according to iSuppli.

Shares of Micron Technologies, a leading DRAM supplier, dropped 64% last year, while SanDisk, one of the largest NAND flash makers, slumped 71%. Qimonda AG, a big German DRAM maker, went bust in January.

Possible winners

Some companies may benefit from deflation if their costs fall faster than the price of the products they sell. Take Dean Foods.

The company buys milk from dairy farmers then processes it, distributes it in refrigerated diesel trucks and sells it to grocery stores and other food retailers. The recent drop in milk prices and a slump in diesel in the past year have cut Dean's costs dramatically.

That's made up for declines in the price of the dairy products it sells, improving profit. As recently as Wednesday, Dean Foods said that fourth-quarter profit more than doubled and issued a bright forecast for 2009.

Other companies that offer consumers ways to save money may also avoid some of the damaging effects of deflation. Sitka's McAuley said Wal-Mart may benefit as shoppers become thriftier.

Meanwhile, fast-food giant McDonald's has remained resilient in recent months. "Companies that provide consumers with the opportunity to save some money and still get fairly good service and products may do OK," Yardeni said.

Even so, Yardeni and McAuley warn, if deflation lingers for a long time, there would be few such examples for investors to consider.

So deflation, and it's attendant terrible side-effects, is here. Prices, demand, and jobs simply go into a self-reinforcing cycle of decline. Easily illustrated by Japan's economic conditions for almost the last 2 decades. Generation Lost.

Japan's reaction was to hope against hope. Still is. Banks STILL hold trillions in NPA over there. They are entering their 3rd decade of Asset Denial. They won't sell or re-price, or otherwise realize these loan losses, as the corporation would cease to exist. The Overhang Continues.

So what are we doing? Surely we aren't following Japan's Bad Example, right?

Ohhhhh, we surely are. Everything possible is being done to avoid realizing losses. Everything possible is being done make it to Barack's Promised Land, where TARP, and other bailout funds flow like water. Everything possible being done to Ride It Out, wait for the bailout some we can bank the money, wait for The Bad Bank to take All Our Bad Loans. Every bank in America made whole again.

Maybe. It's possible. We can certainly print the money.

But The Losses Will Be Recognized. At some Point. By Someone. And that someone is taxpayers. Which seems OK, since it's just us chickens. We made the mess, we'll fix it, we'll be fine.

Actually, this is true in some respects. But what is Really Happening, is that the wealth of this country is being reallocated.

All the banks with bad loans are having their negative net worth made whole.

All the people with foreclosures, are being made whole.

Trillions are being expended to do so. And we are all going to pay. Even those who had NOTHING WHATEVER TO DO WITH CREATING THE PROBLEM.

The Responsible are bailing out the irresponsible. The Good bail out the Bad. The winners are being made to lose.

Did you buy 6 houses by LYING on your mortgage applications at the top of the Bubble mega-froth? Lucky me, I am going to bail you out, because I chose to rent, and not lie, and live within my means.

Citigroup and J.P. Morgan suspend foreclosures

Obama to provide more details about foreclosure prevention plan in Arizona

WASHINGTON (MarketWatch) -- Citigroup Inc. and J.P. Morgan Chase & Co. on Friday announced that they would temporarily suspend foreclosures, as Washington's debate continued about how to save the U.S. economy and moribund housing market.

In a letter to House Financial Services Committee Chairman Barney Frank, D-Mass, J.P. Morgan Chief Executive Jamie Dimon said that he would set up a three-week moratorium on foreclosures.

Citigroup, in its own statement, said that it would suspend foreclosures until the Treasury plan is finalized. The announcements by Citigroup and J.P. Morgan come as President Obama prepares to announce more details about his plan to stem home foreclosures in an address on Wednesday in Phoenix, Arizona, according to White House press secretary Robert Gibbs.

The Arizona housing industry has been pounded by the slow economy and the state is now seeing some of the highest foreclosures rates in the country.

The Treasury plans to use $50 billion of the remaining $350 billion in bank-bailout funds for some form of foreclosure-mitigation program, but it has yet to produce details on the subject.

The goal of the program, which is part of a $1.5 trillion financial rescue program, is to help troubled homeowners avoid defaulting on their loans.

The Obama administration is working on a program that would subsidize mortgage payments for troubled homeowners subject to an affordability test, according to reports.

This approach would be different from other assistance programs, because borrowers would go through a standard eligibility test and could be approved before their mortgage becomes delinquent.

Citigroup and J.P. Morgan are responding to a request from Frank, who pressed bankers on Wednesday to voluntarily set up a moratorium on foreclosures until the Treasury Department has put in place a plan to alter mortgages.

In addition to Frank, the Office of Thrift Supervision asked the federal and many state-chartered thrift institutions it regulates to stop foreclosures on owner-occupied homes until the new plan is finalized in the next few weeks.

Frank, in a meeting with reporters on Wednesday, said he expects that more than 90% of banks will halt foreclosures until the program is up and running.

He declined to provide details of what kind of plan he would like to see take place, but he said some principal write-down for troubled borrowers would be a key part of it.

A Treasury staffer said Tuesday that the program could resemble a proposal introduced by Federal Deposit Insurance Chairwoman Sheila Bair that would use funds from the bailout package in a program to help avoid foreclosures.

It is a loss-sharing program between mortgage servicers or investors and the FDIC and deals with loans that fail six months or longer after being modified.

See? Everyone waiting. Everyone going to get bailed out.

In the end, it's so tragic, you just have to laugh. I am, at some point, going to pay higher taxes for the STD's built on the Eastside. I will pay so that mortgage app liars will be bailed out of the lies. I will pay to artificially somehow keep housing prices high, so that I cannot afford one. I will pay for being honest and living within my means.

I made a bad choice.

I'll learn next time. I want my bailout money. I want money re-allocated TO ME, not AWAY FROM ME. I will be irresponsible. I'll lie. I will fuck you over to get mine.

This is a great country.

OK, I said earlier I would end with an illustration of almost ridiculous self-indulgence. It comes from the owners of Pomegranate, the failed downtown crap-O-torium. This woman is still blogging, and still just oblivious as shit to the World around her. Check this out:

End of a dream (or two or three)

I miss Merenda. We would have gone there a few weeks ago after closing the doors on our own downtown shop for the last time. Instead, we went home and made a nice little dinner, sat in our pjs, and drank some champagne... to soothe our souls.

Truth is, we hardly ever (never) go out to dinner anymore, which makes us part of the problem for restaurants. It's endemic, this economic situation. Call it trickle down (too lite), ripple effect (better) or smashing tidal wave (apt), but it has affected everyone in one way or another.

When I lived in San Francisco some time ago (and please, no one needs to send an anonymous comment about Califungos [sic: Cali-Bangers]) I used to frequent the wonderful Farmer's Market at Ferry Plaza, just like I frequent our wonderful Farmer's Market at Mirror Pond here in Bend.

Back then, the Ferry building wasn't yet refurbished into the foodie heaven it is now, but once a month or so, local restaurants would set up tented booths and cook up a storm for shoppers. At that time, Jody Denton owned Lulu's (south of Market area), one of the restaurants represented at the market. I didn't know him then, but clearly remember standing in line for a soft shell crab sandwich, and going crazy over the amazing taste and texture of it. A bunch of people around me announced (to no one in particular) that it was so good they were getting back in line to get another one.

Sometimes a meal is memorable like that, even if it's eaten standing up in a converted parking lot with seagulls and pigeons swooping around, hoping for a bite. We were happy when Merenda opened. It was hugely ambitious, and all the buzz about how it could sustain itself seemed to dissipate when year after year, it just kept succeeding.

Until the financial crash. I really liked going there, and maybe this post is more about post-mortem support than anything else, but some of the blog posts I've read bothered me in their analysis of why they went down.

Truth is, everyone has a different experience at different restaurants, and some of it depends on the day, time of day, mood of the servers, who's cooking, and who's sitting next to you. There are lots of good restaurants here, and you'll get a different critique of them from everyone you talk to. And no observer will really know the details of why a restaurant – or any business – falls apart.

All I know is the restaurant business has to be a crazy scary venture: more intense and problematic and potentially disastrous than anything you can do in retail. I'm glad another group is giving it a go: the space is fabulous and, I think, the anchor of downtown. It's good that some of the Merenda employees are going to get their jobs back.

And I'm glad that Jody has another job lined up in Sydney. But I'm very sad that they had to go bankrupt in the process. No one wants to see that for a young family. Or anybody. We were there on their last night, and I shed a few tears as we left (oh yeah, lots of raw emotion these last few months).

Jody and Michelle are sure to land on their feet again, and the restaurant will reincarnate itself (empty spaces downtown will get filled: it will just be different).

It just hit me as the end of a dream, a vision. Not just theirs, but ours as well (knowing we'd be soon closing our downtown location), and soon, others. This is what I crave right now: that lemon rotisserie chicken. Maybe with an indulgent side of tempura green beans, followed up with an order of insanely delicious beignets. Call the medics.

I mean, this gal sounds like she's very nice. But, if you read this post closely, and in the context of someone who has just Closed Down A Failed Luxury Handbag Shop, you just have to wonder What The Fuck Is She Thinking?

She even has the barest self-awareness to know that Cali-Bangers are the most LOATHED species on Earth. But even so, she almost defines Happiness by the Quality of Her Consumption. I almost feel bad for this person. How many authentic moments has she had in her life? I mean she describes herself as a "Shopping Monkey" on her blog.

It's actually just sad. And still, she is probably almost broke, and all she can do is reminisce about consuming. And you see this as a common thread in almost everything listed on BendBlogs.com. 95% of all posts are of an almost completely selfish nature: "Why I like/eat/do/dislike/buy/avoid/think about 'X'".

Well, I better wrap this up, so hbm can take a nappy pie.

I love deflation! My back is killing me!

Outrage Exhaustion

I think Dunc used the phrase "Outrage Exhaustion" a few weeks back in the comments to describe the nature of the comments. He just had an entry on Pegasus that there were only 200+ comments over here. I guess I think that's a little funny; I don't know of any local blogs that get that many, but c'est la vie.

But that's probably how this thing will end, especially locally. With a whimper, not a scream.

People will just slowly mentally succumb to this thing. All the Merenda replacing will have failed. The hottest spot in the hottest town in the West will just be laughable. That Subway will probably hold on by it's fingernails, maybe. But the hoity-toity stuff will all go down hard, and finally no one will step up to replace it.

I even think the Old Mill will suffer a long-term erosion. Some big anchors will close. The Money Losing Trophy Property (MoLo TroPro) concept will die a certain death, and that's much of what's there. I can't see REI staying. Greg's Grill gone. Yumm Cafe, Alisons Kitchen, Community Flatbread... all gone.

And there are no jobs here. The nationwide unemployment rate came out this week at 7.6%. As recently as September, we were at 6.0% nationwide, and it appeared things were stabilizing.

No more. This is a statistic that hardly moves one way or another more than .2% in any given month. It's gone up an average of .5% for the last 3 months. Doesn't sound like much, but I haven't seen any similar period in modern history where unemployment has moved so much, up or down.

And here's a graph of recent unemployment figures for the USA, Oregon, and Bend. You don't have to be Kreskin to see where Bend is going.

Unemployment for USA, Oregon, and Bend; Jul 2008 to present.

I mean, look at that; you tell me where you think it's going. The top of that graph is 14%, and if Oregon stays in it's ways of outpacing the nation by almost double, and Bend outpaces Oregon by 50%, it seems like a slam Dunc that we'll hit 15% for this month. 13% for January seems also within reason.

Towns with 15-20% unemployment are just not vital hubs of commerce. Towns like that are usually in long term decline. Those are your little towns out 30-40 miles SW of Missoula or somewhere (ie Burns), that are just in a secular decline. Outdoor mecca? Beautiful? Nice to visit? Oh yeah, all that. But in long term decline nonetheless.

I saw many towns like this on my last vacation. Beautiful spots. Outdoor activities out the ying yang. I had a great time there too. But get on the outskirts, and it was all decay, rot, malaise, and abandoned malls. You could see it on people's faces, they were in existence mode, just surviving day to day.

Not dying, mind you. There was just this perceptible resignation to a fate that had no chance of any "upside". No excitement, no challenges. People had stopped that, because the remnants of failure were all around them.

I think Dunc had it right: The "excitement" of the decline will be replaced by a real sort of despair that things aren't EVER going to bounce right back. We will become like so many other places in the West: Beautiful, activity-rich, but caught in a molasses-like, moribund economic spiral downward.

And I'm not trying to "drag people down" to my way of thinking, or some such bullshit. I'm trying to talk people out of economic suicide. On the slopes of Everest, when Common Sense Caution is not heeded, people die. It's not so dramatic here. Well, except for the people who have died. My point is, the signs are all around us: STOP THE CLIMB.

Many are still not heeding the advice of the environment around them. Everything points to white-out, 100 below, killer conditions; but still people start to climb.

Why is Merenda II even being considered? Why? Because what killed the last guy, won't kill me. I'm better than him. I'll make it. This. Is. Bend.

It's really incredible. Pahlisch Homes has watched as their subdiv's have imploded (from BendBB):
Just noticed today that all Pahlisch signage has been removed from the Fieldstone Crossing development in Redmond. Looks like their model has been shut down completely. Their is no reference to Fieldstone Crossing on the Pahlisch website.

And yet Pahlish announced they have started building The Bridges At Shadow Glen this week.

Ahhh... the power of LLC's. Failure is not an option.

Even our public servants have jumped on the Bubble Bandwagon.

Bend police captain on leave amid FBI probe

Bend Police Capt. Kevin Sawyer has been placed on administrative leave as the FBI investigates one or more businesses Sawyer and wife Tami have been operating, the police chief confirmed Friday. "I am aware of an investigation going on by the FBI into the finances of a business or businesses that Captain Sawyer is associated with,"said Police Chief Sandi Baxter.

And so it goes. Everyday, we seem to find someone with their twig & berries exposed as the tide rushes out. First Summit, now this guy, and there are, like an iceberg, many others that we aren't even hearing about.

The relentlessness of the pain, the disbelief of the corruption, the resignation that we can't beat The Powers That Be, will finally be the nail in Bend's coffin. There won't be anymore excitement, no more challenges. People's outrage will succumb to despondency. We'll all just give up on this place.

Outrage Exhaustion. Great description. Because the vast majority of people in this town will realize at some point that there is an existing "Aristocracy" of sorts (GOB Network), and if you are not part of it, and you have Big Dreams for your life, that you will Not Make It In Bend. This is Not a meritocracy. Things are NOT done "for the People". They are done for a small inbred cadre of well-defined beneficiaries who rig every election.

That's how it is in Bend, Oregon.

Not real people. Not real children. Spending NOT real money, from not real jobs, in a not real place.

OK, enough bitching about that. I just have a teeny-tiny outrage against my own kind.

And I have to preface this with the idea that what is trying to be accomplished and the means by which so many think it will be acconomplished, is just sheer folly.

And it is the passage of The Bailout. It's not a bank bailout. Nor autos. Nor any other particular thing. It's a bailout of this country. We are falling into the Abyss.

And strangely enough there is an unassailable mentality that a BAILOUT will save us. OK, governements can produce nothing. Except money, which they can produce in unlimited quantities. And governments many times think the printing of it can cure all ills. Of course, that's ridiculous.

Our problems will not be undone, until housing hits bottom. The bailout, and many other government measures are doing everything possible to avoid that. Forebearance on loans, delaying foreclosures, loan renegotiations. All these are failed ideas, and simply prolong the pain.

And prolonging the pain, is just what the RePug's intend to do. These hypocritical, lying, thieving, conniving fuckers are as much to blame as the Lib's for this thing.

But what's just classic, is that BOTH parties agree that the bailout is our only salvation (ridiculous, of course, it will only make things worse). But even in their idiotic agreement, they have put partisan politics FIRST, and the perceived needs of the American people a distant second.

BOTH parties have done this. Yes hbm, BOTH.

This is indicative of a country in decline. The elected aristocracy could give a fuck about the rank-and-file. Even when they are implementeing the most ass-backwards stupid plans imaginable, partisan wrangling is far more important than saving their own civilization.

The most depressing part of this implosion will NOT be the dire & near-catastrophic economic consequences, it will be the loss of will, the loss of drive, the loss of cause-and-effect thinking that people have, where if they struggle, work hard, and strive against the odds, that they can make something of themselves in this country.

That is what we are losing. We are rewarding FAILURE, EXCESS and EXTRAVAGANCE, and punishing prudence, thrift, and spending within your means. We're sending a message here with this bailout: Graft, corruption, and theft will be rewarded.

We are a nation in decline.

OK, finally I want to do a little re-print of an MSN article. It's got good info, but I suppose the big shocker is that mainstream press is starting to use The D Word. There is actually starting to be an open debate about whether a modern-ear Depression is possible. Maybe you & I are getting a tin-ear to this, because I have been banging this drum for 2 years.

But you could NEVER find mainstream press even discussing it. NEVER. Until now.

THAT is how BAD it is. All the hopeful sentiment that we are about to bottom imminently, has been replaced by How Low Can We Go? I think the past 60 days have been a wakeup call.

Too late to avoid a depression?

Policymakers are quickly running out of time and room for error. And even a brilliant plan -- which we haven't seen yet -- could fail without some good luck.
By Jon Markman

Over the past week, the world's intellectual, business, government and philanthropic elite emerged from World Economic Forum meetings in Davos, Switzerland, with grim faces and warnings of financial doom.

You'd almost think they'd met to plot a suicide pact rather than global trade, as the headlines were so gory they could have been mulched into meals for vampires. Are things really that bad? Maybe not.

Your contrarian antennae really have to go up in the face of consensus from a cohort of eggheads, politicos and jet-setters not exactly known for clairvoyance. Their big idea last year: that emerging markets' domestic economies had become so strong that a decline in U.S. and European growth would not derail them. Oops.

Credible economic analysts now say there is still a narrow window of time in which policymakers in the United States, Europe and Asia can avoid a meltdown over the next year by immediately coordinating the injection of real financial adrenaline to banks, companies, households and local governments -- not just rhetoric and indiscriminate spending.

Yet that window is closing fast, and if the right steps are not taken soon it may be shut for years. But governments don't know which steps work because economic theory breaks down at the level of human psychology.

Given a set of stimuli -- ranging from tax cuts and longer unemployment benefits to new construction jobs and wider broadband access -- economists try to mathematically determine the choices citizens are likely to make, then use the results to recommend a policy mix to legislators.

The problem is that the models often fail to accurately forecast human behavior, and politicians regularly screw it all up by ignoring the data and diverting funds to pet projects.

History is rife with successful financial episodes, such as the New Deal, in which luck and coincidence are later misinterpreted as results of prescient planning. Slim hopes of an end-zone dance To prove the Davos set wrong, in short, congressional leaders must make the right choices at warp speed under pressure from special interests.

It's a public-policy version of the Steelers' final drive Sunday with time running out in the Super Bowl. Pittsburgh quarterback Ben Roethlisberger, scrambling to elude a rush, had one good shot at throwing the football at an oblique angle to a receiver leaping among three defenders in the corner of the end zone.

In times like these, the result set is stark and binary: hero or goat in football, recovery or disaster in the economy. The Davos pessimists' case for a severe economic dislocation over the next year -- let's go out to the extreme and call it a potential depression -- is easily made, as four key ingredients are in place.

Their recipe calls for a blend of cyclical recession, severe deleveraging, a shift of demographics favoring savings over consumption, and inappropriate fiscal and monetary responses by policymakers. The first three are well under way, so the last one is the decider.

Looking back at the Great Depression of the 1930s and Japan's depression of the 1990s, it's clear that government leaders in each case failed to respond quickly enough, then overcorrected, and in general took steps that at the time were considered best economic practices but actually worsened the problems.

Our leaders will likewise now try to do the right thing based on currently popular theories, but we cannot confidently say whether they will turn out to be appropriate.

You just never know.

The only certainty is that measures must be taken immediately, and every day lost on minutiae such as bank executives' pay or Cabinet nominees' tax follies dampens the likelihood of success. Speed is of the essence, like putting up sandbags to stop a levee break, as we can see in daily headlines now that the darkness of Davos is descending.

The incredible shrinking economies Layoff announcements over the past three months averaged 50,000 a week until they jumped to more than 100,000 last week. In an attempt to outrun revenue shortfalls, businesses are also cutting back on wages, travel and equipment purchases.

But it's a losing battle. ISI Group analysts figure that U.S. corporate profits will decline from their 2007 peak to a 2010 trough by a record 30%, though a 50% fall is not out of the question. They're already down 20%. Customers are disappearing as wages and jobs falter and families raid their emergency funds. U.S. home equity decline has accelerated to a 30% annual rate, which combined with the stock market plunge, has slashed consumers' net worth by $12 trillion.

The pervasiveness of the plunge in demand that animates doomsayers is breathtaking. Reis, a real-estate research firm, this week said rents nationwide fell in 43% of buildings of all types in the fourth quarter, up from an average of 25% in the first nine months of the year. In New York, where financial layoffs are surging, rents fell in 75% of apartment buildings last quarter. This puts securitized loans on U.S. commercial and apartment buildings on track for a default rate of 6% this year, up from 1.1% at the end of 2008.

"We haven't seen this speed of decline before," one Reis analyst told Bloomberg. In Asia, the momentum of deterioration and thus the need for policy speed is even more dramatic. Japan's industrial production is falling at a stunning 63% annual rate; in South Korea, it's falling at a 43% rate.

In China, real gross domestic production was unchanged in the fourth quarter, and ISI analysts expect it to be unchanged in this quarter, which would smash the GDP growth down to just 4% year over year, a stunning comedown for an economy that was growing at better than 10% last year and was once believed to be invulnerable.

In contrast, government leaders appear to be moving in slow motion. The Federal Reserve last week said it was "prepared" to buy Treasurys to push down interest-rate costs even though 10-year-note yields are up a lot in the past two months.

The Obama administration, meanwhile, has dawdled on plans to try to recapitalize the banking system or buy soured assets, and the fiscal stimulus package winding its way through Congress appears by independent estimates to be too small, insufficiently focused on real job creation and overly weighted on fiscal 2010 rather than 2009.

Meanwhile, the head of the European Central Bank is dragging his feet, stating that he would not back an interest-rate cut. I would love to see the smug Davos crowd proved wrong, but the forces at work may have gone too far to be stopped. The nation may be on track now to spend $4 trillion -- more than on anything short of war -- to prevent the credit hole from getting so big we can't climb out.

It's especially worrisome to see so much money used to shore up the worst-managed banks, a misallocation of resources that could haunt us for decades. In summary, total ruin can be averted and the Davos prophecy squelched if lawmakers seize the moment, aim true and get lucky.

Even if the result is low growth amid a newly chastened business and social culture, re-ranking of national priorities to celebrate saving over consumption and acceptance of a lower stature in the world, it's superior to depression and chaos.

Cross your fingers.

Oh right, I did want to let you guys in on a little secret: I was one of the attending physicians when Thomas Beatie gave birth to the first goat-human. There's been quite a bit of consternation about how someone could possibly push a goat out through their cock. I am here to tell you that after I, and assisting physician Neil Patrick Harris (aka Doogie Howser, MD) crammed a giant metal spear into that bastards cock, the end result was not pretty:

Asshole: The Other Pussy

I also want to address the delicate topic of where a man holds a baby goat. It's not in the belly, it's quite a bit lower. Here is a never-before-seen picture of Beatie posing completely naked, just prior to birth:

"Hi, I'm Thomas Beatie and there's a mother fuckin' goat in my nutsack! I'm calling Oprah!"

OK, I'll wrap it up by throwing Dunc a Betty Boop Pinup bone'r two here:

Please Dunc, don't hurt me!Dunc, I'm hankerin' for some spankerin'!

And squat, and thrust, and in and out!I wish someone would go apeshit on me right about now...

I wish there was a big strong Comic book retailer here to help me pet my pussy...

I'll give you this Dunc, She Hot. If I was born during the Civil War, I'd also find this 1930's style porno pretty hot. There ain't many chicks that look bad in a ball gag.

Cascade Bancorp Seized By Regulators

I think one commenter put it best, we're seeing "The End of Days".

Over 2 years ago, when I picked up BEM's mantle, and started this blog, I only knew a few things:

• We were at or near the top of the biggest Bubble of all time
• Bend was one of the most heavily participating cities in the country
• It would all end badly

But a lot of people like OR economist Tim Duy were still saying that things "could be" OK, or they might not be completely "OK", but there will be nothing catastrophic.

But I think the World is coming around to this blog & it's commenters way of thinking, that this thing is going to be disastrous. That this thing will redefine Moore's Law, and everything that can go wrong will go horribly wrong. And a whole bunch of stuff we never even thought about in the early days, will also go wrong.

Because if there is one thing we're all learning, implosions don't go "according to plan". "Project Management" won't help you during a catastrophe. Neither will Positive Thinking. In fact, positive thinking which leads to positive action can hurt you BADLY in many ways in our current circumstances.

And of course, that is exactly what we are seeing. Jay Audia being a prime example, among others. THIS is Not the time to be "Optimistic". We've got a ways to go.

And from the headline, you can see I've "taken a page" from The Bulletin, and put a somewhat misleading headline on this weeks post. Well, sorta, kinda. As the Bulletin always does. We will see CACB seized by bank regulators, sooner or later. NOW is the time to extract your funds. NOW.

CACB, 5 days

CACB is finally having it's Day of Reckoning; a time when we all realize that this Big Behemoth that represents our Diabolical Corporate Levaithan, is really just a decent sized fish in a very, Very small pond. CACB, while Big To Bendites, is Dogshit on a Shingle to the rest of the World, and the banking federales will have no compunction about swooping in and closing this beast one lovely Friday Morning.

In fact this past Friday, the FDIC saw fit to close 3 middling banks, but there was one point of interest in these closures: When shuttering the Magnet Bank in Salt Lake City, the FDIC found itself unable to find anyone willing to simply assume this business:

Utah's MagnetBank closed without an acquirer

FDIC shuts down three banks in one day amid ongoing credit crisis
By John Letzing, MarketWatch
Last update: 6:42 p.m. EST Jan. 30, 2009

SAN FRANCISCO (MarketWatch) -- Federal regulators closed three banks in a single day Friday, as the ongoing credit crisis showed no signs of abating.

Utah's MagnetBank became the fourth bank failure of the year, and the Federal Deposit Insurance Corp. was forced to directly refund depositors after being unable to find another institution willing to take over its operations.

That marked the first time the FDIC has been unable to find an acquirer for a failed bank in nearly five years, according to FDIC spokesman David Barr. "This bank did not have an attractive franchise value, and not many retail deposits or core deposits," Barr said. The FDIC had conducted an extensive marketing process for the bank's assets, he said.

Salt Lake City-based MagnetBank had total assets of $292.9 million as of Dec. 2, and
$282.8 million in total deposits. "It is estimated that the bank did not have any uninsured funds," the FDIC said in a statement.

The FDIC later said it has also closed Maryland-based Suburban Federal Savings Bank, and Florida's Ocala National Bank.

Suburban Federal had total assets of roughly $360 million as of Sep. 30, and total deposits of $302 million, the FDIC said in a statement. Tappahannock, Va.-based Bank of Essex agreed to assume all of the failed bank's deposits, the FDIC said.

Ocala National had $223.5 million in total assets as of Dec. 31, and $205.2 million in total deposits, the FDIC said. Winter Haven, Fla.-based CenterState Bank has agreed to assume all of the failed bank's deposits.

The closures mark the fourth, fifth and sixth bank failures of 2009, bringing the total to 31 since the start of the credit crisis.

The FDIC can almost always find someone willing to take over a banks operations. Almost Always. It's like getting the customers for free. All the bad stuff is wiped out. You just get a whole bunch of customers for almost nothing, and since they are free, you can cherry-pick and get rid of the crap, by imposing onerous fees, etc.

What will be interesting to see, is if they can find a buyer for poor, sad little Cracker Ass Cracker Broke. Let's face it, CACB does have a decent presence in this dust-ridden shithole. But that's about it. What we're seeing with Magnet Bank in UT is just the beginning; banking seems to be a business model that is again on the brink of complete failure.

We saw this in the early 90's. Of course, we saw it en masse during the Depression. Banking is a business model that simply is compelled to undo itself.

To become big, you must take risks & leverage to the hilt. You must participate in the bubble du jour, you must. Or you won't get big. But once the soup goes cold, you face calamitous implosion. And you are once again a nobody.

Unless. Unless you can convince someone that you are Too Big To Fail. Then you receive Corporate Welfare, your corpse has new life breathed into it, and you go on your merry way, doing as you've done before, driven towards ever-larger temporary Bubble-fueled successes and subsequent Taxpayer-fueled failure-bailouts. Always becoming Ever Too Big To Fail.

Which is where we are writ large. We've done this so often with banks, that it has now spread to autos. But NOT one auto maker. It's the industry that is failing. Like banks. It's the whole edifice that is crumbling. We can't move to another part of the cliff face & be safe, the whole thing is crumbling.

And so shall pass our "Civilization". America. This crazy 200+ year experiment seems to be itself collapsing. Like Krugman says: This isn't cyclical, this is structural. There is a fundamental flaw that seems to have rendered Unbridled Capitalism as a system with no fundamental equilibrium point. The pendulum swings. But the force of the feedback mechanism (Greed) is rendering the entire structure supporting the pendulum, unstable.

We've exceeded the engineering specs of capitalism. hbm may be right: Unbridled capitalism undoes itself. This got me to reading Marx:

Political economy

Marx argued that this alienation of human work (and resulting commodity fetishism) functions precisely as the defining feature of capitalism. Prior to capitalism, markets existed in Europe where producers and merchants bought and sold commodities. According to Marx, a capitalist mode of production developed in Europe when labor itself became a commodity—when peasants became free to sell their own labor-power, and needed to do so because they no longer possessed their own land. People sell their labor-power when they accept compensation in return for whatever work they do in a given period of time (in other words, they are not selling the product of their labor, but their capacity to work). In return for selling their labor power they receive money, which allows them to survive. Those who must sell their labor power are "proletarians". The person who buys the labor power, generally someone who does own the land and technology to produce, is a "capitalist" or "bourgeois". The proletarians inevitably outnumber the capitalists.

Marx distinguished industrial capitalists from merchant capitalists. Merchants buy goods in one market and sell them in another. Since the laws of supply and demand operate within given markets, a difference often exists between the price of a commodity in one market and another. Merchants, then, practise arbitrage, and hope to capture the difference between these two markets. According to Marx, capitalists, on the other hand, take advantage of the difference between the labor market and the market for whatever commodity is produced by the capitalist. Marx observed that in practically every successful industry input unit-costs are lower than output unit-prices. Marx called the difference "surplus value" and argued that this surplus value had its source in surplus labour, the difference between what it costs to keep workers alive and what they can produce.

Capitalism is capable of tremendous growth because the capitalist can, and has an incentive to, reinvest profits in new technologies and capital equipment. Marx considered the capitalist class to be the most revolutionary in history, because it constantly improved the means of production. But Marx argued that capitalism was prone to periodic crises. He suggested that over time, capitalists would invest more and more in new technologies, and less and less in labor. Since Marx believed that surplus value appropriated from labor is the source of profits, he concluded that the rate of profit would fall even as the economy grew. When the rate of profit falls below a certain point, the result would be a recession or depression in which certain sectors of the economy would collapse. Marx thought that during such a crisis the price of labor would also fall, and eventually make possible the investment in new technologies and the growth of new sectors of the economy.

Marx believed that increasingly severe crises would punctuate this cycle of growth, collapse, and more growth. Moreover, he believed that the long-term consequence of this process was necessarily the enrichment and empowerment of the capitalist class and the impoverishment of the proletariat. He believed that were the proletariat to seize the means of production, they would encourage social relations that would benefit everyone equally, and a system of production less vulnerable to periodic crises. In general, Marx thought that peaceful negotiation of this problem was impracticable, and that a massive well-organized violent revolution would be required, because the ruling class would not give up power without struggle. He theorized that to establish the socialist system, a dictatorship of the proletariat - a period where the needs of the working-class, not of capital, will be the common deciding factor - must be created on a temporary basis. As he wrote in his "Critique of the Gotha Program", "between capitalist and communist society there lies the period of the revolutionary transformation of the one into the other. Corresponding to this is also a political transition period in which the state can be nothing but the revolutionary dictatorship of the proletariat."[24] While he allowed for the possibility of peaceful transition in some countries with strong democratic institutional structures (such as Britain, the US and the Netherlands), he suggested that in other countries with strong centralized state-oriented traditions, like France and Germany, the "lever of our revolution must be force."[25]

Marx has a fairly compelling arguments here. The decline of Unions, the rise of vast capitalist fortunes. A lot seems to be going according to Marxist plans here.

But there is one problem with the Marxist thought of 150 years ago, and today: We have lowered the barrier to capitalist entry so low, that everyone is a Capitalist Proletariat.

Realtors. Graphic Designers. Web engineers. Even traditional employees. How many people do you know who have held their current position over 10 years? I never have.

Marx said that politicos & proletarians would ultimately revolt against capitalism. But who do we revolt against? The division is so unclear, that like a terrorist cell, it's hard to figure out who the enemy really is.

So we are headed towards something. I almost feel a sense of melancholy, watching as my beloved Capitalism dies a slow torturous death. Will it arise someday for my kids? Maybe. But it seems clear to me, that during the remainder of my working productive years, something will take its place.

I don't think it will be straight up Marxist Communism. But it will be governmentally managed. The Invisible Hand will be cuffed. We'll become more like Italy or (gag) France. We'll bleed the patient with leeches to ensure This Never Happens Again. Cure worse than the disease, as is the way in circumstances like this.

Nobody told me there'd be days like these
Nobody told me there'd be days like these
Nobody told me there'd be days like these
Strange days indeed, strange days indeed

... most peculiar mama

Moving on....

I've found myself headed towards the business listings on craiglist. The Bulletin will not tell us The Bad News of small and middling businesses closing, and so we have to rely on the businesses themselves. And many will either come right out and tell you that they are closing their doors:

The Children's Boutique on Kearney Ave is going out of business!

everything is for sale, even the fixtures.

I have two cash registers, credit card machines, slatwall, tagging supplies and more.
come by and see what we have. Last day Feb 10th

The Children's Boutique
325 ne Kearney
(across from Taco Bell)

385-1168

Or you can sift through the vast picked-over carcasses of your favorite ex-retailer. There's a lot of stuff there. If you have a urgent fundamental need, you can get pretty good deals there. Not great, cuz after all, This Is Bend.

But people like Dunc, and other survivors can outfit the current shop at fairly decent prices.

Of course I raise my usual caveat: Don't Buy Anything Unless You Absolutely Have To. We are in what Krugman calls a deflationary spiral. Cash is becoming worth more, the stuff we bought on the way up like homes, cars, fake titties, Hummers, Volo, City Council Seats, CACB shares, botox, and the rest is becoming worth-less. OK, I can't resist re-prodicing a short reprint of Krugmans Dead On Analysis:

Nobel economist: 'Not your father's recession'

Krugman has a recurring economic nightmare involving a syndrome called a deflationary trap, something that could conceivably last a decade. "This has me very frightened," he says, "and it's just starting to get under way."

Deflation, the opposite of inflation, means that prices fall -- which might strike shoppers as a good deal. But as prices drop, consumers hold onto their money in hopes of even better bargains.

Reduced demand sends prices lower, triggering a downward spiral as factories close, employment shrinks and loans default. Pay cuts mean that homeowners, who thought rising incomes would reduce the bite of their mortgages, instead see their house payments effectively increase, boosting their debt load.

Japan suffered a lost decade or more to deflation after its 1980s economic bubble burst. Krugman says the current recession has disturbing parallels.

During Inflation, your money becomes worth-less, and so it is best employed in real goods. Holding cash simply impoverishes you. Deflation is the opposite: Holding onto your money and not spending it increases your wealth. It is the unfortunate side-effects that collapse the economy.

And spending DOES NOT REVERSE THE PROCESS. Same as holding cash during inflation doesn't STICK IT TO THE MAN or some such. You can't "reverse" deflation by spending. It's not an Entity, it's a state.

This brings me to my final thought: BEDROCK. Seems like people are starting to wonder if there is a "base" to this collapse. Is there a bottom. Will we ever stop falling?

I guess Great Minds Think Alike as Dunc had a recent post on this topic:

It's the psychology, stupid.

To follow up on the previous post, I'm starting to look at the psychology of the consumer again.

While I wouldn't put in the dire terms that Buster put in the comments, there is a fine line between having a wounded consumer and a mortally wounded consumer. To my mind, it's better to be informed and skeptical, but not panicked.

Last night, I began wondering about all those people who have secure jobs, or relatively secure jobs. This is probably the majority, even the vast majority of consumers.

But they've cut back, nevertheless. It's a natural response. But most of them are still coming in and getting their favorite comics, or buying a book, or pulling the trigger for a toy that wows them.

What would be very dangerous is if they didn't just cut back, but stopped spending altogether.

I think that's what all the stimulus package talk is all about. Maybe Buster is right, and little of it will reach Bend in truth. But as long as the 'impression' is out there that SOMETHING is being done, I believe that the consumer will continue to be careful, but not stop altogether.

Obama is a plus, because he holds out the potential for improvement. The stimulus package is a plus, because it looks as though something is being done. The bail-out -- god help me -- is a plus, at least psychologically -- because it keeps the Big Bank Fails headlines out of the paper.

On street level, I saw the immediate impact of Bears, Sterns going down. Then the even bigger impact of Lehman brothers, and Bernie Madoff was the nail. I suppose, Murphy being a tricky bastard, that I should expect at least one more real eye-opener, and hope the psychology doesn't turn permanently bearish.

The underlying conditions are stark, but I can deal with them as long as there isn't another total shift in psychology.

People will start asking this question: What is Bedrock in the American Economy? Where is the bottom? What is fake & what is real? For every Madoff, how many non-shysters are there? Are there any? Is Buffett real? Who can I trust? Can I trust anyone ever again?

Where's the Bedrock? There IS Bedrock in this country. OK, I sound pretty alarmist on here, I know. It's in large part because we are collectively being over-pacified by the local media, and someone needs to don some clapboards to raise awareness.

But even in a place like Bend, people have to eat, they need to sleep largely under a roof, they need clothes. There is a ROCK BOTTOM here. I don't think we'll end up like Fossil or worse.

But where is The Bottom? I don't know folks, but it seems to be that those who went up the most will fall the farthest. And No Where Went Up Farther And Faster Than Bend Oregon. No Where. And we've already seen that things are far worse than anyone thought possible even 1 year ago. A year ago McPain had a chance.

So when I and others in the comments talk about this town going back to 40-50,000 people, homes reverting back to $125K, and unemployment going to 20-25% (or more), this isn't panic-mongering; its just a reversion to Bends Bedrock. Its base. A place where people eat, drive, dress, work and otherwise live simply. It's not bad. It's our bedrock.

I'll end with a Bully piece about how bad this is already for select locals. And remember: This is the price we are paying for having as a community CHOSEN to have a 24 month unbridled Greed-fest primarily for those at the very top of our local socio-economic stratum. This is it. The hangover will affect everyone and will linger for a decade or longer. Was it worth it?

Meet the people behind the numbers

By Story by Lauren Dake Photos by Pete Erickson / The Bulletin
Published: February 01. 2009 4:00AM PST

Department of Human Services employees say they’ve never seen anything like it. Every month, the number of people seeking assistance rises. In December, 10,636 families in Central Oregon received food stamps. Statewide, they are calling it an emergency. But in Central Oregon, they are looking for an even stronger word. With a 29.5 percent increase in families receiving food stamps in December compared with December 2007, the tri-county area is the hardest hit in the state, when measured by the increased request for food stamps. Many families and individuals are seeking help for the first time in their lives, others are finding they need more. Below, a few of those people agreed to share their stories.

Jeff Johnson

Jeff Johnson’s chicken Parmesan dinner expired 22 days ago.

In about a month’s time, he went from buying fresh foods at the grocery store to getting free, slightly expired food.

A recent divorce came at a time when the 45-year-old, self-employed residential and excavation construction worker was experiencing slow times.

The Bend resident went from living in a 2,552-square foot, five-bedroom, three-bathroom home on 40 acres, to a 35-foot fifth-wheeler in his church’s parking lot.

Now, the man who lives in a $42,000, 2006 Weekend Warrior, which he bought with visions of traveling the state with his family, is answering questions he never dreamed someone would ask him.

“How are you meeting your basic needs?” asked Department of Human Services employee Sue McDonald — a stranger to Johnson.

His face flushed, Johnson shared the story of his first visit to the food bank, of living behind his church, of borrowing $20,000 from his parents.

“Do you have any income?” she asked. The answer was no.

She asks about assets.

“It’s kind of hard driving a 2006 Chevy pickup to a food bank,” he said.

He tried for military benefits but was told by officials in the Veterans’ Affairs office he was 33 days short of continuous active duty to qualify.

On Wednesday, he decided he needed more help than he could get from the food bank and applied for state assistance for the first time in his life.

McDonald gave him a list of resources, places to go for transitional housing, for clothes, for extra food.

“Food stamps weren’t intended to carry anyone through today’s economy,” McDonald told him. “They don’t last a month.”

In 2006, Johnson’s gross annual income was $170,000. His house, then appraised at nearly $1.2 million, was $70,000 away from being paid off.

“There have been slow stretches during the last couple of winters,” Johnson said. “But not like this. This is just incredible.”

It’s an odd feeling, Johnson said, to own expensive goods that aren’t worth anything. He tried selling his tools at Trade-N-Tools, where you can trade tools for money. But he quickly found out he wasn’t the first one with the idea; the place was inundated, he said.

He was never irresponsible with money. He planned ahead. He had a savings account, but that was wiped out by lawyer’s fees.

His parents, who also live in the area, are using their savings to help their son.

“I grew up with parents that never took vacation; we drove a station wagon with a red-front fender. It was all mismatched and had snow tires on it year round,” he said, adding he intends to pay back every dime his parents have given him.

Although Johnson never dreamed he would be in this position, he said, he’s being proactive about surviving. “There’s just no income. I just can’t get any money …” he said. “But it’s easy to find people in worse shape than me.”

Joel Hall

Joel Hall would like to leave Bend — but he can’t.

“There are more job opportunities elsewhere … But I can’t afford leaving,” he said. “The economy’s impact on a small town like this …”

When he first moved to the area, in 2005, 37-year-old Hall worked for the Bend-La Pine School District as a teaching assistant.

He has a bachelor’s degree in education from California State University- San Marcos.

Hall was laid off from that job. He was laid off from Flatbread Pizza. He’s been a bartender but was laid off there as well.

"It was tough five years ago finding a job in this town,” he said. “Now, this town that seemed to explode for a while, it’s just imploded.”

He’s getting by teaching snowboarding a few hours on Mt. Bachelor. But that’s only about two hours a week. And he hasn’t received unemployment benefits yet, because he’s been told it’s a four- to six-week wait.

“In the meantime, there’s no income,” he said while waiting in line for food stamps on Wednesday. He’s dressed in all black, with The North Face sneakers. He’s clutching an issue of National Geographic magazine. “I wouldn’t be standing in this line if that wasn’t the case.”

Hall has moved in with a friend to reduce expenses.

“Thank God I have good friends,” he said. “But they are losing their jobs, too, and they have educations. They are lawyers …”

Maybe, he said, it’s time for a career change.

“I would like to get into a field that can withstand this stuff,” he said, mentioning health care as a possibility.

Wednesday was his first time applying for food stamps.

“I never though there would be this many people here,” he said, after waiting in line for about 40 minutes. “But it seems to be hitting people from all directions.”

Although Hall said he’s determined to stay optimistic and keep his head up, it was a difficult decision for him to visit the DHS office.

“I’m totally embarrassed,” he said. “I didn’t want to come down here and wait in this line. But six weeks with no income … I check Craigslist and the paper all the time. There’s just not much out there.”

Kris Hakkila

As soon as Kris Hakkila, 44, of Bend, noticed his work drying up, he started applying for jobs.

He has yet to hear from anyone. In December alone, he sent out 40 résumés, looking for jobs at flooring manufacturing companies or as a project manager on different jobs — without a single call back.

“Not a thing, not a letter, not a call,” he said. “You just know they are being bombarded with applications.”

And so, on Wednesday, the self-employed hardwood floor contractor applied for food stamps for the first time.

His sentiments echoed many others at the DHS office.

“I’ve been through tough times,” he said. “But never this bad before.”

Along with his wife, who works as an assistant to a financial broker, Hakkila has two daughters, 14 and 17.

“All our money is going to pay our bills,” Hakkila said. “Soon, we’ll have absolutely nothing.”

Two years ago, his business was bringing in around $60,000. He has a job lined up in March, but other than that his income is close to zero.

He’s never even thought of applying for food stamps before. And he waited until there were no other choices.

“You know, it kind of sucks,” he said.

Karen Albert

Nearly every weekday morning, Karen Albert took the Les Schwab Tire Centers shuttle from Prineville to her office at the company’s new headquarters in Bend.

But last Friday, she decided to drive her own car.

An hour into her workday, at 8 a.m. her boss called Albert into an office. The human resource director was waiting.

“They told me they were letting me off due to the economy,” she said.

The 48-year-old didn’t see it coming.

“They told us they were done with layoffs.”

Albert was one of 25 people laid off a couple of weeks ago. Earlier this month, the company also laid off about 25 people.

“I just called my daughter and cried,” Albert said.

Since she drove her own car, she didn’t have to wait until her shift was over for the shuttle to arrive and ride home with her former co-workers.

“That was lucky,” she said. “I’m trying to find the blessings in all of this.”

She drove home and cleaned the house.

“And then I went online and applied for unemployment benefits,” she said.

Albert worked for the tire company — Central Oregon’s second-largest private employer — for five years.

A single mom with no other income, Albert immediately thought of her two children, ages 21 and 19. Her daughter, the oldest, has rheumatoid arthritis. And her youngest, a son, is a wrestler in college.

On Wednesday, Albert sat in the Prineville office filling out an application for the Oregon Health Plan.

“Amy can’t go without medical coverage, and my son is on the wrestling team,” she said. “If I don’t have coverage, I don’t care, but they need to be covered.”

Albert said she’s hoping the insurance coverage will be the only assistance she needs.

“I was raised in a family where you don’t ask for help. You take care of yourself,” Albert said. “So it’s rather humiliating. But you do what you have to do to take care of your family.”

Mona Meeds

Mona Meeds didn’t want her children to know.

But she mentioned food stamps while speaking to her husband, and her children heard.

“I didn’t want them to be embarrassed,” said the 31-year-old mother of four.

“If I hadn’t mentioned the Oregon Trail card, they wouldn’t know,” she said.

The Oregon Trail card is a debit-like card that makes food stamps available electronically.

When it became harder and harder for her husband, who owns his own heating and cooling business, to find work, Meeds knew she had to apply for help.

“The work just isn’t there,” she said. “During the housing boom, there was so much work.”

She applied for food stamps and signed her children up for the free and reduced-lunch program.

Without the aid, she’s not sure what would happen. Savings are gone, and her husband continues to take jobs farther and farther away from Prineville.

Even though she is constantly on the move, picking up and dropping off her children, ages 5, 11, 14 and 15, she applied for a job at Rite-Aid.

“It’s the only job I’ve seen posted,” Meeds said. “But they didn’t call.”

Four years ago, the family built a home and had money in the bank.

“Now, I try not to think about it,” she said.

Her children took the news well.

“I told them Dad doesn’t have much work and we’re getting assistance. When it gets better, we’ll get off of it,” she said.

With Crook County’s unemployment rate recently reaching 14 percent, Meeds said her children took it well, in part because they are familiar with tough times.

“They took it better than I thought,” she said. “They have a lot of friends that are having hard times too.”

Keshia Yaw

Keshia Yaw sat in the Department of Human Services office in Madras on Wednesday, waiting for her mother to pick her up.

“I know what I’m going to do,” said the 18-year-old single mom from Warm Springs. “I’m going to find a job, work on scholarship forms, get re-accepted to COCC (Central Oregon Community College) and transfer to Portland State.”

Maybe, she said, she would study something in the medical field.

Although, she doesn’t like asking for help, Wednesday was the first step in realizing her goals.

A blue folder, full of information, was on the table in front of her. Inside was information on how to receive cash assistance from a program called Temporary Assistance for Needy Families. The cash grants are $647 a month for families of four that earn less than $795 a month and have less than $2,500 in assets.

More than money, she’s hoping the program will help her get a job. The goal of the temporary assistance program is to create self-sufficiency for participants. To receive benefits, job searches are mandatory. And the individual must participate in the services available — such as job training classes that help with résumés.

Yaw lives with her mom, who receives food stamps and disability. She doesn’t have her driver’s license. It was too expensive, so any job needs to be near home.

“I don’t like it, depending on other people,” she said.

Yaw wasn’t the only young face at the Madras DHS office on Wednesday. Vicky Higgins, the operations manager, said her office serves a large teenage population.

In 2007, the office helped nearly 40 homeless teenagers.

“The biggest increase is those people who have never asked before,” Higgins said. “But the teen population is really increasing, too.”

Basilio Gomez

For the past 12 years, Basilio Gomez has worked at Bright Wood, in Madras.

He’s no stranger to the economy impacting the hours he works.

When times are good, the forklift driver is guaranteed 40-hour workweeks at the wood remanufacturing company. But lately it’s impossible to work enough hours to support his wife and four children.

On Wednesday, the 44-year-old applied for more food stamps and filled out the paperwork to put his two older children, ages 12 and 11, on the Oregon Health Plan.

The younger two children are already covered through the plan.

He has insurance through the wood manufacturing company, but the deductible is too high.

“It’s bad this year,” Gomez said.

Jaimie and Dave Crockett

Since September, Jaimie Crockett, 25, of Jefferson County, has been taking her résumé to any grocery store and gas station she can drive to.

“I’m trying to find anything,” she said.

Her husband, Dave, 36, was demoted from a salaried to hourly position at Bright Wood, Central Oregon’s third-largest private employer. During a recent week, he only worked 16 hours. He’s been with the company for 14 years.

The couple waited Wednesday in the lobby of the DHS office in Madras for an appointment with a caseworker, who will explain how to apply for food stamps.

Dave never imagined it would come to this point.

“A couple of years we went through this at Bright Wood,” he said. “But that was for a month.”

The couple has two daughters, ages 7 and 2.

“This is horrible,” Dave said. “I’ve never had to ask for help for anything.”

In September, Dave was bringing home about $3,000 a month. The money went to house payments and groceries. Last month, his income was $1,000.

Although Jaimie doesn’t like it, she has an easier time asking for help.

“I’m willing to do whatever to put a roof over our kids’ heads,” she said.

Dave is also studying accounting at Central Oregon Community College, so there are student loans to pay. He’s hoping it’s a recession-proof job.

As the mortgage payments pile up, the hardest part, Jaimie said, is not knowing if they will be able to stay in their house.

“We need to have a safe, comfortable place for our kids,” Jaimie said. “And that’s in jeopardy. If I didn’t have kids, it would be different.”

They are hoping the food stamps can alleviate some of the grocery bill costs so they can put more money toward paying off their house.

“I just kept thinking we could do this on our own,” Dave said.

But they couldn’t.

“We tried to put it off, but it caught up with us,” Jaimie said. “We couldn’t think about it anymore; we just had to do it. So here we are.”

(Kudos to The Bully for running this piece. Credit where it's due.)
Post over.