Economy out of balance?

[ Originally published on: Saturday, October 27, 2007 ]

BERNARDSTON -- ''The End of Money'' may have sounded like an unfathomable topic for a Franklin County Chamber of Commerce presentation -- especially a program sponsored by a local bank.

But Chris Martenson's 25-minute talk Friday morning opened with ''The next 20 years is going to be unlike the last 20 years,'' and kept the attention of the 100 or so attendees right from the opening reality check: It took 300 years to create the first trillion dollars in this nation's economy, but 10 months to create the last of the current 12 trillion dollars.

''There's a very enormous set of changes that are coming to our country at this particular point in time,'' said Martenson, who acknowledged that his doctorate is in pathology, not economics. ''It's incumbent on us …. important … critical to understand what are these changes that are coming? These changes are very obvious, very observable and very predictable.''

He began conducting local seminars about three years ago focusing on the decline of the dollar, dramatic inflation and the danger of the housing bubble to the nation's financial system -- trends which he said are starting to come to pass.

Martenson, who four years ago quit his executive job as a strategic analyst for a Fortune 500 pharmaceutical company and traded his 4,000-square-foot waterfront home in Mystic, Conn., to move to Franklin County and focus on learning about the economy's pitfalls -- and then teaching others about it -- says he has a scientist's love of data and the context that's often overlooked in analyzing it.

''I let the data do the talking,'' said Martenson, a Montague resident who runs a private financial consulting business.

Martenson's advice for how people should respond was limited, beyond pointing out that people should consider whether their investments are diversified enough, and several audience members interviewed afterward pointed out that shortcoming.

''It left me yearning to hear what we should do,'' said John Cormican, a Greenfield Savings Bank computer specialist.

Matt Sheridan, a financial adviser with A.G. Edwards, said, ''It's hard to dispute the record on oil prices.'' But while he called the talk ''sobering,'' Sheridan added, ''He told us what was wrong, but not how to fix it.''

Martenson, speaking after the talk, emphasized the need to first recognize what the problems are and then think about what to do in response.

''We have to solve these problems on a community level, because I don't see that national solutions will come in time,'' he said. ''We have to find resources in our community.''

In his talk, Martenson drew on the parallels of climate change and the environmental disasters of Hurricane Katrina and the current California wildfires.

Martenson boiled down his eight-hour seminar to point to some realities he says shouldn't be ignored:

u A ''mismatch'' between the country's liabilities to meet Social Security and Medicaid and Medicare liabilities and the money set aside to pay for those programs as Baby Boomers retire. ''We would need to have more than 50 trillion in the bank today earning interest in order for those programs to be solvent. … At some point in the future, our country is going to have to face a lot of hard choices around those. Every year that we wait, that problem gets $4 trillion larger.''

A trillion dollars translates into a stack of $1,000 bills that's 63 miles high, he said.

u The price of oil has been ''climbing inexorably for four years now,'' while the supply has gone down since late 1995, and the United States is poorly positioned to deal with a decline of petroleum production because we export over 65 percent of our oil. ''In Europe, they've been planning for this for decades, in how they've laid out their cities, what kinds of mass transit they have and how close they keep the farms and the food production to the population centers.''

u Climate change is happening, and it will take a while to adapt as rainy areas become dry and vice versa.

u The U.S. dollar is sinking against other currencies. ''The Katrina-sized risk in all this is that the U.S. dollar is the world's reserve currency,'' with nearly $5 trillion in banks overseas. ''If they all came back, the value of the dollar would go down very, very rapidly. That immediately translates into higher oil costs.''

Pointing to graphs that showed dramatic inflation surges at the end of the Revolutionary War, the War of 1812, the Civil War, the Spanish-American War and World War 1, Martenson said that the U.S. printing more money so far for the expense of the Iraq war makes no economic sense, particularly since war destroys things rather than creates lasting goods and services that realistically contribute to the economies.

''We went straight from World War II right into the Korean War, then into the Cold War,'' Martenson said. The gasp from the audience was audible as he then showed a post-1975 graph that captured the steep rate of inflation that followed the end of the Vietnam War in 1973, virtually to the present day.

Although there have been long periods without inflation in this country, the expectation today is that everything will cost more in the future.

''Where we get in trouble is when inflation gets out of control,'' he said, pointing back to $10 trillion getting added to the economy in less than a year.

''Once inflation gets hold, it starts to accelerate,'' said Martenson, adding that the public response of buying more at that point only exacerbates the inflation.

When the Federal Reserve cut interest rates in August, he said, there was a 15 percent skyrocketing in commodity prices over two months. ''Cutting the interest rate is the equivalent of printing more money.''

''All of these things can absolutely be shaped to our benefit. There are huge challenges coming, but with every challenge there's opportunity if we can see it coming. These are just changes; they just happen to be what they are.''

In a Recorder interview last year, Martenson advised people to get their own finances in order, learn to do with less and stop borrowing, detaching from a dollar-based economy and getting food locally to support the local economy.

Following Friday's chamber meeting, Greenfield Co-Operative Bank President Michael Tucker said, ''I'm most concerned about the deficit. At some point, we're going to have to pay for this. … What looks like is going to happen is our kids are going to have to pay more taxes.''

Tucker, whose bank sponsored the presentation at Bella Notte restaurant ''to get people thinking,'' said he didn't think the situation is as bad as Martenson painted it, but added. ''It's an area that people should be concerned about.''

Franklin County Community Development Corp. Executive Director John Waite, said ''The global economy and the U.S. economy is not sustainable, so what to do about it is to do more local … Green Fields Market, Greenfield Mercantile and locally owned businesses that buy and sell from each other (and) agriculture are a huge part of it. … It's about community.''

On the Web: http://drmss.com

You can reach Richie Davis at: rdavis@recorder.com or (413) 772-0261 Ext. 269

 

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