Recession: An American Experience

Posted on 22. Jan, 2010 by in uncategorized

The subprime mortgage meltdown started around 2007, the last year I lived in the States. Economists believed the risk was contained to only subprime or the domestic house market. Since then we’ve seen big banks fail, investments plummet, and trillions of public dollars injected into banks around the world. We’ve learned about collaterized debt obligations (CDO), credit-default swaps (CDS), and a slew of other culprits in what amounts to the steepest recession since the Great Depression.

My only impression of the Great Depression came from American textbooks. I thought of it as a depression, a miserable time spanning a generation. Similarly, my feel for the current American recession was limited to what I’d read in newspapers. This was my first time in America during the biggest recession of my lifetime.

My goal for 6 weeks was to earn as many US dollars as possible. Before leaving Colombia, I secured a full time job serving and bartending. I also lined up retail promotional work for about 15 hours / week. Finally, I presented the same company a proposal for an e-marketing campaign (a four-figure deal), which was accepted.

I found so much work I gave up all my shifts my last week because I felt I hadn’t spent enough time with family and friends.

I worked 3 long weekends doing promotions inside Costco stores, one of the more innovative retail giants in big-box capitalism. I saw other deals at similar stores: Target, Walmart, etc.

The VitaMix Solution for $394.99 – This product was promoted in Costco stores. The Solution included a power blender, a disc, and recipe book to make your own juices. VitaMix demonstrated the product and handed out samples of the juice they made. The one I tried had pineapple, carrot, spinach, strawberries, and more. I couldn’t help thinking they’re selling a $400 blender during the worst recession since the Great Depression.

¼ pound hot dog + free refill fountain drink for $1.50 – Everyday in the Costco food court: ¼ all-beef hot dog with a refillable drink for $1.50. You couldn’t get that in Colombia or Peru.

Levi’s jeans for $19.99 at Target –The Levi’s brand suffered overexposure in America during the 90s, but it’s a top quality brand internationally and especially in Latin America. I’ve seen Levi’s and Wrangler jeans retail for $60 – $100. The ones I got at Target didn’t have that red tab on the butt, but they’re classic dark Levi’s nonetheless for $20.

City Museum’s best year to date was 2009 – Friends who work at the City Museum told me their best year was the last one. Something had changed though. They often heard from tourists from Missouri or Southern Illinois that they usually go to Florida. But with the economy, they decided on a road trip to St. Louis.

I noted St. Louis is an inferior good to Florida. When a product sells better in a down economy, it’s defined an inferior good. Busch beer, Wal-Mart, and vacations to St. Louis are examples of inferior goods.

PBR: $2 pints at Fitz’s, $1 16 oz cans at Delmar Lounge – Pabst Blue Ribbon was never at these two places. One now carries it on tap and the other in a 16 oz can. The increased distribution isn’t due to branding ground gained; Delmar’s been a PBR natural habitat for a long time. These places chose not to serve it before, but PBR is also an inferior good.

High-end marijuana and vaporizers – My smoker friends have abandoned cheap marijuana. Everybody pays $50 for 1/8 ounce of super-potent marijuana. Things apparently aren’t so bad to sacrifice in this category. One health-conscious friend ordered a vaporizer so he could vaporize his marijuana instead of smoking it. They’ve become popular in California in a new legal industry sprung from the state’s legalization of medical use. This gadget provides for a smoke-free THC high.

Restaurant food costs & revenue – The restaurant where I worked had changed the burgers from an 8 oz patty to 7 oz, while standard price increases kept with inflation.

Labor costs – The same restaurant runs a leaner operation than before. Former management subscribed to the TGIFriday’s school of using lots of staff. However, when sales are significantly down, cuts must be made to stay profitable. The floor managers won bonuses by achieving their goals in cutting labor costs.

When the economy returns to growth, the restaurant will have gotten stronger during the down-time. I now look at recessions as belt-tightening seasons and opportunities to cut fat, rather than misery and depression.

Unemployment – A couple family members are out of work. Recessions and their impact on quality of life aren’t so bad so long as you don’t lose your job. But they’re still doing fine.

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5 Responses to “Recession: An American Experience”

  1. Andrew Meyer

    23. Jan, 2010

    Interesting thoughts. I’ve observed many changes also, though from a slightly different perspective.

    For people who are having to cut back, there’s never been a better time to be poor. Everything from flat screened TVs, to Hyundais, to Target, to computers, to free movies and TV over the internet, there has never been so much high quality available at low prices or zero prices. The value one can get for very little money is just amazing. There has never been a better time to be poor.

    If you are building a business, you’ve never been able to find as many, incredibly high quality people available and eager to contribute to promising businesses. Executives from multi-national businesses are seeing the writing on the wall for their firms and bringing programs and ideas their businesses were to tradition bound to implement to very small businesses.

    I fear the depression in the US is going to get much worse and it will be very difficult for many people, however it will be very good for the US. One has to remind themselves that the best time in the history of the world to start a bank was in 1934. The scars from past mistakes were still fresh and led to a responsibility and focus. The innovative businesses of that period in banking, advertising, entertainment and services dominated the world for the next 50 years.

    The next five years are likely to be very painful for the US as consumers and the government deleverage, but looking at the businesses start to take shape, America’s future has never been brighter.

    How do you think the recession/depression effecting Colombia?

  2. Colin

    26. Jan, 2010

    Andrew, I’m thrilled to see someone cares about the economic posts.

    I think most Latin American countries weathered the storm just fine, including Colombia. The countries overly dependent on oil were the hardest hit, but it’s no surprise to those who follow given those countries’ leaders. Colombia may have dipped into negative GDP for a quarter or so, but I believe it’s generally steaming right along with Peru. Building construction sure hasn’t disappeared. Some of Latin America’s solid fundamentals showed through and that’s why The Economist is churning out a bunch of articles drooling over Latin America, focusing on Brazil.

  3. Drew Cummins

    26. Jan, 2010

    I agree, I found the post pretty insightful. Nice job

  4. matthew

    03. Feb, 2010

    economy fucking blows here. im still looking for jobs. and 60 dollars is nuts for levis i buy them too at target as i like how they fit. i got a few pairs in different styles.

  5. Rachel

    15. Feb, 2010

    The economy here in the states IS great if you have a job! My husband just got a job in Dallas and he’s making more money now than when the economy was “booming” five years ago.

    Sure, there’s a lot of competition, mostly for unskilled and illegal workers, but if you have an education and the gusto to get off your ass you can find well paid opportunities.

    I move to Dallas when the school year ends in Louisville and I’m opening up my own food operation down there. Good economy or bad economy, people like to eat. I have never seen restaurants so busy!

    Anyway, great post. I think you prove that if you are creative enough, there’s money to be made.

    BTW, I worked for a vitamin and supplement distributor in Peru and the prices are marked up considerably high. The product is intended for a higher end clientele and most of it is imported from Canada and the U.S.

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