news story / By Ryan Burns

Call the Fiscal Justice League

Forget the bailout, our economy needs superheroes

(Nov. 6, 2008)  The world economy teeters on the verge of collapse. Stock markets in the U.S., Europe and Hong Kong resemble Richter readouts from the Big One. Wall Street brokers’ heart rates leap tall buildings in a single market rebound while here on the Main Streets of Humboldt County we look desperately for answers.

What does it mean for us? Will the villainous credit crisis and impending recession destroy our home values, obliterate our 401(k)s and lay waste to our industries here behind the Redwood Curtain? Where can we turn in our time of need?

GALLERY >

Last week, a team of mild-mannered financial eggheads gathered for a panel discussion at HSU — four professors, the president of a local bank and a certified public accountant/business consultant, all called to action by Maggie Gainer, director of HSU’s Office of Economic Development. They sat behind two tables, exuding calm confidence to the nervous crowd gathered in the Goodwin Forum of Nelson Hall East. It was the Fiscal Justice League, here to save the day!

Or at least, that seemed to be the hope of some in attendance. Whether worried, confused or angry, the citizens of our humble county wanted answers. HSU Economics Department Chair Erick Eschker began with a refresher on how we got here.

“There was a credit bubble,” he said, “lots of money looking for a place to earn some returns in the early part of this decade.” It ended up in housing, which had its own bubble inflated by loose (read: “irresponsible”) lending. Wall Street made matters worse by funneling the risk into mortgage-backed securities and inventing creative trading instruments — “creative,” in retrospect, being a euphemism for “bat-shit crazy.”

It was a house of cards suspended by collective faith that the housing market would increase forever. It didn’t, clearly, and we’re all now suffering the aftermath. “You’ve heard the term, ‘Money makes the world go ‘round?’” Eschker asked. “I like to instead say, ‘Credit makes the world go ‘round.’” In the modern world, no credit equals no economy.

That’s a simplified version of the state of the world economy. So, what about here? Eschker recently released his assessment in a paper with the sobering title, “The Pain Begins.” In it, he says the local seasonally adjusted unemployment rate has increased to a level not seen in more than 10 years. Claims for unemployment insurance also jumped in recent months while help wanted ads have declined. “All signs point toward a softening labor market,” he wrote.

Makes you want to reminisce about the good ol’ days. But it was those very days that led us to where we are now.

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