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Forget about technology, market size and products. VCs should invest in the entrepreneur.
As a reputed hacker and a serial entrepreneur, Rich Skrenta personifies the kind of person that I love to invest in. He is by most accounts a prodigy--his technical prowess showcased to the world while still in the ninth grade. Early successes in his career include NewHoo (subsequently the Netscape Open Directory) and Topix. Our paths crossed while Rich was still at Topix, and it was instantly clear that his future was infinitely bright. I jumped at the chance to invest when he started Blekko, but the reality is I'm just as excited about what tomorrow will bring.
Enter my new lens on investing: Entrepreneur equity. Specifically, equity in all the commercially productive activities of a person's career. I want to invest in the innate drive, talent and potential of a person. I want to invest in what they're working on now, what they're thinking about next, and whatever they dream up in the future. When it comes to exceptional talent, I've stopped worrying about technology, market sizes, product-market fit, etc. I just want to invest before the valuation gets frothy (seed is so 2010).
In case you're wondering, no, I'm not a feudal overlord. I'm not talking about payday loans and cement boots. In fact, what I'm talking about is not a new idea at all. The concept of making long-term investments on a person's complete body of work has analogues in many industries. Bowie Bonds (and the further music-backed securities that followed) in 1997 were an example of what can happen when you securitize the intellectual output and associated property rights that span the career of an artist (starting notably with David Bowie and much of his work).
I want a cross between Bowie Bonds and the MacArthur "Genius Award," the $500,000 grant given by the MacArthur Foundation to exceptional people to work on projects of their choosing. Perhaps a more recent analogue is the social venture Enzi, which is like Kiva for education. They're finishing up pilots at Stanford University to allow peer-to-peer investments in Stanford international students with financial need. Help pay their tuition and you get a share of their income streams for a fixed period in their future. The first batch of these students has already graduated and is now entering the productive period of the cycle.
Let's take a test case--Jim Everingham. He was the technical cofounder of LiveOps, and most recently the founder of image monetization platform Pixazza. Both are portfolio companies and repeat bets on people, notably ex-Netscape veterans, Everingham and his team (including hacker-ninja Lloyd Tabb). To date, my firm has had to make multiple discrete investments in both entities, but the reality is those investments were just a proxy for following the career of a prolific talent. If there had been a mechanism to invest directly in Jim (and others in the nexus), I'd be the first to do it and posit that it would be a more accurate reflection of our actual investing behavior.
Venture capitalists, today more than ever, need to be talent scouts. In "Why Entrepreneurs Don't Need VCs," I outlined the reasons why the current landscape has fundamentally altered the role of venture capital, and as embryonic investors we have to think in terms of people, not companies. It's well established that most start-ups pivot multiple times, and the idea we invest in is rarely what the company ultimately does.
More recently, I started to ask the question, if the art of investing is really about identifying great talent early, then lately I feel like I'm working at the wrong abstraction layer. Investing in financials, products, market opportunities, companies, ideas even--these are all second-order consequences of something more basic. I want to invest in the underlying asset. I want to invest in first principles. I want to invest in him (or her). It seems to me it should be possible to make an equity investment in a person's future. It can be proscribed for entrepreneurial activities, or it can be structured around future income. The point is to give future entrepreneurs the validation and resources to take chances early in their careers. Imagine the Omar Hamouis and Caterina Fakes that could have been if they just had the flexibility to leave their day job and take a chance.
How does one actually make any of this happen? How do you value entrepreneurs? I hand-wave for now and leave that to wiser folks (like Forbes readers). But I do know where I'd put a couple of these bets. I've seen a twinkle in a few eyes lately and I want to double down.
WASHINGTON (MarketWatch) -- Since being laid off as a machine operator more than a year ago, Robert Blalock has drained his individual retirement account. Now the 56-year-old resident of Fernley, Nev., doesn't expect to retire until his 70s.
"We make our house payments, but it's month to month," Blalock said. "If I don't get a job pretty soon we may end up going into foreclosure."
Worried Americans look inward
Jerry Seib discusses why isolationism, protectionism and anti-immigration sentiment is growing as the economy slumps.
Blalock is one of millions of Americans who will experience a long-term lifestyle scar due to a job loss.
The long-term negative effects of unemployment can take different dimensions, said Harry Holzer, an economist at Georgetown and the Urban Institute. There will be earnings losses, and kids may have trouble in school, he and other economists said.
For those who lose a job, the consequences of a layoff are "severe and long lasting," Till von Wachter, an economist at Columbia University, recently testified before U.S. lawmakers.
"The average mature worker losing a stable job at a good employer will see earnings reductions of 20% lasting over 15 to 20 years," von Wachter said.
"The effect of a layoff is devastating," he told MarketWatch. "On average it will take a long time to recover." Others agreed. "It's a huge hit, and also persistent," said Heidi Shierholz, a labor economist with Economic Policy Institute.
Earnings losses vary among demographic groups and industries, but no group is exempt from "significant and long-lasting costs of job loss," von Wachter said.
Still, that doesn't mean all laid-off workers will suffer the same fate.
"It's not predetermined," von Wachter said. "All of these statements are about averages. Workers can do things differently and they may advance and recover more quickly."
Education matters
Education is a key factor in a laid-off worker's career prospects, many economists said.
"If those same people who lose work experience now take the time to get a little more education, an extra degree or certificate, if it's in the right field that can offset the loss," Holzer said.
For his part, Blalock has been working to expand his skill set. He recently earned his bachelor's degree in special education, and is looking for a teaching job.
"This is one of those things where you kind of circle the wagons, and hope for things to change a little bit," he said. "Hopefully, things will turn around. Sometimes you have to regroup."
While additional training can be helpful, it doesn't help all workers, Holzer said.
"The older they are, the tougher it is, especially for less-educated workers," Holzer said. "If they have never set foot onto a community college campus, and they are 50 years old, it's a hard sell."
Also, the cost of education in both time and money can be off-putting. Also, education isn't a cure-all, von Wachter said.
In the short run, lower-educated workers often are hit hardest by unemployment, in terms of number of people laid off, than more educated labor-market entrants, von Wachter said.
"However, in the long run, less-educated individuals tend to recover faster," he said. "In fact, it is workers in the middle of the education distribution who can suffer close to permanent earnings consequences from entering the labor market in a recession; those individuals at the bottom and the top of the education distribution recover more quickly from a bad initial start.
"Thus, more education in itself does not yield full insulation against shocks occurring in the aggregate labor market," he said.
However, he said, more education may still raise earnings and employment stability.
Negative effects for children, young adults
Adults aren't the only ones affected by a dismal labor market. A parent's job loss raises the risk that his child will repeat a grade in school, according to recent research by economist Ann Huff Stevens at the University of California at Davis.
If a parent gets laid off, the probability of a child's grade retention rises by 0.8 percentage points, raising it to an average of 6.3%, according to the research.
"If we view grade repetition as a signal of academic difficulties, these short-run effects may be consistent with findings of longer-term negative outcomes in education and earnings," Stevens wrote.
And of course, the weak labor market also hits young adults. Fran Dinehart, a 24-year-old cousin of mine who just earned her master's degree in social work, is currently looking for a good full-time position. She's somewhat concerned about her prospects.
"I'm pretty worried. I'm not seeing a lot of opportunities to do the kind of work I'd like to be doing," Fran said.
She may have good reason to worry: The unemployment rate for 20- to 24-year olds was 15.6% in July, compared with 9.5% for the general population. Read government data about employment.
In school, Fran specialized in gerontology. Ideally, she would like to work with an agency that helps families and communities maintain seniors in their homes as long as possible. "It's pretty competitive," she said. "I'm not in the position to turn down anything, so I'm not going to be picky about wages."
While unemployment remains highs, young cohorts will be adversely affected, Shierholz said.
"We have this huge swath of workers who are going to see these persistent effects," Shierholz said. "For people who lost a job, or didn't get that first good job, it's not clear how we are going to keep [negative] effects from happening to them."
Young workers "will lose early work experience that they would otherwise have had," Holzer said. "They seem to be permanently on a lower trajectory."
Ruth Mantell is a MarketWatch reporter based in Washington.
It's new, it's exciting, it's quickly growing in popularity - it's also usually anonymous and potentially dangerous.
Formspring.me is a nine-month-old social networking website that allows users - nearly a third of whom are 17 or younger - to ask cruel, anonymous questions or make comments such as "Go kill yourself and make the world a better place," or "Is that you in your profile picture? It looks like a dead old man."
Experts acknowledge that while cyberbullying has been going on for a while now - the deaths this year of at least three teens have been linked to it - Formspring represents a new frontier.
"This site is essentially an anonymous way for teens to bully each other, and the danger in that is it, over time, becomes overwhelming," said Missy Wall, director of Teen Contact, a Dallas-based teen hotline. "Cyber bullying isn't new, but this sort of copy-paste teenager impulsiveness causes kids to make an account to try to be popular."
But Formspring officials say that the anonymous aspect is not necessarily harmful.
Sarahjane Sacchetti, director of communications for Formspring, said the site is giving people around the world "a new way to connect and express themselves." She said about 100 million questions are answered each month.
"All of our users want to have a public platform for them to feel comfortable asking their friends questions or even asking their boss a question without the ramifications," she said.
Alexis Montes De Oca, the father of a 16-year-old Formspring user in Grapevine, Texas, said that he is concerned about what can happen when the users are not known to each other.
"With all the abuse and harassing that can go on, it can pose a real danger," De Oca said. "Kids are not always aware of the implications of their opinions. Sometimes these opinions are not shared lightly, and they do not know the effect they can have on somebody else."
Formspring is not always anonymous, though, and it's not always used in a nefarious fashion. Company officials say it's intended to give its 12 million regular users - more than 50 million people visit the site each month - the opportunity to "do what comes naturally: ask questions and give answers about anything and everything."
And some prominent individuals and companies, such as Marvel Comics executive editor Tom Brevoort and Red Bull energy drink, use the site to promote their businesses and strengthen their relationships with their audiences and supporters.
Many North Texas teens who use Formspring say they initially joined the site to stay connected with friends. But the comments eventually became more grave and hostile.
"When I made the account, everyone was being nice," said Elizabeth Kirby, a 17-year-old rising senior at Grapevine High School. "But then I began to get messages telling me I was fat and that I liked food and I would respond, but in a classy way. It ended up getting to the point where I was horrified to check my Formspring because I would always get a mean question on it."
Kirby said her own self-confidence helps keep her from being devastated by the comments, but she knows that's not always the case for others.
"I have a relative amount of confidence, so I am able to ignore it, but people like my sister are crushed when people say those things," Kirby said. "The other day, someone called her an ugly, fat elephant on Facebook. She felt terrible."
Comments of that type are not surprising to cyberbullying experts, who say that online aggression can begin as young as 7 years old.
"The things that kids say to each other are beyond cruel," said Parry Aftab, founder of StopCyberbullying.org in Newark, N.J. "Kids actually get together in groups and decide which phrases would be the most hurtful to their intended victim. I've seen everything from 'You're sleeping with your sister' to 'Your mom wanted to abort you' and of course, 'You're fat, ugly, stupid, etc.' "
Kirby said she ended up blocking anonymous questions on her account to avoid harassment. Although many Formspring users accept anonymous questions, they have the option of blocking those when they set up their accounts. They can also block specific people or delete unwanted questions before they are made public.
Austin Keeler, 18, a recent graduate of St. Mark's School of Texas, said he is aware of the negative comments on Formspring, but he plans to continue using the site because it adds to his social networking experience.
"Obviously there are some bad things, but for the most part, it is good, addictive fun," Keeler said. "I know a lot of people who have a lot of bad things out there, but for the most part, the people who read it know those things aren't true. They are just wild accusations.
"Still, if push comes to shove, you can just delete your account." Sacchetti hopes it won't come to that for most Form-spring users. She said the company will work with law enforcement and has the ability to trace a user's IP address if comments become too threatening or if a legal issue arises.
"We also have stricter policies for 13- to 17-year-olds," Sacchetti said. "For them, we have more private logins and settings for anonymity, where only logged-in users can ask anonymous questions."
Teenagers' Formspring accounts are automatically given "protected" status, which prevents them from being viewed or found by search engines. And, Sacchetti said, youngsters must grant access to users they want to share content with.
But any teenager can override those restrictions by selecting other readily available profile settings - and many often do.
The cyberbullying problem - and how to rectify it - may not be limited to young people, though. Anne Collier, co-director of ConnectSafely.org, said that while schools can play a large part in educating children about Internet safety, parents have a more significant role.
"We can't blame it all on children," said Collier, whose Web-based forum studies the impact of social websites. "If we as adults slander each other openly, it is learned behavior. This is a community effort. We have to be role models for our children."
Andrea Lair-Kirby, Elizabeth's mother, agreed and added that parents should know as much as possible about how their children are using the Internet and how that use is affecting them.
"Talk to your child and make them understand what they are doing," Lair-Kirby said. "Parents are often thinking, 'Well, not my child,' thinking it won't happen to them or that their kids aren't doing it. But they need to know it can happen and how to deal with it by talking to your child."
Today's superhero is too much like an action hero who participates in non-stop violence; he's aggressive, sarcastic and rarely speaks to the virtue of doing good for humanity”
End QuoteProfessor Sharon LambStudy leader
With her team at the University of Massachusetts, she then analysed the types of male role models the boys were exposed to.
It showed two main types of man - the aggressive superhero or the slacker who does not even try. "There is a big difference in the movie superhero of today and the comic book superhero of yesterday," said Professor Lamb.
"Today's superhero is too much like an action hero who participates in non-stop violence; he's aggressive, sarcastic and rarely speaks to the virtue of doing good for humanity.
"When not in superhero costume, these men exploit women, flaunt bling and convey their manhood with high-powered guns."
Boys could look up to and learn from comic book heroes of the past because outside of their costumes, they were "real people with real problems and many vulnerabilities".
She said the other option for boys was to be a slacker. "Slackers are funny, but slackers are not what boys should strive to be; slackers don't like school and they shirk responsibility.
"We wonder if the messages boys get about saving face through glorified slacking could be affecting their performance in school."
In a second presentation, Dr Carlos Santos, from Arizona State University, examined 426 middle school boys' ability to resist being emotionally stoic, autonomous and physically tough - stereotyped images of masculinity.
He found that being able to resist macho images - especially aggression and autonomy - declines as boys transition into adolescence and this decline puts their mental health at risk.
"Helping boys resist these behaviours early on seems to be a critical step toward improving their health and the quality of their social relationships."
The U.S. nuclear-powered aircraft carrier USS George Washington leaves for joint naval and air drills with South Korea at a naval port in Busan, South Korea, July 25, 2010. South Korea and the United States on Sunday began their large-scale joint military drills off the east coast of the Korean Peninsula as scheduled. (Xinhua/Yonhap)
BEIJING, Aug. 14 (Xinhua) -- Recent and planned dangerous moves of the United States in Northeast and Southeast Asia are manifestation of Washington's Cold War mentality and pose a threat to the security of China and the whole region, said the Globe magazine in a commentary.
The United States and South Korea has recently held military exercises in the Sea of Japan. The Pentagon announced that the two countries will also hold new war games in the Sea of Japan and the Yellow Sea. Furthermore, Washington has also indicated that it will stick its nose into the South China Sea, claiming that territorial disputes in the region has a bearing on U.S. national interests.
The U.S.-South Korean joint exercises at the end of July were no ordinary war games, said the signed article by Ju Wen. They were unprecedented in the past three decades both in terms of scale and weaponry. The resources involved were said to be enough for launching a full-scale war, it said.
With the participation of 8,000 troops, the games involved aircraft carrier USS George Washington and some other 20 warships as well as about 200 aircraft, including cutting-edge F-22 fighters.
The U.S. sabre-rattling raised the ire and drew protests from countries in the region. But Washington refused to change course and seemed determined to even expand the scope of its war games in Asian waters, said the magazine.
Pentagon said last week that U.S. and South Korean militaries were planning a new series of exercises, to be conducted in the Sea of Japan and the Yellow Sea simultaneously in following weeks. Moreover, the Pentagon said there would be more joint exercises that could last months.
While flexing muscles in the waters of Northeast Asia, Washington also showed a growing interest in the South China Sea and tried to come between China and her neighbors, said the magazine.
In a July speech in Hanoi, U.S. Secretary of State Hillary Clinton claimed the United States takes as a "national interest" in resolving South China Sea disputes.
She also told Vietnamese leaders that Washington hopes to upgrade its ties with Hanoi to a new level and sees its relationship with Vietnam "part of strategy aimed at enhancing American engagement in Asia and in particular Southeast Asia."
The United States proposed a nuclear cooperation deal with Vietnam and most recently, conducted controversial joint naval training exercises in the South China Sea, involving USS John S. McCain and USS George Washington.
Washington said its recent military maneuvers in Asian waters were for peaceful purposes. But that contradicts the facts, said the magazine.
The U.S.-South Korean war games were said to be aimed at preventing a repeat of incidents like the sinking of South Korea's Cheonan warship and maintaining peace of the Korean Peninsula. However, the war games were more than enough to intimidate the Democratic People's Republic of Korea, said the magazine. They were actually a show of force against China, it said.
USS George Washington, which is said to be involved in the upcoming war games in the Yellow Sea, has a reconnaissance range that covers the entire North China region, thus posing a direct military threat to China, said the magazine.
The real intention of the U.S. maneuvers in the waters of Northeast Asia, the commentary said, is to consolidate the U.S.-South Korea and U.S.-Japan military alliance and boost U.S. military presence in the region, and therefore intimidate and contain China.
Washington's intention to contain China becomes clearer as it tries to interfere in the South China Sea disputes and strengthen its military presence in Southeast Asia, said the magazine.
To a larger extent, the U.S. moves reflect the Obama administration's ambition to return to Asia to seek dominance of regional affairs.
Barack Obama claimed in Tokyo last year that he was the first U.S. president with an "Asia-Pacific orientation." Clinton said in Hawaii early this year that the future of America is closely linked to that of the Asia Pacific and that the future of the Asia Pacific depends on the United States.
Unfortunately, Washington's desire to return to Asia does not mean that it will bring in investments or technology, which is much needed to promote the region's prosperity. Instead, the objective is to reinforce its dominance in the Asia Pacific, said the magazine.
In addition to more troops in Afghanistan, the U.S. military is transforming Guam into its new strategic strike center that could cover large areas of the Asia Pacific. It redeployed 60 percent of its nuclear submarine fleet to the Pacific and has been consolidating its bases in Japan, South Korea and the Philippines. The recent war games demonstrated an intention to expand the sphere of U.S. military influence into the Yellow Sea and the South China Sea, said the magazine.
Although war games are not actual wars, the clattering of U.S. war machine in Asian waters remind people in the region of the notorious "gunboat policy" of Western powers in the colonial era.
The unpleasant noise naturally leads to regional tension and risks military confrontation, said the magazine. In today's world, whose theme is multipolarization, globalization and common development, no country or region can succeed in seeking global dominance through military power. The Iraq and Afghan wars serve as good examples, it said.
Both the United States and China are important countries in the world. They are tasked to safeguard world peace. Peaceful coexistence, mutual benefit and common prosperity are therefore the only choice for the two countries and peoples, said the magazine.
China lags far behind the United States in terms of overall economic and military powers, and has neither the intention nor capability to threaten the United States, it said.
Instead of posing any threat, China's rapid development is benefitting the United States. China's growing economic strength has helped the United States recover from the latest financial crisis.
Washington should discard its Cold War mentality and gunboat policy, and return peace to the Sea of Japan, the Yellow Sea and the South China Sea, said the magazine.
Union members hold up "I want to work" placards as they join a protest of several thousand people demanding jobs outside City Hall in Los Angeles on August 13, 2010. Photograph: Mark Ralston/AFP/Getty Images
Richard Gaines is one of the best-known faces on Camden's Haddon Avenue. It is a rough-and-tumble street, lined with cheap businesses and boarded-up houses, and is prey to drug gangs. Gaines, 50, runs a barbershop, a hair salon and a fitness business. He works hard and is committed to his community. But Haddon Avenue is not an easy place to make a living in the best of times. And these are far from the best of times.
Just how badly the great recession has struck this fragile New Jersey city, which is currently the poorest in America, was recently spelled out to Gaines. In happier times – whatever that might mean for a city as destitute as Camden – local businesses on Haddon Avenue could at least rely on a bit of trade from those who made their money on the street.
Young men bought flashy clothes and got sharp haircuts and always paid in cash. But no longer. The economy is now so bad in Camden that even the criminals are struggling and going short. "Even the guys who got money from illegal means really don't want to spend it," Gaines said.
Such a development, though, is just a snapshot of the deep problems still hitting the wider American economy. Growth rates are stuttering and a recovery is struggling to take hold. It may even now be showing signs of going backwards again, as countries such as Germany start to power forward. Joblessness has taken hold in America, with the numbers of long-term unemployed reaching levels not seen since the Depression of the 1930s. The figures are frightening and illustrate a society that remains in deep trouble.
The headline jobless figure of 9.5% is bad enough but does not begin to convey the problem as it fails to measure those who have stopped looking for work. Over the past three months alone more than a million Americans have fallen into that category: effectively giving up hope of finding a job and dropping out of the official statistics. Such cases now number some 5.9 million and their ranks are likely to grow as millions more find their jobless status becoming a permanent state of hopelessness. Surveys show that with each passing week on the dole their chances of finding a job get slimmer.
Though corporations, especially in the banking sector, are posting healthy profits, they are not hiring new workers. At the same time, government cuts are sweeping through city and state governments alike, threatening tens of thousands of jobs and slicing away at services once thought vital. Schools, street lighting, libraries, refuse collection, the police, fire services and public transport networks are all being scaled back.
America appears to be a society splitting down the centre, shattering the middle class that long formed the cultural bedrock of the country and dividing it into a country of haves and have-nots. "A once unthinkable level of economic distress is in the process of becoming the new normal," warned Nobel-prize winning economist Paul Krugman in a recent New York Times column. Or, as Steven Green, an economics lecturer at Baylor University, put it to the Observer: "We are really in a tough spot right now."
There is a new name for those falling down the black hole of joblessness that has opened up in America's economy. They are the 99ers.
It is a moniker that no one wants. It refers to the 99 weeks of benefits that the jobless can qualify for in America. Government cash helps those laid off keep a tenuous grip on a normal life. It keeps a roof over their heads, pays a phone bill, puts food on a table and petrol in a car. But once the 99 weeks are up the payments stop – as is happening now for millions of people – and they are 99ers.
For many, that moment, which America's politicians have refused to extend, represents the moment of destitution; a sort of modern American version of the old Victorian trip to the workhouse. There are now more than a million 99ers and the number gets bigger each week.
But who are they? Despite Republican attempts to paint them as feckless or job-shy, they are usually anything but. The 99ers are people like Anne Strauss, 58, who spent 35 years working as a PR professional on Long Island. Despite spending every day hunting for work, she has not had a job since June 2008. She and her husband are now living on credit cards watching debts mount as they stare into the abyss. "Looking for a job is the hardest I have ever worked," she said with a smile that conveyed no humour or happiness, only the deep stress that is common to many 99ers.
Strauss, along with about 50 other 99ers, protested on Wall Street last week, demanding an extension of the benefits that could keep them out of poverty. As bankers and financiers strode into the flag-draped Stock Exchange they chanted: "Shame! Shame!" and told their stories. It was a litany of middle-class lives shattered by the recession. There was Connie Kaplan, a corporate librarian who was desperate to resume her career. "We are not bums, we are hardworking," she said. Or Lori Ghavami, a New Jersey financial analyst in her 30s, who had once worked on Wall Street itself and now was staring at landlords' bills she was scared she could not pay. Or New Yorker Steven Bilarbi, 62, who had worked for the same employer for 37 years, until 2007. He has not worked since, despite refusing to spend daytime hours at home and engaging in a permanent job hunt. He is now living off savings and depleting his pension.
"I go to job fairs. I don't feel like staying home. What would I do? Watch game shows and soap operas?" he fumed.
Meeting 99ers is to tap into a deep well of anger at lives that have been knocked off course, shattering the enduring vision of the American dream that many had felt they had achieved. Just take Donna Faiella, a 53-year-old New Yorker who lives alone in Queens. She spent 28 years working in film post-production and video-editing. She was successful and had a career. Now she is desperate for a job, any job. But she cannot find one. "I will do anything. I will sweep floors. You think I look forward to collecting unemployment? It is fucking degrading," she said, almost quivering with anger.
Faiella is in dire trouble. Joblessness has eaten away at her sense of identity. "I feel like we are worthless. We are lost in the world. I don't know what to call myself. I don't have a title any more. What do we do? What do we do?" she implored. Faiella has one week of benefits to go. Then her 99 weeks will be up. She will have a title again. But not one she expected. She will be a 99er. "I am petrified. Do I become homeless?" she said, adding that she has begun making inquiries at local shelters.
If the 99ers are coming to symbolise a human segment of society that America is slowly abandoning to its fate, then Camden is the geographic expression of that marginalisation. Large stretches of the once bustling river port city seem to epitomise urban blight. Vacant lots and burned-out abandoned houses line many of its streets.
Its 79,000 residents have the lowest median household annual income of any city in the US at just $24,000 (£15,000). In terms of crime rates it was the nation's second-most dangerous city last year. Some estimates reckon that about a third of Camden's houses are empty. A third of its people are in poverty and a fifth are unemployed.
It is a deeply grim picture and it is getting worse. Camden's city government is facing the prospect of massive cuts as its cash-strapped resources have run out and it has built up huge debts. Services have already been cut and only a last-minute rescue last week saved Camden's three public libraries from being closed.
In a city that has had it tough for decades these are hammer blows to its residents. One woman who has watched in dismay as the recession unfolded outside her door is Dorothy Allen, 81, who has lived near Haddon Avenue for almost four decades. Known by almost everyone as "Mom", she calls herself "the mother of the block". She has never known anything like the area's current troubles. "I have been here since 1971 and it's the worst it's ever been," she said. Yet to listen to America's politicians many would think recovery is just a matter of time. Yes, they say, the recession has been hard, but America will pull through and everything will be as it once was. Last week New Jersey senator Robert Menendez visited Camden, stopping at a local health clinic. He spoke of the achievements of the Democrats in staving off economic disaster.
Job creation was coming, he told his audience of health executives: "It is not going fast enough to get people back to work but it's a dramatic turnaround." It does not feel that way for millions of Americans all across the country. Camden is far from unique in slashing its services. In Colorado Springs more than a third of street lights have been switched off to cut the municipal electricity bill. The city has also sold off its police helicopters.
In Hawaii schoolchildren were told to stay at home for 17 Fridays to save costs. In a suburb of Atlanta local bus routes were closed, at a stroke wiping out public transport for thousands of people who relied on it to get to precious jobs.
Whether it's the poor of Camden or Colorado Springs or Atlanta, or among the growing throngs of the 99ers, millions of Americans are discovering that working hard, doing the right thing and obeying the rules are no longer enough.
Back at the 99er rally on Wall Street, Anne Strauss felt that way. During her working life she had refused to claim benefits to which she was entitled as she thought she was doing just fine. Now, as a newly minted 99er, she was looking for help from the country that she had always believed in. But the help was not forthcoming. It is hard to see how the version of the American dream that Menendez described could now ever apply to her. For Strauss, living on credit, desperate to work, but with no job in sight, that dream looks a thing of the past, not the future. "This is not the country I grew up in," Strauss said.
Case study: 'This is my last $260 and barring a miracle I'll be sleeping in my car'
Alexandra Jarrin, 49, worked for a small technology company near New York City, earned $56,000 a year, had petrol in her car and a roof over her head. She was enrolled in a graduate business school. Then, two years ago, she lost her job .
She received her last unemployment payment in March, putting her among the first wave of "99ers" who have come to the end of their 99 weeks of entitlement to benefits. When interviewed by the New York Times, she was living in a motel in Brattleboro, Vermont, having paid $260 she managed to scrape together from friends and from selling her living-room furniture – enough for a week-long stay.
She said she wept as she left her old life. 'I thought, you know, what if I turned the wheel in my car and wrecked my car?' Her vehicle is now on the verge of being repossessed. Jarrin has contacted her local shelter, but was told there was a waiting list. "Barring a miracle, I'm going to be [sleeping] in my car," she said.
Ten years ago, one of America’s leading economists delivered a stinging critique of the Bank of Japan, Japan’s equivalent of the Federal Reserve, titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” With only a few changes in wording, the critique applies to the Fed today.
Paul Krugman
At the time, the Bank of Japan faced a situation broadly similar to that facing the Fed now. The economy was deeply depressed and showed few signs of improvement, and one might have expected the bank to take forceful action. But short-term interest rates — the usual tool of monetary policy — were near zero and could go no lower. And the Bank of Japan used that fact as an excuse to do no more.
That was malfeasance, declared the eminent U.S. economist: “Far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.” He rebuked officials hiding “behind minor institutional or technical difficulties in order to avoid taking action.”
Who was that tough-talking economist? Ben Bernanke, now the chairman of the Federal Reserve. So why is the Bernanke Fed being just as passive now as the Bank of Japan was a decade ago?
Now, America’s current economic troubles aren’t exactly identical to those of Japan in 1999-2000: Japan was experiencing outright deflation, while we aren’t — yet. But inflation is well below the Fed’s target of around 2 percent, and it is continuing to slide. And Americans face a level of unemployment, and sheer human misery, far worse than anything Japan went through.
Yet the Fed is doing almost nothing to confront these troubles.
What could the Fed be doing? Back when, Mr. Bernanke suggested, among other things, that the Bank of Japan could get traction by buying large quantities of “nonstandard” assets — that is, assets other than the short-term government debt central banks normally hold. The Fed actually put that idea into practice during the most acute phase of the financial crisis, acquiring, in particular, large amounts of mortgage-backed securities. However, it stopped those purchases in March.
Since then, the economic news has grown steadily worse. And earlier this week, the Fed changed course — but barely. It now says that it will reinvest the proceeds from maturing securities in long-term government bonds. That’s a trivial change, basically the least the Fed could get away with without facing a firestorm of criticism — and far short of the major asset-purchase program the Fed should be undertaking.
Back in 2000, Mr. Bernanke also suggested that the Bank of Japan could move expectations by making announcements about its future policies. In particular, he argued that it could make private-sector borrowing more attractive by announcing that it would keep interest rates low until deflation had given way to 3 percent or 4 percent inflation — an idea originally suggested by yours truly. Since we are, if anything, in worse shape now than Japan was in 2000, an inflation target of at least 3 percent would very much be in America’s interest. But as chairman of the Fed, Mr. Bernanke has explicitly rejected any such move.
What’s going on here? Has Mr. Bernanke been intellectually assimilated by the Fed Borg? I prefer to believe that he’s being political, unwilling to engage in open confrontation with other Fed officials — especially those regional Fed presidents who fear inflation, even with deflation the clear and present danger, and are evidently unmoved by the plight of the unemployed.
And in fairness to Mr. Bernanke, discord among senior officials also makes it difficult for policy to change expectations: it would be hard to credibly commit to higher inflation if this commitment were constantly being undercut by speeches out of the Richmond or Dallas Feds. In fact, I’d argue that loose talk by some Fed officials is already having a negative economic impact. But while Mr. Bernanke doesn’t have the authority to stop that loose talk, he could make it clear that it doesn’t represent overall Fed policy.
Last, but not least, policy is suffering from an act of neglect by President Obama, who waited until his 16th month in office before offering a full slate of nominees to fill vacancies on the Federal Reserve Board. If he had filled those slots quickly — his nominees still aren’t in place — the Fed might be less passive.
But whatever the reasons, the fact is that the Fed — which is required by statute to promote “maximum employment” — isn’t doing its job. Instead, like the rest of Washington, it’s inventing reasons to dither in the face of mass unemployment. And while the Fed sits there in its self-inflicted paralysis, millions of Americans are losing their jobs, their homes and their hopes for the future.
