Of course, that investment was the Downtown Specific Plan. Yet somehow things didn't quite work out as planned. And ever since that special moment in time there has been a small group of very anxious, and rather resentful, people who have had half a decade to dream of getting their money back.
Five years ago things were decidedly different, of course. The American banking system had obviously lost its collective mind and was lending vast sums of money for even less than it took to get it. The subprime mortgage mess being something the world has yet to get over, and might not for quite some time. And in its wake it left behind millions of foreclosures, vast seas of unsold condos and store fronts, and trillions upon trillions of dollars in serious new debt for the always generous Uncle Sugar.
But that was then. Now the Downtown Investors Club is back in power here in Sierra Madre. Their handpicked councilmembers are behaving as expected and pushing all the right buttons. The DIC waited a long while for this moment, and the time has come for them to reclaim the opportunities that were so unceremoniously ripped from their hands 5 years back. There is no way that they will fail to achieve the promise of investments made back then.
Except that there is this one little problem. It is no longer 2005, banks are no longer throwing their money at any fool with a blueprint and a lot, and even if they did who would be able to buy the resulting condos if somehow they were actually financed and built? You really couldn't find a worse time to try and make money out of the kinds of high-density downtown development so popular with our local investors half a decade ago.
This week the respected financial analyst John P. Hussman issued a Recession Warning. Now many folks who get their news from the popular sources might be thinking that this seems counterintuitive. Most believing that we were in a recession, and that we're now coming out of it. And that could very well be the case. But have you ever heard of the term double dip recession? Here is how they're reporting this story on Forbes.com:
Hussman Sounds Recession Bell - John Hussman, fund manager of Hussman Strategic Total Return (HSTRX) and Hussman Strategic Growth (HSGFX), is amping up his recession warnings, saying that, "based on evidence that has always and only been observed during or immediately prior to U.S. recessions, the U.S. economy appears headed into a second leg of an unusually challenging downturn"
Hussman recently noted that of the four pieces of his recession indicator, the only one not yet signalling a recession was the ISM Purchasing Managers Index, which needs to fall to 54 or lower. The most recent reading, from May, was well above that, at 59.7. But now, Hussman notes in his latest market commentary that the ECRI Weekly Leading Index, which has been a leading indicator for the ISM Index, has declined to -6.9%, a bad sign.
Now as bad and disheartening as that might sound, there is another report making the rounds this week. And this one is far worse.
Paul Krugman, Nobel Prize winning economist and New York Times columnist, declared in his June 27 column that the country is heading into what he fears might actually be a full blown depression.
The Third Depression - Recessions are common; depressions are rare. As far as I can tell, there were only two eras in economic history that were widely described as "depressions" at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.
Neither the long Depression of the 19th century nor the Great Depression of the 2oth was an era of nonstop decline - on the contrary, both included periods when the economy grew. But these episodes of improvement were never enough to undo the damage from the initial slump, and were followed by relapses.
We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost - to the world economy and, above all, to the millions of lives blighted by the absence of jobs - will nonetheless be immense.
Some pretty sobering stuff.
So as our recently reorganized City Council works hard to bring the development dreams of the Downtown Investors Club to fruition, can it be this is really all in vain? That the worsening state of our economy precludes the kinds of things they might wish to do here? And all of the arrangements being made to benefit their invested supporters and patrons will never make it past the planning stage? Are they piping paper water to paper condos?
Can it be that all they're doing is rearranging the deck chairs on the Downtown Investment Club's Titanic?