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FROM THE EDITOR

The economy: Local 'bottom' hit, in November…?

This recession is getting a bit tedious. Enough, already.

We ourselves ran an Oregon media business in the 1980's, and until now we have been saying that, in our opinion, the 1981-84 recession was worse than this one has been, here in Oregon. We still think so, but it's getting close to parity now.

Nonetheless, in November we saw some hopeful indications that things are starting to turn up here.

One of them was that although Oregon unemployment stayed about the same in total, there actually was an upturn in business hiring - balanced in the statistics by an increase in governmental layoffs.

Businesses are cautious about hiring until they see the light at the end of the tunnel, since a new worker costs money that may not immediately be returned in increased business. When businesses start hiring, they believe things are getting better, and they will need the extra help.

Government, though, looks at tax receipts - a TRAILING indicator - and when those get bad enough, they cut costs. In the economic world it is a recognized fact that when there is 'capitulation' - when those who have been holding out 'just a bit longer' finally give up, that's the bottom and the recovery has begun. That may be happening now in government.

We have also seen a spike in 'capitulation' in the business community lately - established businesses suddenly throwing in the towel. There was quite a bit of that, here, in October and November. Nonetheless, new businesses do continue to open.

So, to us, the tea leaves favor the idea that we have just about hit bottom in this recession, and recovery - very slow recovery - may have already begun in this city, this state, and this nation.

But wait…

Unfortunately, there is a joker in this deck. It has to do with what is happening with the Euro, the European common currency, across the Atlantic.

You've certainly heard enough about that - Greece, close to bankruptcy; Italy in real trouble - and it may seem all quite distant. It is, after all, half a world away.

The problem is, if Europe spirals back into recession, we may wind up being sucked back down into it ourselves. Thus, we earnestly hope that the Euro community gets its act together very well and very soon.

It began years ago, when these nations in Western Europe decided that what they needed to realize the kind of success the United States has had is to have what we have - a strong common currency.

What they were overlooking - all except Great Britain, which now looks brilliant for stubbornly hanging on to the Pound Sterling - is that while in the United States we have 50 sovereign states that use the dollar as their common currency, none of our states has the power to print any dollars - or to run up a deficit in dollars. Every state is required to have a balanced budget, and as we've recently watched in California, if a state manages to run up a huge debt, they have to find a way of balancing their budget with cuts and more taxes.

In Europe, these nations agreed to have a common currency, and to accept Euros as payment from anyone who had any Euros in any of these countries. As in the U.S., where the dollar in your pocket can be spent in any state in the Union.

But, these European countries are still sovereign in a way our states haven't been since the Constitution was ratified. For one thing, they are separate nations, and they can still run up debt and a deficit. The deficit is denominated in Euros, the currency they accept.

If a country is running a big debt, the money they borrow to make payments on it carries high interest rates, to reward lenders for taking a real risk they won't be repaid. Greece and now Italy have seen their bond interest rates skyrocket lately for this reason - and these much-higher interest rates make it increasingly unlikely these countries will ever be able to pay back both their debt plus this swelling interest.

So, the tussle in Europe is how to keep these and other countries (Ireland has already been in this crisis) afloat, and away from bankruptcy, without devaluing the Euro for all participating countries - including the prudent ones, without big debt - and thereby throwing all of Europe into an inflationary spiral. At the moment, it is hard to see how they can prevent it.

Next time, if nations band together for a common currency, perhaps they will adopt the American model - and although these countries would remain sovereign states, they would have to be subject to a constitutional central government and would be required to balance their books every year.

If anything good comes from this mess in Europe - particularly if it gets as messy as it could - it might be that the United States with its relatively stable dollar may, despite its own debt level, constitute a better 'safe haven' for investors around the world than anyplace else, and investment may flow here.

In the meantime, things seem to be looking up a bit right here, and THE BEE hopes they keep doing that.