Getting Back to Reality

The extraordinary increase (as a percentage move) in the 10 Year T Note yield shows the artificiality and the fragility of market values, everything being propped up by the Federal Reserve in the absence of any sound fiscal policy.  The recent Fed minutes merely hinted at the possibility of reducing asset purchases before the end of this year, and bond investors were left without their bungee cord:

Bill Gross, the "bond king," persuasively writes about the problem in his January letter, a long discourse on why "helicopter money" rained down by the Fed to save the financial system has to end badly in some way.

The artificiality of it all hasn't escaped the notice of corporations, many of which have loaded up their balance sheets with cheap debt, while holding mounds of cash, even to the point of paying massive dividends to their shareholders with borrowed funds.  The poster child for this is Costco which paid its shareholders $3 billion and borrowing the funds to do it.  Of course that was before the laughable fiscal cliff deal, which raised taxes on dividends to 20% from its present 15% but only for high income taxpayers.  They were talking about taxing dividends as regular income which must have freaked out the five largest shareholders who are corporate officers or directors, their take on the special dividend with borrowed funds being almost $12 million.  What a country! Borrow the money to pay your top people a huge bonus that is taxed at only 15%.  It truly is the microcosm for the contrived and completely unpredictable financial landscape of today.

A few days ago Barry Ritholz suggested a positive way of using today's manipulated market -- that is to upgrade and repair our aging infrastructure. Many of our roads are atrociously maintained and bridges are crumbling, not to mention aging water systems, power plants, and a railroad transportation system which is truly 3rd world quality.  As Ritholz says: At some point in the future, your kids are going to ask — “Wait, you could have upgraded _______ and it only would have cost you 2.5% in borrowing costs?!?”

 
Isn't that where we should be putting borrowed money to work, creating jobs?

The Alternative Reality

It's easy to be cynical in this presidential election year, the rhetoric and posturing of the scripted, agnotological "debates," the Super PAC ads, the robo-calls, the deluge of direct mail, sending out those sound bites to "the undecided."  But what would this election cycle be like if McCain had won in 2008?  Ironically, it would have been the Democrats finger pointing about the economy because we'd probably be in a similar situation, or worse, who knows -- it's impossible to prove an alternative reality, but we can speculate.

The debt Romney carps about was first ramped up by the Treasury Department of the previous administration, not by Obama, with the enactment of the Troubled Asset Relief Program (TARP) in 2008 to stabilize the financial system and it was quite necessary at the time.  Jobs were falling off the cliff before Obama took office. Our financial system was in melt down.  And what would have been a McCain administration response as that crisis just continued to deepen?  Go into an austerity spending mode?  Cut taxes?  No, that would have been impossible.  The time for government to reign in its spending is when the economy is NOT falling off the cliff and even a Republican administration would have had to take similar action (and the Federal Reserve's Ben Bernanke was an appointee of the Republican administration as well).

Reviewing some of the more distant past, Clinton enacted tax increases in 1994, mostly on high income earners. Eventually, those, as well as a booming economy (note, no loss of jobs due to raising taxes on the upper 1%), turned around President George Bush Sr.'s deficits into surpluses. After three consecutive years of national debt reduction under Clinton, the surplus in 2000 amounted to $230 billion. 

The first fiscal year impacted by George W. Bush's tax cuts was 2002 when the surplus swung to a $159 billion deficit, a $286 billion negative change from the previous year.  True, we were now embroiled in the war on terror, but the administration persisted on raising the stakes with tax cuts.  Bush said while campaigning for a local Alabama congressman. “In order to make sure that our economy grows, in order to make sure the job base is strong, you need to have a congressman who will join me in making sure that tax relief plan we passed is permanent and doesn’t go away.”  Where were the jobs after nine years of this "temporary" but massive tax cut, mostly benefiting the upper 1%?

When Paul O'Neill, Bush's Treasury Secretary, argued against a second round of tax cuts, VP Cheney purportedly said "You know, Paul, Reagan proved that deficits don't matter. We won the mid-term elections, this is our due."   This was Cheney speaking, not some liberal Democrat. O'Neill said in an interview "It was not just about not wanting the tax cut. It was about how to use the nation's resources to improve the condition of our society. And I thought the weight of working on Social Security and fundamental tax reform was a lot more important than a tax reduction."  For that view, O'Neill was eventually fired.

Obama clearly underestimated how long it would take to reverse years of deficit spending, not only his administration's (necessary as the private sector was not spending), but his predecessor's as well. (He also didn't anticipate being stonewalled by Congress.)   But if McCain had defeated Obama in 2008, he would have inherited the same mess and today we might have Hillary Clinton running against McCain (or Palin or Romney) making some of the same arguments about fiscal responsibility being spun by Romney. 

As I said, it is hard not to be cynical about this particular election, but I respect Paul O'Neill's admonishment:  "It was not just about not wanting the tax cut. It was about how to use the nation's resources to improve the condition of our society." That is why I support President Obama and hopefully in a second term he would have Congress' cooperation to achieve some fundamental tax reform and make inroads in controlling the growth of entitlements. 

And last night, as I was preparing to post this, a bit of serendipity led me to watch the 1957 classic A Face in the Crowd on Turner Classic Movies. Directed by Elia Kazan and written by Budd Schulberg, it depicts Larry Rhodes (Andy Griffith), a drifter who is found in a jail by Marcia Jeffries (Patricia Neal), who she enlists to sing and talk on a local Arkansas radio station, he ultimately rising to the pinnacle of media demagoguery.  He is nicknamed "Lonesome" Rhodes by Marcia, and she goes on the journey with him from obscurity to fame to fall.  

The relevancy of this film, made more than fifty years ago, to today is striking.  Lonesome is drawn into the political arena, and is brought in to help transform the film's Senator Worthington Fuller into a Presidential candidate.  Lonesome instinctively and sardonically understands the manipulative power of language and media. 

When he first meets the Senator, he advises him to abandon his stiff personality and give himself over to Lonesome's control:  "...Your problem is getting the voters to listen to you. Getting them to like you enough to listen to you. We've got to face it, politics have entered a new stage, television. Instead of long-winded debates, the people want slogans. 'Time for a change' 'The mess in Washington' 'More bang for a buck'. Punch-lines and glamour....We've got to find  a  million buyers for the product 'Worthington Fuller'....Respect? Did you ever hear of anyone buying any product beer, hair rinse, tissue, because they respect it? You've got to be loved, man. Loved....Senator, I'm a professional. I look at the image on that screen same as at a performer on my show. And I have to say...you'll never get over to my audience not to the millions of people who welcome me into their living rooms each week. And if I wouldn't buy him, do you realize what that means? If I wouldn't buy him, the people of this country aren't ready to buy him for that big job on Pennsylvania Avenue....I'm an influence, a wielder of opinion...a force. A force."

To Marcia he says :"This whole country's just like my flock of sheep!....Rednecks, crackers, hillbillies, hausfraus, shut-ins, pea-pickers - everybody that's got to jump when somebody else blows the whistle. They don't know it yet, but they're all gonna be 'Fighters for Fuller'. They're mine! I own 'em! They think like I do. Only they're even more stupid than I am, so I gotta think for 'em. Marcia, you just wait and see. I'm gonna be the power behind the president - and you'll be the power behind me."

An actor on Rhodes' show asks him about Senator Fuller: "You really sell that stiff as a man among men?" Lonesome Rhodes replies: "Those morons out there? Shucks, I could take chicken fertilizer and sell it to them as caviar. I could make them eat dog food and think it was steak. Sure, I got 'em like this... You know what the public's like? A cage of Guinea Pigs. Good Night you stupid idiots. Good Night, you miserable slobs. They're a lot of trained seals. I toss them a dead fish and they'll flap their flippers."

'Nuff said before next Monday's "debate" after which the "undecided" can flap their flippers.

Anecdotal Headlines Redux

One of the advantages of writing a blog is to be able to understand what I was thinking (or not thinking) at a certain point in time.  It can be satisfying, or amusing, or downright embarrassing looking back. We are all adrift in an ocean of information, the seas fomenting more than ever, that affecting our perception of the horizon, when we can see it at all.  Sometimes, the headlines of the Wall Street Journal seem to cry out a general national Zeitgeist and this weekend's edition was such a moment.  I've noted this phenomenon before, first on Wednesday, December 10, 2008, Anecdotal Headline Annotations, which I prefaced with a sentence that could exactly apply to the most recent edition, three and a half years later: If I was handed a copy of today’s Wall Street Journal only a couple of years ago, I would have thought the headlines were a forecast of an ethical and economic Armageddon. How otherwise does one interpret the following captions, from just one day’s newspaper?  

 

Then, a little more than two years ago, Friday, April 9, 2010, I posted another such moment, Anecdotal Headlines, writing at the time: ...while the Dow basks in the glow of massive liquidity injections in a low interest rate environment, approaching 11,000 as I write this, and investment bankers are rewarding themselves with record bonuses, the economy swims on against the tide of high unemployment (much higher than reported), kicking the state/municipal finance crisis down the road, and rising foreclosures

Usually, extreme headlines happen at inflection points.  Certainly the Dec. 2008 posting was one as far as the stock market is concerned (the Dow bottoming three months later), but the April 2010 posting was during the market's ascent. However, the so called "market" seems to be disconnected from the economy and jobs and whatever recovery there has been of Main Street mostly has been induced by the Federal Reserve and other government stimuli.  Some like to finger point, believing that recent deficit spending is the cause of our economic malaise.  I don't like deficit spending any more than they, but it is overly simplistic to think that if we ran our government like a responsible family, sitting around the ole' kitchen table, budgeting our expenses, tightening our belts, all will be OK.  Running a country is not like running a household, and without the stimulus, who knows where we would be today. 

We are going to hear a lot about the economy, everything being Obama's fault (note now that gas prices have fallen in the last few weeks we no longer hear about his being responsible for those) but another benefit (there are not many) of writing this blog is some of the documentation it provides. The Monday, September 22, 2008 entry, This Fundamental is Whining  is worth revisiting in this regard. Senator Phil Gramm, who had then become a lead economic adviser for McCain’s presidential run, called us (the American public) "a bunch of whiners," saying the only economic problem we have is a "mental recession."  Well we now know that this little "mental recession" was real, could have been a depression (who knows, it still might become one), and it was set in motion long before Obama took office.  Nonetheless, at the time McCain was already blaming Obama for the economy, saying “We've heard a lot of words from Senator Obama over the course of this campaign…But maybe just this once he could spare us the lectures, and admit to his own poor judgment in contributing to these problems. The crisis on Wall Street started in the Washington culture of lobbying and influence peddling, and he was right square in the middle of it."  Obama was to blame even before he became president!  And today, we not only have the residual effects of our own economic problems baked into the cake, there is also the exogenous factor of Europe's slow-motion economic collapse -- something we have no direct ability to control, even if we could agree on anything.  Then, there is the sun-setting of the Bush tax cuts, a fiscal cliff that desperately needs our malfunctioning government to agree on something. What are the chances?

Unfortunately, presidential elections do focus on how people feel at the time, and while we were feeling lousy in 2008 and "hope" was a mantra we eagerly seized, now we will be asked to "hope" some more, or rely on the magic wand of a private equity bailout specialist, Mitt Romney.  It is a nice fantasy (the magic wand), and as the Federal Reserve may be running out of its own magic bullets, the economy and the leading economic indicators will dictate the election, no matter how much tinder the Super Pacs throw on the campaign fires. 

The headlines of today are not much different in tone than those that preceded them, two years ago, and almost four years ago. Two of my favorites from 2010 are: Greek Bond Crisis Spreads and  Fed Chiefs Hint at Low Rates Possibly Into 2011.  Where is Yogi Berra when you need him? "It's deja vu all over again."  But he might have got it wrong with,  "The future ain't what it used to be."

So, how are we to divine our economic and moral future from today's headlines (presented in the order as they appear, just from the first section of the Wall Street Journal June 2/3 2012)?.....

Grim Job Report Sinks Markets

Feeble hiring by U.S. employers in May roiled markets and dimmed the already-cloudy outlook for an economy that appears to be following Europe and Asia into a slowdown

As Costs Soar, Taxpayers Target Pensions of Cops and Firefighters

Edwards Jury Saw Guilt, but Lack of Proof

State Takes Fresh Crack at Mortgages

Fannie Mae and Freddie Mac will participate in a Nevada program to cut loan balances for certain homeowners who are current on their mortgages but owe more than their houses are worth in what could be a model for other hard-hit states.

Big Scandal for Small Town

Sunland Park, N.M. sees Mayor-elect indicted amid host of lurid allegations.

Sen. Kirk Of Illinois Pushed Coin Bills

Sen. Mark Kirk of Illinois pushed for legislation authorizing a collectible coin that generated $2.5 million for an organization that had hired a firm that employed his former girlfriend to lobby for the bill, according to people involved in the matter.

Campaign's Focus Turns to Grim Data

Friday's weaker-than-expected jobs report quickly became the central focus of the presidential campaign, with President Barack Obama seeking to mitigate the political fallout and presumptive Republican nominee Mitt Romney trying to seize on the disappointing numbers.

Fed is Sure to Step Up Debate on More Stimulus

Friday's dismal jobs report is sure to sharpen a debate at the Federal Reserve about whether to take new actions to spur economic growth, but it likely doesn't settle it.

Euro-Zone Reports Deepen Gloom

Block sets record in number of Jobless as manufacturing activity falls; figures highlight widening North-South divide.

Asia Weakness Heightens Fears of Contagion

Manufacturing activity in China and across a wide swath of Asia slowed in May, heightening fears that the turmoil in Western economies is dragging down one of the few remaining engines of global growth.

Brazil Loses Steam As World Slows

Brazil grew at its slowest pace in more than two years during the first quarter as weak industrial production and a weakening global picture undermined Latin America's largest economy.

Cyprus Is Close to a Request for Bailout

Cyprus looks increasingly set to become the fourth euro-zone country to seek financial aid under Europe's temporary bailout fund, as early as this month, as it scrambles to protect its banking system from Greece's widening financial crisis that is threatening to engulf its tiny island neighbor.

Japan Gives Warning on Yen

The Japanese government went on high alert against the newly rising yen Friday, trying to scare off global investors with multiple threats of intervention in currency markets, but stopping short of direct action to drive the yen down.

The More Things Change....

Welcome to the twilight zone. When I read stories such as Microsoft possibly borrowing to increase its dividend and stock buybacks, I see it as just another sign of the American economic system gone wild. There was once a day when companies borrowed money to finance expansion for the production of goods. Now we borrow to pay shareholders or make titanic bonuses to executives. Or we finance our deficit by borrowing from China to keep the American consumer, AKA Hamster on a Wheel, buying at the local official distributor of goods made in China (and other emerging countries), Wal-Mart. But even with interest rates at all time lows, we cannot create borrowing demand in housing, or small business so unemployment remains intolerably high.

In the past I’ve written about many of the pieces of the economic conundrum we’ve created for ourselves, the problem of job creation, the local government crisis, the underfunded pension guarantees, entitlements, banking bailouts, the inflation/deflation tug of war, and in general our consumption oriented society. In fact, while everyone feels a little better as we have thrown so much $$ at the economy to keep it afloat, repair some damage to everyone’s 401Ks, the really major challenges lie ahead, and in one of the more divisive political environments as the midterm elections loom. The more things change, the more they stay the same…. Alphonse Karr
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Volcker, Stiglitz, Hussman….

Here’s some positive news from or about people who can help point us in the right direction. First there was the big news that Paul Volcker will finally take a key role in addressing economic reform, particularly with the reinstatement of some of the key features from the Glass-Steagall Act. Joseph Stiglitz touches upon that need as well as other issues in an extract from his new book, Freefall; Free Markets and the Sinking of the Global Economy in a piece entitled “Why we have to change capitalism”

We now know the true source of recent bank bonuses: “free money” profits: According to Stiglitz, “the alacrity with which all the major investment banks decided to become ‘commercial banks’ in the fall of 2008 was alarming – they saw the gifts coming from the federal government, and evidently, they believed that their risk-taking behaviour would not be much circumscribed. They now had access to the Fed window, so they could borrow at almost a zero interest rate; they knew that they were protected by a new safety net; but they could continue their high-stakes trading unabated. This should be viewed as totally unacceptable.” Also, Stiglitz puts the bailouts in the context of the bigger picture: “the failures in our financial system are emblematic of broader failures in our economic system, and the failures of our economic system reflect deeper problems in our society. We began the bailouts without a clear sense of what kind of financial system we wanted at the end, and the result has been shaped by the same political forces that got us into the mess. And yet, there was hope that change was possible. Not only possible, but necessary.” As a consequence he argues for “a new financial system that will do what human beings need a financial system to do.”

Meanwhile, the Financial Times carried an excellent piece on Paul Volcker now that he is again front-and-center, Man in the News: Paul Volcker. For too long now Volcker inexplicably had been pushed off the center stage. Last March, as the market was in complete free fall, my tongue-in-cheek piece about “the new era of the 177K” asked, “Where is Paul Volcker to lead the way back to the 401K?”. Per the Financial Times: “this week the towering former Fed chief stood by Barack Obama’s side as the president embraced what he dubbed the “Volcker rule” banning proprietary trading – over the reservations of some of his most senior economic advisers.”
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Then, John Hussman, the economist who runs his own mutual funds, and each Monday blogs about his views, published, today, a lengthy, carefully reasoned Blueprint for Financial Reform.
This is an extraordinarily detailed eight point plan/proposal and rather than giving the bullet points here, go to the link. It deserves careful consideration by our elected officials. Needless to say, he sides with Volcker. Hussman for Chairman of the Federal Reserve or bring back Volcker?
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I've argued that in addition to financial reform, the main economic focus must be job creation: “a true recovery requires jobs, jobs, jobs – and how are they going to be created – by banks trading energy futures? What happened to the commitment to the infrastructure? Our roads, utilities, and public transportation are falling apart. Alternative energy seems DOA. Aren’t these the areas our financial recourses should be focused on, ones that will create jobs, in construction, technology, and finance, and can lead a true economic recovery we can pass on with pride to future generations?”

Green shoots first, then…..

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Well Worth Noting…

Two interesting articles, one an interview with Richard Koo, a former economist with the Federal Reserve Bank of New York and now chief economist of Nomura Research Institute, which appeared in this week’s Barron’s Magazine, A Japanese Rx for the West: Keep Spending and the weekly commentary of the economist and mutual fund manager John Hussman, Timothy Geithner Meets Vladimir Lenin

Koo’s views might seem to be counterintuitive – government needs to increase deficit spending on a three to five year plan while the private sector is repairing its balance sheet. Japan failed to recognize the dangers of “a balance sheet recession” and the USA could make the same mistake. I would agree, provided spending is focused on our infrastructure or alternative energy, or on myriad other public projects that resonate in our economy, creating jobs while fixing our roads and public transportation, encouraging energy independence, reducing greenhouse gases, and improving our educational system. Such investments are aimed at Main Street, not Wall Street. I would imagine Koo would be the first to note that bailouts of irresponsible investment bankers do not constitute the kind of government borrowing he means.

Koo contends that while the private sector repairs its balance sheet, writing down debt on devalued assets, it is imperative for the Federal government to borrow because even if interest rates are zero, the public sector cannot be induced to borrow: “The only way the government can turn this economy around is to do the opposite of the private sector -- borrow the money the private sector saved and spend it, which means fiscal stimulus. That's what saved Japan from entering a Great Depression.”

In effect we can’t make businesses borrow by giving capital to the banking system which only encourages more reckless economic behavior – it has to be spent elsewhere, and what better place than our infrastructure and energy independence?

John Hussman, meanwhile, writes about the very kind of borrowing we must eschew, especially as it is being done without our elected constituency’s input: the Treasury’s recent announcement that it would provide Fannie Mae and Freddie Mac UNLIMITED financial support for the next three years, reminding us that it was Vladimir Lenin who said: “The best way to destroy the capitalist system is to debauch the currency.”

As Hussman notes, “in a single, coordinated stroke, the Treasury and the Federal Reserve have encroached on spending powers that are enumerated for the Congress alone.” And perhaps worse, “…homeowners who have been diligently making their payments will keep their homes, and homeowners who took out mortgages they couldn't afford will keep their homes as well with no adverse consequence to the lenders – since the underlying loans are now owned largely by the Fed, and the Treasury has pledged its unlimited support. Why pay one's debts if it becomes optional, and the Treasury stands to absorb unlimited losses at public expense?”

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Citigroup Raises Pay as Unemployment Rises

It is a tired old argument in the financial service sector, raising salaries “to retain the best talent.” Today the New York Times reports Citigroup Has a Plan to Fatten Salaries .

It goes on to note “industrywide, total compensation is expected to rise 20 to 30 percent this year, approximately to the levels of 2005, before the crisis, according to Johnson Associates, a compensation consulting firm.” It was during that time the instruments of financial destruction began to flourish, so why not roll back the clock to then?

Having run a business in both good times and bad times, we all benefited from the former and we all had to tighten our belts during the latter. Why should the financial services industry be except from the financial laws of gravity and why does the Board of Directors approve such policies while their shareholders suffer and their businesses take government funds? Bank of America and Morgan Stanley are also raising base salaries. Guess they too are concerned about “retaining the best talent.” All of this as unemployment rises -- where does this logic end? It almost seems like a back door form of price-fixing, as isn’t it inevitable that the expense of these coordinated salary increases find their way into the cost of financial products?

Juxtapose that to an article in the same edition of the Times: Despite Recession, High Demand for Skilled Labor. Some jobs such as registered nurses, geological engineers, and welders are going unfilled, even during the recession. These are jobs that actually produce something and are critical to our society. One might as well work in the financial services industry where compensation is immune to supply and demand.

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Slowly Letting Out the Bad News

Among all the talk of green shoots, the recession bottoming, and the hope that the spending will produce growth, a new headline from Reuters: "White House forecasts higher U.S. budget deficit.”

One gets the feeling that the Obama administration has little choice but to let this kind of bad news out slowly, hoping the market and the psyche of the country can absorb it without disrupting the tenuous nature of the recovery, particularly in the credit and stock markets. Until REAL unemployment recedes deficits will inevitably grow beyond forecasts. The recent unemployment figures include some “gains” because of recently hired government census workers and fails to count workers who have just given up or are working part-time, and does not yet include the 1.6 million college seniors graduating this year.

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Music For Our Times

Maybe it is merely a coincidence that directly or indirectly through professional musicians I recently received emails with the text of Karl Paulnack’s welcome address that was given to entering freshmen at the Boston Conservatory. Although this was made last September it is just making the rounds via email.

The timing of this address, at least the timing of it becoming well known at this particular moment in our economic malaise, is noteworthy. For the past decade we have “mortgaged” the country’s future for fast, easy gains, and government, corporate America, and consumers alike have been complicit in this unprecedented moral breakdown, perhaps similar to the roaring 20's, resulting in the depressed 30's which only WW II could rescind. Today we are left with the consequences of failing financial institutions, declining residential and commercial property, and other gathering storms, bad consumer loans and ultimately failing municipalities as their taxing power is dependent on a strong labor market and real estate values, and finally inflation. And the global nature of the crisis just makes it more frightening. This collapse is building a crescendo of anxiety.

It is easy to think of the arts being irrelevant in such an atmosphere. This is the very idea that Paulnack’s address contradicts. In fact, music is not only relevant but also essential to our survival. This address by the director of the Boston Conservatory music division who is also an accomplished pianist should be required reading during these tumultuous times.

Paulnack reminds as that even in WWII’s concentration camps there was music. “Art is part of survival; art is part of the human spirit, an unquenchable expression of who we are. Art is one of the ways in which we say, ‘I am alive, and my life has meaning.’”

Or after 9/11 the author remembers, “people sang around fire houses, people sang ‘We Shall Overcome.’ Lots of people sang America the Beautiful. The first organized public event…was the Brahms Requiem, later that week, at Lincoln Center, with the New York Philharmonic. The first organized public expression of grief, our first communal response to that historic event, was a concert. That was the beginning of a sense that life might go on. The US Military secured the airspace, but recovery was led by the arts, and by music in particular, that very night.”

The essence of his message is “music is one of the ways we make sense of our lives, one of the ways in which we express feelings when we have no words, a way for us to understand things with our hearts when we cannot with our minds.” He therefore charges the incoming freshman: “I expect you not only to master music; I expect you to save the planet. If there is a future wave of wellness on this planet, of harmony, of peace, of an end to war, of mutual understanding, of equality, of fairness, I don’t expect it will come from a government, a military force or a corporation. I no longer even expect it to come from the religions of the world, which together seem to have brought us as much war as they have peace. If there is a future of peace for humankind, if there is to be an understanding of how these invisible, internal things should fit together, I expect it will come from the artists, because that’s what we do. As in the concentration camp and the evening of 9/11, the artists are the ones who might be able to help us with our internal, invisible lives.”

The full address can be read here.

Perhaps this is one of those times when music “is needed to make sense of our lives.” Music is among the oldest of human activity (certainly predating economics!) and as Daniel Levitin states in his innovative work This is Your Brain on Music, an argument “in favor of music’s primacy in human (and proto-human) evolution is that music evolved because it promoted cognitive development. Music may be the activity that prepared our pre-human ancestors for speech communication and for the very cognitive, representational flexibility necessary to become humans.”

One of my favorite melodies is from a similar era, the depression years, the plaintive, ironical song, Smile, written by Charlie Chaplin, for the 1936 film Modern Times, in which he starred. In the film, Chaplin’s Little Tramp struggles to survive the Great Depression and the indifference of the modern industrialized world. The song’s melody captures the sadness of the times while the lyrics remind us to “smile and maybe tomorrow, you'll see the sun come shining through.” This is my own brief piano rendition of Smile in Windows Media format.
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