ECONOMY
The Real Economic Picture
Paul Craig Roberts
If investors want to understand the lies the US government tells with statistics, they need only visit www.shadowstats.com. Roberts discusses the following charts as they appear on that site: Average weekly earnings; annual consumer inflation; gold versus the Swiss franc; nonfarm payroll employment; consumer confidence; housing starts; inflation corrected real GDP; and inflation-corrected real retail sales.
“These graphs courtesy of John Williams make it completely clear that there is no economic recovery. In place of recovery, we have hype from politicians, Wall Street, and the ‘presstitute’ media. The ‘recovery’ is no more real than Iraqi ‘weapons of mass destruction’ or Iranian ‘nukes’ or the Obama regime’s phony story of assassinating last year an undefended Osama bin Laden, allegedly the mastermind of Islamic terrorism, left by al Qaeda to the mercy of a US Seal team, a man who was widely reported to have died from renal failure in December 2001, a man who denied any responsibility for 9/11.
A government and media that will deceive you about simple things such as inflation, unemployment, and GDP growth, will lie to you about everything.”
Illusion Of Recovery—Feelings Versus Facts
James Quinn
What passes for journalism in the US today is all about feelings. Are Americans confident? Bullish? Optimistic about the future? The US has turned into a giant confidence game. There are stories about recovery, and public opinion is manipulated so people will feel good and spend money. Facts are inconvenient.
A recent false storyline was the dramatic surge in new jobs. This fantastic news was utilized by the six banks that account for 80% of stock market trading to propel the NASDAQ to an 11-year high and the Dow to a 4-year high. The press did its part with headlines of good cheer designed to encourage Americans to pull out their wallets and spend.
What the media is not reporting is that the NASDAQ is down 42% from its 2000 high of 5,048. No one has pointed out the S&P 500 is trading at the same level it reached on April 8, 1999.
The US Bureau of Labor Statistics manipulates data until it achieves a happy ending. It uses a birth/death model to create jobs out of thin air, later adjusting those phantom jobs away. It creates new categories of Americans to pretend they aren’t really unemployed. It makes adjustments for seasonality, and for the census. Essentially, anything the BLS reports on a monthly basis is a guess, massaged to present the most optimistic view of the world. The government-preferred unemployment rate of 8.3% is a terrible joke, but the media passes along this misinformation anyway. No wonder the public doesn’t realize the US is having a second Great Depression.
Life—And Death Proposition
Bill Gross
Recent central bank behavior, including that of the US Fed, provides assurances that short and intermediate yields will not change, and therefore bond prices are not likely threatened on the downside.
Most short to intermediate Treasury yields are dangerously close to zero, which implies limited room for price appreciation. You can’t put $100 trillions’ worth of credit in a system-wide mattress, but you can move in that direction by delevering and refusing to extend maturities and duration.
The transition from a levering, asset-inflating secular economy to a post-bubble delevering era will be no easy feat; currently Ben Bernanke and the Fed are trying to softly delever a credit-based financial system that is overlevered and has assumed far too much risk. But significant costs may be ahead for a global economy and financial marketplace, which are still functioning under the assumption that cheap and abundant central bank credit is always a positive dynamic.
Where does credit go when it dies, asks Gross. It goes back to where it came from. It delevers, it slows and inhibits economic growth, and it turns economic theory upside down, ultimately challenging the wisdom of policymakers. The US—and indeed the world—will be making this up as they go along for what may seem like an eternity. A 30-50 year virtuous cycle of credit expansion that has produced outsize paranormal returns for financial assets—bonds, stocks, real estate and commodities alike—is now delevering because of excessive “risk” and the “price” of money at the zero-bound. We are witnessing the death of abundance and the birth of austerity, for what may be a long, long time.
It Is Safe To Resume Ignoring The Prophets Of Doom…Right?
Adam Davidson
Back in 2005, economist Nouriel Roubini (Dr. Doom) was written off by most as having a fringe view that merited little attention. A few years later Richard Wolff, a Marxist economist, believed the bursting of the housing bubble would lead to a deep crisis. He, too, was largely ignored.
For nearly a decade, the most accurate forecasts have come from the fringe, so it’s upsetting to learn that many of those same doom-and-gloom prognosticators now believe, for various reasons, that we are on the brink of another catastrophe that may be far worse than that of 2008. They cite a slowdown for China, a European recession, a US currency crash, a global economic collapse.
With hindsight, it’s clear that the mainstream view can be shockingly incompetent. The widely held consensus just before the 2008 crisis was the Fed, through the visionary leadership of Alan Greenspan, had figured out how to get permanent, healthy economic growth without fear of inflation. Globalized trade and finance had spread risk widely.
The mainstream view now reflects more gloom. The Blue Chip forecast—the average of 50 top economic prognosticators—predicts that the US and world economies will inevitably recover. But the growth won’t necessarily feel like growth; it will be slow, and millions will stay unemployed for many years. The big difference is that in 2006, with the real estate market booming, most were blind to the impending disaster. Now it’s all we can see.
