Economic recovery: Fact or fiction?
Everyone says the economy is in recovery. The only trouble is, the things that need to recover to bring about genuine recovery aren't recovering.
U.S. Treasury Secretary Tim Geithner speaks about the state of the economy and manufacturing in the U.S. during a news conference at the United Steelworkers headquarters in Pittsburgh, Pennsylvania, as seen in this photo taken March 31. Although the government and the media talks about economic recovery, the economy has a long way to go, argues one blogger.
Jason Cohn/Reuters/File
News Flash:
WASHINGTON (AP) – Consumer spending rose in March by the largest amount in five months but the gains were financed out of savings, which fell to the lowest level in 18 months. A slight rise in incomes added to concerns that the recovery could weaken unless income growth increases more rapidly.
This is supposed to be a recovery. Everyone thinks it’s a recovery. All the papers say so. Investors are betting on it. Politicians and economists are congratulating themselves for it.
The only trouble is, the things that need to recover so that there can be a genuine recovery are not recovering.
On the surface…
Monster.com says the job situation is improving.
Case & Shiller say the housing market is improving.
Yesterday’s news also told us that Europe has agreed to bail out its problem child, Greece. The New York Times:
ATHENS – Greece announced on Sunday that it had reached agreement on a long-delayed financial rescue package that would require years of painful belt-tightening, but the deal might not be enough to stop the spread of economic contagion to other European countries with mounting debts and troubled economies.
The bailout, which was worked out over weeks of negotiations with the International Monetary Fund and Greece’s European partners, calls for 110 billion euros, or $146 billion, in loans over the next three years intended to avoid a debt default.
And so, on the back of this good news, the Dow recovered what it had lost on Friday. Oil traded at $86. And gold edged up 2 bucks.
Up, down, up, down – suddenly, the stock market seems nervous. Maybe it is beginning to realize that the recovery story is a lie…a fake-out…
We have a feeling that the present volatility is going to be resolved by a decisive move to the downside. So, we’ll keep our ‘Crash Alert’ flag up the pole for a bit longer.
Of course, we’ve been wrong about the timing before. And if we’re wrong this time, don’t bother to send us an email. Some of the world’s most important fortunes have been preserved by selling too soon. We won’t mind being a bit premature again.
“This recovery has nothing in common with typical post-war recoveries,” we told our audience in Las Vegas on Saturday, “because the recession has nothing in common with the garden-variety recessions of the post-war period. This time it’s different…”
Which is to say, this time it’s the same…it’s coming back to normal…not getting more bizarre.
In the meantime, unemployment benefits have been extended three times. Now, they’re going to expire with some 15 million people out of work.
The first-time house-buyer credit has expired too.
And the feds have already shot off their monetary and fiscal ammunition… They’ve already used more stimulus than any time government ever used.
And what did we get for it? After $8 trillion worth of banking and financial guarantees…plus deficits greater than any the country has seen since WWII…
…all we get is a small upturn in the key figures. They’re still terrible. They’re just not getting terribler…at least, not right now.
What do you expect? The figures can’t do down forever. They’ve got to turn up. But they look more consistent with a zombie economy and a long, drawn-out correction than with a real, robust recovery…
But wait. The government keeps track of these things, doesn’t it? And it reported on Friday that the US GDP grew at an annual rate of 3.2% during the first quarter.
Well, well, well…guess that settles it. We are wrong again. Recession is over. Break out the champagne. That makes three quarters in a row with positive GDP growth.
But hold on…
The GDP number is just another one of the lies that bind investors and consumers to bad ideas and keep them coming back to bad habits. More on that later in the week…
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