The Depression Continues Despite the Smoke, Mirrors, and Dazzling Bull from Washington
There is a lot of smoke and mirrors in mainstream economic news these days. There always has been. The wizards always seek to manage expectations andÂ manipulateÂ public sentiment in what they consider to be the right direction. But things have gotten much worse over the years, especially since the Federal Reserve began its â€śMagical Monetary Tourâ€ť as David Stockman calls it in 2008.
This year we were told that the Christmas shopping season started out strong. In the #oldmedia we saw lines of shoppersÂ clamoringÂ to get into Target and Walmart to get their hands on the latest trinkets. But then, in the wake of the holiday we find out thatÂ 2012 was the weakest Christmas shopping season since 2008.
The stock market keeps climbing, for the most part, but what we donâ€™t hear (in most outlets) is thatÂ retail investors continue to exit the marketÂ even in the midst of this rise. Why? My bet is that 1) many people just donâ€™t trust the â€śmarketsâ€ť any longer and 2) people are dipping into investment accounts because they have to.
But we are in â€śrecovery.â€ť
Much has been made of an uptick in housing, that finally the sun is rising over the real estate market. I hope that this is true and around Washington I have seen some housing construction since the middle of last year.
But I also know that Washington DC is unlike most markets. It is the place to which much tax revenue flows. This is a land of federal workers and defense contractors. Government has grown steadily since â€“ well â€“ forever, but especially since 2008 so I take the life I see in the market with a grain of salt. But maybe Iâ€™m wrong here. Maybe the earth will begin pushing up McMansions like mushrooms all over the place by the summer.
Much has also been made of theÂ unemploymentÂ rate coming down from 10% to 7.8%. But this is more smoke. As weâ€™ve reported before,Â if we used the old way of determining unemployment we would see that we are at 1930s levels of unemployment.Â This however makes for very nasty headlines and both the Federal Reserve and the current administration would prefer not to see this information generally available.
They think that if they can just manage economic expectations up, if people buy the lie, much of our current economic nastiness will resolve itself. I mean how are people supposed to go out and buy if all they hear is that we are in a depression? Keep the recovery drumbeat going at all costs. Dear God, says Bernanke, keep it going.