Wednesday, May 29, 2013

False Economic Recovery

Heidi Moore at The Guardian has an article today titled “Don't be fooled by the false economic recovery,” which rather makes me think she has been reading my mind. She talks about “the power of illusion, to mask reality” and relates that to the actual meaninglessness of consumer confidence and housing prices as a measure of economic recovery, when unemployment is still persistently high, the number of people in poverty and on food stamps is still rising, and wages for the working class remain stagnant at best.

She makes good points. The people of this nation are prone to being taken by illusion, such as the one that a war in Iraq would make us safe from terrorism, followed by the idea that continuance and escalation of the war in Afghanistan would do likewise by “denying them space in which to plan their attacks.” Economically, people look at a soaring stock market and rising home prices and need no other evidence that the economy is booming.

Buoyed by such “confidence” they rush out and buy cars with nothing down and four year loans and bid $100,000 above the asking price for houses, and think that doing that sort of thing constitutes rational behavior. Confidence based on an utterly irrational stock market and the fact that other irrational actors are also buying houses at ridiculous prices.

My parents used to ask me, “If everyone else jumped off of a five story building, would you do so too?” Today's American answer economically is clearly, “Yes.”

Notice that the booming portion of the economy is in two areas. One is cars and houses, both of which are bought on credit and means the nation is once again piling up debt at a furious rate. The other is the stock market, which as it functions today is not actually part of the economy at all, but is a parasite which sucks money out of the economy.

Europe is doing a slow motion economic implosion, and it is only a matter of time before the Euro is a thing of the past. Japan is circling the drain as it frantically devalues its currency an a last ditch effort to survive. China is slowing down, no matter how often it releases fancy numbers in an effort to disguise that fact. And yet this country, having apparently decoupled economically from the rest of the world, is entering an economic boom.

Hurry, get your reservation in for the unicorns that are coming.

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