Free Markets, Free People
Recovery? Maybe it is time to use the “D” word
Market Watch writer Al Lewis opines:
The Great Depression that Federal Reserve Chairman Ben Bernanke claims to have averted has been part of the background radiation of our economy since at least 2008.
It’s just that like radiation — it’s invisible.
Uh, no. It’s no. It is simply a word, a description, that most of the media refuses to use.
Here, try it out. “Depression.” See, it’s not so hard.
In fact anyone who takes an objective look at what we’ve been suffering has concluded that while our current condition may not fit the arbitrary definition of whatever is considered a depression today, our economy certainly isn’t in any condition to be called recovered or even “recovering”. In fact, it is a disaster:
In a new research note, JPMorgan points out that since 1970, Japan, Finland and Sweden have all gone through what the U.S. is currently going through. And all three of them had recoveries stronger than America’s. The above chart compares the economic recovery — as measured by real GDP per capita — of each nation at different points after the trough of their recessions. And the U.S. is in dead last after 12 quarters from the bottom.
Take a particular look at Japan. That is the economy during the “lost decade” that we’re currently underperforming. Says JP Morgan’s Michael Feroli:
The poster child for slow growth coming out of a debt-fuelled financial crisis has to be Japan, which ever since the early 1990s has had trouble getting a head of steam. The recession which kicked off Japan’s “lost decade” lasted from 1991 to 1993. Including the recovery experience from that recession is sobering: we are currently faring worse than Japan at the same point in their lost decade.
So what’s the plan? How are we going to work ourselves out of this position? What policies will we institute to begin the actual, not pseudo, recovery? Well, it’s an election year. Don’t expect to hear the hard truths from this administration. Instead, prepare to be reminded “its working”. That in spite of reality:
As the economy reels, the national debt approaches $16 trillion, and we hear fears of Congress jumping off a fiscal cliff by year-end. Many states and local governments are struggling with massive deficits, too. Three California cities have filed bankruptcies.
U.S. companies are warning of slower growth amid Europe’s meltdown, yet the Dow Jones Industrial Average has crossed the 13,000 mark, and some observers are predicting new highs for the index soon.
The rising stock market is as counterintuitive as interest rates falling to new lows after the U.S. lost its triple-A debt rating last year. It isn’t that investors aren’t wary. It’s just that every place else makes them more wary. This isn’t the definition of a recovery.
No, it’s not. But then Lewis doubles down with stupid:
The cure for our battered economy has been to allow our disasters to occur more slowly through taxpayer bailouts and extraordinary interventions from the Fed. So far, this strategy has worked. We have averted a sudden crash in favor of a depressingly slower one.
As we said from the very beginning, you can either let the economy takes its course and suffer the results quickly, get over it and recover, or you can find a way to extend it to where the effect may not be as dramatic but will linger and linger and linger.
We chose the latter path and it hasn’t at all worked out the way it was predicted (remember, at this point, unemployment was supposed to be in the 5% area if the stimulus was approved and 8% area if it wasn’t – so it’s hard to say “it worked”, isn’t it?).
The spin says the downturn was softened. But again, I point to the promises vs. the reality. We are no better off in terms of unemployment than it was claimed we’d be if we didn’t go an additional trillion dollars in debt.
And the economy isn’t recovering, it’s bouncing along the bottom of a trough with the possibility of going even lower if Europe implodes.
Yet the only plan I’ve seen or heard about is to repeat what failed previously with the Fed talking about a QE3 while we’re already awash in about 10 trillion dollars in funds it has already injected. I don’t know about you but I simply haven’t much confidence in Ben Bernanke’s assurances that he can wring all that cash out of the system without triggering another economic downturn or hyperinflation. History is not on his side.
I think Ace points to the truth of the matter that the media and politicians simply won’t touch:
This is the worst "recovery" by any nation since 1970, and it could be partly due to a category error: We’re not recovering from a recession, we’re still in the depths of a depression.
That’s right, it isn’t the “worst recovery”. There hasn’t been a recovery. There have been “bright spots” here and there which quickly faded, but overall, we’re in the same place economically we’ve been for months and years. And it isn’t an “invisible” depression to the unemployed and those who’ve given up hope and dropped out of the job market. It is very visible. And most likely they remember the promises and the results.
Of course, instead of facing this and holding politicians accountable, our media will continue to play to the distractions, the nonsense and the irrelevant instead of asking the hard questions, demanding answers and informing voters.
Unfortunately, such is life in America today.