NYTimes' Optimism

According to FLOYD NORRIS, "Why So Glum? Numbers Point To a Recovery." He goes on to write in NYTimes, "The signs are that the U.S. economic recovery is growing stronger. So why do so many seem not to believe it?"


AnnS, from Michigan, replies:

You must stop. You really must stop comparing coconuts to rocks as if you are comparing apples to apples. The reasoning - & assertion that 'history' supports your argument - are both incorrect & false. You insist upon ONLY looking at things that have occurred within your adult lifetime & then assuming since the symptoms are the same, the illness is the same. If you took sudafed, asprin & fluids for aches, pains, a stuffy head & a fever, it worked if what you had was a cold. If the same symptoms are caused by ebola, your diagnosis based upon having had a cold before a& the same treatment will not work.

(1) This is NOT a recession caused by
(a) Production which exceeded demand - 1958 & 1991 recessions
(b) Interest rates being high AND external shocks to the economy (gas prices) - 1973 recession
(c) Interest rates jacked to astronomical levels - 1982 recession
(d) Speculative bubble that had limited impact on the real economy (dot.com crash) - 2001 recession

(2) This is a GLOBAL financial crash. This time it IS different.

In the past 200 years, there have now been 5 GLOBAL financial crashes. 3 were triggered by the outbreak of wars (Napoleonic, WWI & WWII) & ended when the wars ended. The 4th crash took 10 years to end - & was ended by WWII for the US by the vast amount of money poured into war production by the government. 2007 is the 5th.

(3) Financial crashes since WWII have been either national or regional - never global. It took an average of 4.8 years for the affected countries or regions to get back to where they had been before the crash. They did it by EXPORTING their way back to a functioning economy. One country (Japan) had a national crash but couldn't export its way out of it because now it was competing with China for the same customers.

The US has been a negative net exporter for decades. SO we are going to export what? And how are we going to export more than we import? We did export some stuff in the '00s called SIVs and CDOs and credit default swaps --- and blew up the world. Can't do that again as no one is stupid enough to buy that stuff.

Oh & the stock market is a useless indicator. Historically the equities markets (stocks) recover in 3 years from the crash.

(4) Recover based upon WHAT? Can't get by selling each other houses or junk from China anymore. Tilly & Jake out there on Main St are broke - flat tapped out & busted. There is NO MONEY to spend. Mortgage debt increased 216% from 1995. Household consumer debt (credit cards, cars etc) increased 75%. Household incomes barely increased 40%. They are DROWNING in debt they have to pay off -- and no one but no one will lend them money either with credit cards or the house ATM to go shopping.

There are 4 major drivers for an economic recovery.

(a) Consumer spending. Forget it. They are up to their eyeballs in debt & their earned incomes are falling.

(b) Residential construction. Sorry but have an excess supply of houses as it is & the prices are STILL too HIGH for the typical household with its median income of $54000.

(c) Commercial construction. Nope. We don't need more hotels, shopping centers etc. Vacancies in strip malls are the highest ever. Hotels are closing. Purchasers are walking away from underwater office buildings with 20-30% vacancies. Businesses do not need space when they don't have enough customers & the customers are history.

(d) Exporting. Export WHAT which will be more than imports?

(5) And since you haven't deigned to notice, check out the BEA income data.

(a) 2009 was only the 2nd time since WWII that total personal income FELL. Last time it happened was 1948 & it bounced back in 1949. It is not bouncing this time. The only thing keeping total personal income from falling further are the 'transfer payments' - Social Security, unemployment etc.

(b) The Wages and Salaries data is very very grim. Total wages/salaries have fallen back in total dollars to late '06/early '07 and are still falling.

(c) Proprietor's Income (what business owner's make) is worse. Total PI is back to the same amount as in 2004.

So you are shocked that people aren't all happy and giddy about Wall St? ROFLOL!! Not only are the real $$ in wages & incomes back to '04 or '06, but in the meantime there has been inflation of 15% ('04 to now) to 8% (06 to now) & the population has increased by 4-6%. They have little or no savings, incomes/wages are less and the amount of credit they are using is less.

OF COURSE they are pessimistic. They are broke. They owe mind-boggling amounts of money on their debts. They aren't making anymore than they did 4-6 years ago & in the meantime inflation has driven price up 8 -15%.

(6) Record number of long-term (6 months ++) unemployed whose profiles are educated professionals over 40.

DO have the NYT spring for a copy of "This Time Is Different: Eight Centuries of Financial Follies." You will learn something.