In the early 1970s we used to say to each other, especially when embarking on a questionable adventure, "When the going gets weird, the weird get going!"
Get going out there.
The dominant economic and financial commentary has us in strengthening recovery, and a serious minority says we are near new recession. Both are correct and mistaken. Begin at the very beginning, circa 1990, when the entrance of China into global markets began to undercut Western wages.
We were still so rich that we didn’t notice. A dozen years ago we found it easy to borrow to maintain our standard of living, until the whole shebang hit the wall, from Anaheim, Calif., to Athens, Greece.
In the last five years, the U.S. Federal Reserve and European Central Bank have prevented a collapse of the financial system, buying time until we get our affairs in order by other means, which we have not gotten around to.
We are in the Central Bank Intensive Care Unit, and all the beeping and hissing and hoses and lights and dials have us confused and forgetful about how we got here — and no, we’re not just going to hop out of bed and jog five miles.
It is very good news that new unemployment claims have fallen near normal at 350,000 last week, but that is not the same as hiring (next Friday we get that). Our 20-year decline in real wages may have concluded, and maybe not.
New jobs, when they come, may pay better, but likely not. Consumer confidence reached the highest level since March 2009, but it hasn’t been a fun three years.
Orders for durable goods had a terrific monthly gain in December, and then tanked 4 percent in January. Auto sales had a terrible January and a red-hot February.
The Institute for Supply Management’s manufacturing index was supposed to continue a positive run from January’s 54.1, and instead plunked to 52.4 in February. In January, personal income rose a tepid 0.3 percent, and spending was up only 0.2 percent.
An astounding number of so-called analysts see a housing recovery (none at the Fed does, though). Case-Shiller’s latest home-price index stone-dropped 3.8 percent in the last 90 days of 2011.
CoreLogic reported yesterday that 27.8 percent of mortgaged households are underwater or nearly so — no progress at all. Connecting the two stories through the miracle of arithmetic, falling prices create more underwater households. Got that, cheerleaders?
Nothing above describes self-sustaining recovery, or new recession. Just ICU.
To escape — get our affairs in order by other means — requires our own concerted action by public policy. No part of our political process (except the Fed) got anything done last year, or the year before, or will this year. This is an election year. Oh, boy.
By midyear 2011, President Obama had lost by 2-to-1 the confidence of the independents who put him into office. Then, Tea Party misbehavior in the budget battle, and six months’ revelation of the Republican underbelly in all its nomination-season glory, and independents now favor Obama 2-to-1. Still, the president sees the world through a golden haze of self-congratulation.
He saved the country from "Depression II"? (The Fed had that done before he sat down.) And now he uses former President Ronald Reagan’s "America is back"? (Pardon, sir, but back where, exactly?)
Hard "lefties" are a pain: calling for nanny-state intrusion, and grabbing at wallets not their own. But, from William Jennings Bryan forward, given a choice between a guy with too-bright eyes and a special pipeline to the Almighty, and anybody else … we’ll take anybody.
The doubtlessly capable Mitt Romney lacks the charm of Richie Rich and will have to drag a "hard-rightie" ball-and-chain wherever he goes, even though they hate him.
We are a democracy, and the next nine months’ circus will be about us. Foolish partisanship among candidates is a reflection of us. Candidates who will not speak to real issues in authentic ways … they won’t until their focus groups and polling say we want them to.
There is nothing wrong with our system, just us, and our refusal thus far to acknowledge that 20 years ago the world moved on without us.
Compete in the world, and live within our means: If we look interested in that discussion, there is no telling what competition of ideas might break out among candidates.
This week’s charts mark the overall confusion, first a pair from the deeply respected Economic Cycle Research Institute (ECRI). The first is disturbing, showing the "descending tops" of recovery since 2009 — the cause of ECRI’s new recession call.
(Right-click to view larger chart sizes.)
Then again, the ECRI may be nothing more than a proxy for the stock market, which is doing OK, and so may be the economy.
This one is labeled "Chart 2" in a series otherwise omitted, and shows a surprising thing: Government spending is falling, with the private sector not so bad (index equals 100 as of recession’s end).
Worry about inflation all you wish, but it is actually trending lower than the Fed’s 2 percent target ("Personal Consumption Expenditure Deflator" chart from Tim Duy). QE3 (a third round of quantitative easing by the Federal Reserve) is still a high probability.