Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

A Faith-Based Economic Recovery

Economics / Economic Recovery Nov 30, 2009 - 04:11 PM GMT

By: TheDailyReckoning

Economics

Best Financial Markets Analysis ArticleJoel Bowman writes: Today we have something extraordinary for you to ponder. We call it, in the prescribed, politico-doublespeak of the times, a “recovery.” Allow us to elaborate for just a moment…


A “recovery,” as defined by the same economic talent that led us into mass speculative temptation in the first place, is a magical reversal of fortunes for the global economy.

What is this recovery based on? Glad you asked, because here comes the extraordinary part…it is underpinned by the hysterical, back-slapping delusion that comes from accepting that there is, in fact, a recovery. It is real, in other words, because we are told it is real.

Convinced yet?

As the late astronomer, Carl Sagan, was fond of saying, “Extraordinary claims require extraordinary evidence.” In the absence of such evidence, let us examine the faith-based foundation on which the stability of the world’s largest economy now rests.

Below are a few tenets all sworn Recoverites must accept, any and all evidence to the contrary be damned:

1. That a consumer economy can continue to grow exponentially, even as the consumers themselves are forced to economize…

Where once manufacturing, innovation and a solid savings base held sturdy the US economy, there is now consumption, a waning service industry and a fiscally constipating accumulation of debt.

With household liabilities as a percentage of disposable income running at almost 130% for the average American family, and official unemployment bubbling over a 26-year peak of 10.2%, it’s tough going at the mall…even for the mighty US consumer…and even after the government has bribed him to go out and spend!

Already GDP estimates for the September quarter were revised downward – from 3.5% to 2.8% – after it became clear that the effects of the Cash for Clunkers program – the governmental equivalent of economic Viagra – had worn off sooner than expected. Barely had the poor consumer got his pants off and his wallet out when his many embarrassing deficits became all too apparent.

2. That the notices of liability printed by the Feds – commonly referred to as “greenbacks” – will enjoy the infinite confidence and unyielding patience of the nation’s foreign creditors…

For the past year we have heard rumblings from the BRIC nations, in particular China, over the government-sponsored debasement of the greenback. Most recently, Liu Mingkang, the Middle Kingdom’s chief banking regulator, argued that the combination of a weak dollar with persistently low interest rates had encouraged a “huge carry trade” that was having a “massive impact on global asset prices.”

It is no secret that “dollar alternatives” are openly discussed among large holders of US paper. So shaky is the dollar, in fact, that even a (briskly discredited) rumor in an English paper about OPEC nations ditching the buck sent the world’s “reserve” currency into a tailspin, tipping off gold’s current trailblazing rise – itself another indicator of fear and loathing of the once almighty buck.

(As we were jotting these few words, midweek, the greenback had just fallen below one Swiss franc for only the second time ever, reaching a 15-month low on the dollar index and approaching a 14-year low against the yen.)

3. That those creditors will continue to reinvest said monies back into the increasingly regulated and overtaxed US securities exchanges…

And that’s to say nothing of the growing minority of American citizens and companies already, wisely, looking for ways to flee their own shores with the hope of doing business in more accommodating, less intrusive arenas.

4. That extorting money from current and future workers in order to allocate it to the nation’s least efficient industries is a positive long-term strategy…

Over the past year, the government of the United States of America has pumped more money into its flailing economy than the total value of all the gold ever mined in world history…doubled.

Before we go on, let us remember that each and every one of those dollars – and the trillions more splashed around by the do-gooder interventionalists of the world – are dollars that are NOT now available to private citizens or the thousands of small businesses that might have benefited from a little extra cash during this whole crisis.

The true opportunity cost of this gross misallocation of vital resources will, of course, never be known. What is known, however, is that said bailouts helped the federal budget deficit along to a post WWII record of more than $1.4 trillion in fiscal 2009. Treasury officials warn the national debt limit of $12.1 trillion may be reached and breached by as early as December.

5. That those still purchasing stocks are better informed than the industries’ insiders…

Insider selling increased during the latest week from $960 million in sales to over $1.39 billion. That compares with “buys” totaling just $160 million. The ratio of selling to buying has, at times during this stock market rally, stretched to as much as 31:1.
Is there something outsiders know that insiders don’t? Unlikely.

6. And, that the geniuses who missed the warning signs of the biggest bust up in modern financial history are the most qualified to guide us out of it…

Even up until the very eve of the crisis, elected and unelected politicians assured those who knew better that the vast and plentiful risks to the financial industry were contained. Clearly, they were not. At every juncture since then, those leaders and others have sought to impose the very measures – currency debasement, deficit spending, increased state intervention, bailouts, nationalizations etc. – that history tells us lead to outright ruin.

Sir Isaac Newton – himself a man of faith…and a devout student of alchemy – once wrote, “If I have seen further it is only by standing on the shoulders of giants.”

What is perhaps the most galling of this entire financial debacle is that, with the abundance of insightful economists history has granted us, today’s leaders should appear proud to be seen standing on the shoulders of earthworms.
That, in itself, is something even the most delusional among us ought to have serious trouble believing in.

A Faith Based Recovery was originally published in the Daily Reckoning

© 2009 Copyright The Daily Reckoning - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in