Many people in government, the media and the general public believe that if there is enough "happy talk" about the economy, and enough people believe the economy is improving, it will improve.
Are they right?
Well, it is true that consumers and small investors drive a large portion of the economy. And it is true that consumers and small investors, in turn, are largely driven by their perception of what is happening.
But is it also true that when the fundamentals of the economy are lousy, or there has been a giant bubble and vast overleveraging, or there has been massive fraud, or the government has gone so far into debt that it has formed a black hole, then all of the happy talk in the world won't turn the economy around.
For example, happy talk did not work during the first couple of years of the Great Depression, once the speculative bubble and leverage of the Roaring 20s burst, leading to the inevitable crash (as economist Irving Fisher documented).
And University of Maryland professor economics professor and former Chief Economist at the U.S. International Trade Commission Peter Morici wrote in 2006:
The speculative frenzy of recent years is causing a major adjustment, and the happy talk of realtors is prolonging the process. The absence of realistic analysis about the extent of overvaluation is characteristic in an industry that sees nothing but an upward progression for values, but houses like any other asset can be overpriced.
Things are likely to get worse before they get better.
Morici was pointing out that there was a bubble in housing, and happy talk would not keep the bubble from bursting.
As Washington Post business writer Steven Pearlstein predicted in August 2007:
Despite the happy talk from Washington and Wall Street investment houses -- eerily reminiscent, by the way, of the early days of the savings-and-loan crisis of the late '80s -- these shocks [the subprime and credit crises] will have serious consequences ...
And economist James Galbraith is saying now (just as his father economist John Kenneth Galbraith said 50 years ago) - that "happy talk" won't solve the crisis.
Indeed, the chair of the congressional oversight committee of the bailouts (Elizabeth Warren) and the senior regulator during the S & L crisis (William Black) both say that hiding the true state of affairs and trying to put a happy face on an economic crisis just prolongs the length and severity of the crash.
Happy talk might have worked before the biggest bubble in history burst, the unstoppable deleveraging process began, and the too-big-to-bury fraud began and the government dug itself into a multi-trillion dollar hole of debt.
But it is now long past time for happy talk, which is why all of Obama, Geithner, Bernanke and the other cheerleaders' pep talks are failing.
Indeed, the government has been gaming the fundamental economic indicators with more and more blatant attempts to hide the true state of affairs from the public for decades:
- Nixon took the U.S. off the gold standard because the U.S. defaulted on its ability to pay debts in gold
- The social security trust fund was long ago raided
- The government has been cooking its books and hiding debt through various accounting tricks for years
- The government deletes the 2 most important classes of inflation (food and energy) from the "core" inflation figures, has suspended reporting of the M3 monetary supply, and uses the fake U-3 instead of more accurate U-6 employment figures
- The Fed has blown bubble after bubble with artificially low interest rates
- The government has supsended mark-to-market, is letting banks cook their books, rolled out the fraudulent stress tests, and is engaging in every conceivable scheme to hide the true state of affairs
Despite all that, and despite the fact that the government, CNBC, ABC, Charlie Rose and all of the other boosters have tried to put a happy face on things, it hasn't worked.
I kindly disagree.
ReplyDeletethank you so kindly for taking my money sir, please give it back, try it at the banks and get your mind fucked!
@ Anon
ReplyDeleteGo upstairs and wash your mouth!!
In Gold We Trust.
"Happy talk" seems to be the only kind of talk people can handle on ANY issue these days! Most of my friends and family cannot STAND to talk to me anymore. People who've known me for years and years are fond of asking, "When did you get so political?" as if the problems I am talking about are just something I cooked up on my own, as if I have simply decided to start some new fad or something, rather than the truth that all of these problems are things I had simply been unaware of before, but now I AM aware, I AM concerned, and they should be too.
ReplyDeleteIt matters not that my grave concerns have facts behind them that have elicited my so-called "political" talk. Instead, I am being treated as if I have somehow "changed" when it is THEY who have changed and developed a low tolerance for REALITY. Even when they ARE willing to accept what I say as fact, it seems they have been so worn down by all the fraud, the lying about the fraud, the lack of prosecution of fraud--along with all the continuing abuses of the citizenry by our increasingly totalitarian empire--that they are incapable of becoming angry about it! What little reality they cannot deny they act helpless to treat as anything but inevitable.
Then, if I suggest that there is something at work behind the scenes perpetuating it all--such as the enormous amount of evidence that the "elites" are all members of some occult "club" that demands higher loyalty than any oaths of public office they may have taken--they simply cannot accept it. For some bizarre reason, these "sophisticated and educated" people prefer to believe that what's going on is arbitrary and coinicidental, but NEVER connected in any rational way.
Me, I prefer rational explanations. At least rational explanations can be examined and challenged, and perhaps THAT is the rub: They do not WANT to examine or challenge anything because that might involve THOUGHT AND ACTION, which sounds too much like WORK. And God forbid that they do anything like WORK.
In the end, all these children inhabiting the adult bodies around me who will not 1)admit that there is anything wrong, and 2) recognize that there is something we should/could do to prevent it, or prepare or protect ourselves from it, much less 3)consider doing anything to forestall it? When this collapse comes to full fruition and they are all starving and kicked out of their McMansions, they will not receive one single, solitary turnip green from MY garden. My answer to their shock and hunger pangs shall be: I told you to wake up and you would not. It was your inability and/or unwillingness to grow up and face up that brought this down on ALL of us! So now go deal with the consequences of your invincible ignorance over there on your own, because I am not going to help you one little bit. You would not listen to ME when I tried to warn you, so I will not listen to YOU now?