Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Great Fakeroo Economic Recovery

Economics / Recession 2008 - 2010 Sep 09, 2009 - 07:57 AM GMT

By: LewRockwell

Economics

Best Financial Markets Analysis ArticleThere is something affected, something not believable, something agitpropish, about all the cheers for the glorious economic recovery we are experiencing. Some of its biggest boosters don't even quite believe it.


I'm thinking of the reporter on National Public Radio a few days ago who, at the end of a segment, offered a passing warning that the bust did not come to an "organic" end, but rather was artificially stopped by government intervention.

That's an intriguing admission, suggesting that not even this reporter really believed it. I certainly don't believe it. In fact, I seriously doubt that even the champions of this great fakeroo believe it.

What he hinted at is the crucial difference between a recovery that comes from within the structure of the market economy and one that is imposed from without. The former is sustainable, a basis for growth in the future. The latter is not sustainable. It lasts only so long as the stimulus lasts.

The most conspicuous problem remains unemployment, which is nearing double digits even in the official data while unofficial data even from Fed economists hint that the reality is closer to 16%. Among the youth, the rate is 25% and growing.

Month after month, the press announces the "good news" that unemployment is not as high as expected, and yet if you look at the trend line, we have not seen an uninterrupted climb in job losses of this scale in our lifetimes.

To be sure, this is only a symptom. When an economy goes from boom to bust, a bout of job losses is inevitable. It can even suggest a good trend, as people leave jobs in failing sectors to enter jobs in the healthy sectors. Policy should not attempt to stop this trend.

What is of concern here is the timing. The problem keeps getting worse, which suggests that in fact the bust has not played itself out entirely. And this is backed by other trends.

Let's first talk about housing statistics that are off the cliff. Consider housing starts. Over a year, the crash from the height of 1.8 million per month to 390 thousand per month. The latest rebound looks like a blip on the radar screen. July numbers on foreclosures are the worst we've seen, and the third time in five months that we've seen a new record. Already 2.9 million homes have been foreclosed on, and there are probably at least that many still on the chopping block. Banks are reluctant to do the deed because foreclosures devastate their books, so they delay as long as possible.

There is the sleeping giant of commercial real estate, which rose as much as residential housing, tripling loaned dollars in the course of a mere 10 years. And yet there has not been a crash here. Looking at the numbers, one gets the sense of a high-flying jet about to run out of gas.

And when you broaden the perspective past housing, to the whole of domestic investment, it looks like an Olympic high dive with no end in sight. In fact, ten years of investment has been effectively reverted. We stand today where we stood in 1999. Investment is a very important piece of data for assessing our future, because it is always forward looking. In this case, there doesn't look to be progress in the future at all. Even from the point at which this figure turns, we have another few years before real economic growth returns.

Why do matters in the financial sector look better? It is wholly a consequence of trillions in artificial stimulus, a market re-jiggered and falsified through money creation and partial nationalization and bailouts. These do not last.

A few months ago, many people were worrying about the inflationary future that is suggested by the astonishing increase in phony bank reserves over the last year. Today, however, the tune has changed. Bernanke is now being heralded as the great genius of our times.

What this suggests is that no efforts are going to be undertaken to suck the phoniness out of the system. The new reserves are going to stay in the system, and every effort will be taken to convert the reserves into real money supply increases. And if this actually happens, you had better hold on for a wild inflationary ride.

Do we even need to mention the federal budget problems? Revenues continue to collapse as government spending soars, creating a gigantic hole in the budget at a time when pressure for more spending is accelerated by the recession. There is no talk of budget cuts. We are entering into uncharted territory.

A year ago this month, the whole country was in agreement that we had been living an illusion for the previous ten years and that the prosperity we thought we were enjoying was not sustainable. There was no dissent on this point. Even Obama admitted it. Today, the illusion is even more egregious than it was, and yet people are once again embracing it as if it will not end.

The policy response to the downturn has been one of the most short-sighted and economically irrational in the entire history of mankind. Why did they do it? It's all about the politics of the short term. The entire economic structure has been phonied up in order to make a success of the Obama cult. This is the driving motivation, alongside the obvious desire on the part of financial and banking bigshots for a bailout.

Please clip and save this column and reread it 18 months from now. In the meantime, don't be among those who believe that the government has discovered the secret to prosperity in the offices of the Bureau of Engraving and Printing.

Llewellyn H. Rockwell, Jr. [send him mail] is founder and chairman of the Ludwig von Mises Institute in Auburn, Alabama, editor of LewRockwell.com, and author, most recently, of The Left, The Right, and The State.

http://www.lewrockwell.com

    © 2009 Copyright LewRockwell.com - 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