Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20
China Recovered in Q2. Will the Red Dragon Sink Gold? - 23rd Jul 20
UK Covid19 MOT 6 Month Extensions Still Working Late July 2020? - 23rd Jul 20
How Did the Takeaway Apps Stocks Perform During the Lockdown? - 23rd Jul 20
US Stock Market Stalls Near A Double Peak - 23rd Jul 20
Parking at Lands End Car Park Cornwall - UK Holidays 2020 - 23rd Jul 20
Translating the Gold Index Signal into Gold Target - 23rd Jul 20
Weakness in commodity prices suggests a slowing economy - 23rd Jul 20
This Stock Market Stinks - But Not Why You May Think - 22nd Jul 20
Protracted G7 Economic Contraction – or Multiyear Global Depression - 22nd Jul 20
Gold and Oil: Be Aware of the "Spike" - 22nd Jul 20
US Online Casino Demographics: Who Plays Online For Money? - 22nd Jul 20
Machine Intelligence Quantum AI Stocks Mega-Trend Forecast 2020 to 2035! - 21st Jul 20
How to benefit from the big US Infrastructure push - 21st Jul 20
Gold and gold mining stocks are entering a strong seasonal phase - 21st Jul 20
Silver Eyes Key Breakout Levels as Inflation Heats Up - 21st Jul 20
Gold During Coronavirus Recession and Beyond - 21st Jul 20
US Election 2020: ‘A Major Bear Market of Political Decency’ - 21st Jul 20
Summertime Sizzle for Gold and Silver - 21st Jul 20
Overclockers UK Custom Built PC Review - Delivery and Unboxing (3) - 21st Jul 20
Will Coronavirus Vaccines Become a Bridge to Nowhere? - 20th Jul 20
Stock Market Time for Caution?  - 20th Jul 20
ClickTrades Review - The Importance of Dynamic Analysis and Educational Tools in Online Trading - 20th Jul 20
US Housing Market Collapse Second Phase Pending - 20th Jul 20
Capitalising on the AI Mega-trend - 20th Jul 20
Getting Started with Machine Learning - 20th Jul 20
Why Moores Law is NOT Dead! - 20th Jul 20
Help the Economy by Going Outside - 19th Jul 20
Stock Market Fantasy Finance: Follow the Money - 19th Jul 20
Did the Stock Market Bubble Just Pop? - 19th Jul 20
Quick Souring of the S&P 500 Stock Market Mood - 19th Jul 20
The Six-Year Jobs Recession - 19th Jul 20
Silver Demand Exploding! - 18th Jul 20
Tesco Scraps Covid Safe One Way Arrow Supermarket Shopping System - 18th Jul 20
The Rise of Online Pawnbroking - 17th Jul 20
Gold Rallies Together With U.S. Covid-19 Cases - 17th Jul 20
Gold & Silver Measured Moves - 17th Jul 20
The Bizarre Mathematics Of How Negative Interest Rates Create Stratospheric Profits - 17th Jul 20
From a Stocks Bull Market Far, Far Away, Virus Doomsday Scenerio! - 16th Jul 20
Fiscal Cliffs and the Self-destructing Treasury - 16th Jul 20
Dow Stock Market Crash Watch - Update - 16th Jul 20
Gold & Silver Gaining on US Dollar Weakness - 16th Jul 20
How to Find the Best Stocks to Invest In - 16th Jul 20
Overclockers UK Custom Build PC Review - 2. System Build Changes Communications - 16th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Do You Believe We're In Economic Recovery?

Economics / Economic Recovery Aug 08, 2010 - 10:03 AM GMT

By: Justice_Litle


Best Financial Markets Analysis ArticleTreasury Secretary Tim Geithner has a message for the American public: "Welcome to the Recovery." As a joke it might be funny – but it isn't...

I read something this week that made me laugh out loud – though it wasn't supposed to be funny. Treasury Secretary Tim Geithner, aka Turbo Timmy, has an opinion piece in The New York Times titled "Welcome to the Recovery."

The title alone is worthy of mirth. It has a certain musical reminiscence to it: "Welcome Back My Friends to the Show That Never Ends," or perhaps "Welcome to the Machine."

"The devastation wrought by the great recession is still all too real for millions of Americans who lost their jobs, businesses and homes," Geithner begins. "The scars of the crisis are fresh, and every new economic report brings another wave of anxiety."

The opening two sentences are frank and on target. But before long, the piece quickly veers into cloud-cuckoo land. Having taken a perfunctory stab at credibility by first citing what is plain as the nose on our faces, Geithner then seeks to twist our minds and avert our eyes. It's really actually OK, we are supposed to conclude. Things are getting better.

The data points cited by the piece appear true enough, insomuch as an NYT fact-checker would not dispute them. But as some wag once said, "there are lies, damn lies, and statistics," and Timmy's rosy data points are designed to deceive.

To understand why the Geithner op-ed is a fine piece of Machiavellian craftsmanship, it's helpful to revisit Swordfish, a 2001 action flick starring John Travolta and Halle Berry. In the movie, Travolta plays Gabriel, an amoral criminal mastermind who answers to a higher calling.

Gabriel: Have you ever heard of Harry Houdini? Well he wasn't like today's magicians who are only interested in television ratings. He was an artist. He could make an elephant disappear in the middle of a theater filled with people, and do you know how he did that? Misdirection.

Stanley: What the [bleep] are you talking about?

Gabriel: Misdirection. What the eyes see and the ears hear, the mind believes.

Disappearing the Elephant

In "Welcome to the Recovery," Geithner goes for a little of that old Houdini magic.

Geithner is not merely trying to convince Americans that, despite what they see and hear and experience on a daily basis, things are actually getting better. No, his ambitions are much grander than that. He is trying to make an elephant disappear.

The elephant in this case is the blatantly rigged nature of the system, and the atrocities committed in the name of propping up and preserving that system at all costs. We are supposed to forget what happened with AIG. We are supposed to forget the Christmas Eve Coup. We are supposed to forget the hidden puppet masters dwelling in the shadows.

But most of all, we are supposed to forget that the U.S. financial system, with its powerful lobbying arm reaching deep into the bowels of Washington, is designed to be a well-funded oligarchy, first and foremost serving those at the very center.

It has been this way, more or less, since 1913. The rules have always favored the largest and best connected... as one would only expect, as these same players have the most clout in molding and shaping the rules.

(By the way, you should hear what my fellow editor Adam Lass has to say about the economic recovery. Sign up here for his investment commentary.)

What's new in this latest round of crisis, though, is the bright white dividing line of clarity drawn between "haves" and "have nots." When the system became so leveraged, so close to meltdown as to threaten total collapse, all the customary niceties were abandoned – and it became clearly obvious who was worth saving (i.e. "too big to fail" at all costs) and who was not.

Washington is ruled by an oligarchic financial power structure, with those at the top convincing all below that they are "indispensable" on top of everything else... and thus that their healing and well-being must come before all else, at the expense of every average American if need be. That is the elephant Geithner wants us not to see.

A False Prognosis

Geithner cites seven bullet points of "good news" – a mix of massaged data points and plausible conjecture – to argue that the recovery is here and on its way. He talks of booming exports... returning job growth... repaired balance sheets... banks on the mend, and so on.

The most pressing issues, of course, are artfully dodged. There is no talk of the following at all:

  • Post-stimulus slowdown risk: The increasingly likely odds that the economic booster effects of stimulus programs were temporary, and are now wearing off.

  • Corporate anorexia and long-term job loss: The reality that public companies continue to hit earnings targets and boost profits by slashing jobs and capital expenditure, preparing to work from a permanently reduced revenue base moving forward.

  • Small business in a death spiral: Per the Naked Capitalism blog, "A Wells Fargo/Gallup survey of 604 small business owners conducted in early July showed a plunge in already negative readings to new lows. This gloomy outlook matters because small businesses were the biggest source in job creation in the last upturn..."

  • Personal bankruptcies still on the rise: Per the WSJ, "More Americans filed for bankruptcy protection in July, reversing a trend of declining filings over the previous three months and highlighting the continuing financial struggles of many consumers..."

  • Balance sheet unknowns: Banking analyst Meredith Whitney argues that bank balance sheets only appear to have improved via the use of accounting tricks, such as reduced set-aside provisions for future losses. Meanwhile, Brett Arends points out that, while corporate cash levels are at record highs, so too are corporate debt levels. The private sector is still heavily leveraged.

  • Sovereign debt woes: The reality that a majority of Western world nations (plus Japan) have inflated their public balance sheets to dangerous size, with the threat of an Icelandic or Greek style crisis still hanging over Europe, the United States, Japan and others.

Those are just a few items on the plate that Geithner's "Don't worry, be happy" stance did not address. There are more concerns too – not least the fact that we are at the tail end of a 25-year leverage and debt supercycle (yet still living in denial of that reality), or the growing dangers of a housing market double dip, or the painful truth that the flood of stimulus thus far has flowed into the pockets of those who need it least, rather than those who need it most.

As for when a genuine "recovery" can be expected, your humble editor would wager it will not be until we give up the fantasy that two leveraged wrongs can make a right. We will not get out of debt by putting ourselves in more debt. We will not revive the free market and the private sector by grossly expanding the public sector. And we will not see a revival of local lending institutions and small businesses – still the backbone of the U.S. economy – until we abandon the belief that a cadre of financial behemoths at the top can bleed the country dry with no consequence. These fictions have not yet been disgorged.

How about you? Do you believe we are in economic recovery, as Geithner suggests? Or does it still have to get worse before it gets better? Are Geithner's improvement metrics fair, or is he trying to pull a Houdini and take our eyes off the elephant? If there is still harsh medicine to come, how harsh could it get? Share your thoughts and observations here:

Don't forget to follow us on Facebook and Twitter for the latest in financial market news, investment commentary and exclusive special promotions.

Source :

By Justice Litle

Justice Litle is the Editorial Director of Taipan Publishing Group, Editor of Justice Litle’s Macro Trader and Managing Editor to the free investing and trading e-letter Taipan Daily. Justice began his career by pursuing a Ph.D. in literature and philosophy at Oxford University in England, and continued his education at Pulacki University in Olomouc, Czech Republic, and Macquarie University in Sydney, Australia.

Aside from his career in the financial industry, Justice enjoys playing chess and poker; he enjoys scuba diving, snowboarding, hiking and traveling. The Cliffs of Moher in Ireland and Fox Glacier in New Zealand are two of his favorite places in the world, especially for hiking. What he loves most about traveling is the scenery and the friendly locals.

Copyright © 2010, Taipan Publishing Group

Justice_Litle Archive

© 2005-2019 - 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

6 Critical Money Making Rules