The assertion by analysts and economists that data from the quarter from July-September signals the end to the recession is so distorted and ridiculous, that you have to question either their integrity, sanity or ability to make that determination. This is so far from the truth that it can’t even be seriously entertained as a probability or possibility.
What much of this assertion is based upon is the tax credit offered to first-time home buyers and the debacle that was the Cash for Clunkers program, which consumers took some of the cash from and spent it on smaller items. In other words, it was a government-induced faux spending activity, which will soon go away and leave no traces of sustainability. The Cash for Clunkers revenue will probably make next month look productive as well, but that should be it.
The idea the there is improvement in the number of bad loans that are 30 days past due is also an accounting trick, as the banks are simply keeping the foreclosures off of their books. How they’re doing that is the bank doesn’t place the holder of the mortgage on the non-performing loan list until after a 3-month period. Then they won’t initiate the foreclosure process until two years later, making it look like things are going along nicely in spite of the challenges. This is all illusion, and doesn’t reflect the reality.
With all these concerns, American consumers have also been socking away money at a much higher savings rate than normal, also keeping that money from being spent in the economy. Much of this is to build up a financial cushion or to pay off debt.
According to the Commerce Department, eight out of the last ten months incomes have been stagnant of fallen. Add that to consumers saving more and you have to ask where the idea that we are in recovery comes from.
This doesn’t even take into account the subprime and Alt-A loans which will create a lot of problems for a lot of American people over the next two years. It doesn’t matter if the banks pretend they aren’t behind on their loans or don’t officially enter into bankruptcy; the repercussions will still be very real either way.
Consumers have carried not only the American economy at tune of 70 percent of all economic activity, but they’ve been carrying the global economy as well for years. Those days will most likely never return to the previous levels, which suggests there could be more pain in the short as well as long term. This doesn’t mean there will never be a recovery, just that probably will never again be what it was in the past for American consumer spending habits.
Finally, the thought that just because the consequences of the misguided printing of extraordinary amounts of money by the Fed to bailout and shore up poorly run banks and businesses hasn’t come about yet, doesn’t mean it won’t. There’s no way that this type of debt and deficits won’t result in a huge inflationary leap sometime in the near future. That will cause even more problems for American people going forward.
In conclusion, it’s amazing that some analysts or economists would go on record as saying the beginning of the end of the recession began in the current quarter. There’s absolutely nothing but wishful thinking, dishonest reporting, accounting tricks, and ignoring of the real numbers and circumstances that reveal we’re far from out of it.
And nothing in the numbers, once you know what to look for, imply that the dangers are over.
I take issue with these people because American consumers unwisely could listen to these demagogues and start to spend again in a way that reflects what is being said, when in reality they’re just at much as risk as they’ve ever been. All of this in an attempt to create a self-fulling economic recovery prophecy based in smoke and mirrors, rather than honest data.
