Republicans All Alone in Viewing the Economy as in Good Shape

Gallup ^ | 3/21/06 | Frank Newport

[pissant]

PRINCETON, NJ -- Americans continue to resist giving the nation's economy positive ratings, regardless of what so-called "hard" economic indicators may show. Only about a third of Americans rate the current economy as excellent or good and 6 out of 10 say the economy is getting worse, not better. In general, these ratings are slightly worse than earlier this year, although still not as negative as they were early last fall after Hurricane Katrina and the rapid run-up in the price of gasoline. Views of the economy remain highly partisan, with Republicans the most positive, Democrats most negative, and independents somewhere in the middle. Independents in particular have become more negative in their views of the economy this year, and now are much closer to the negative attitudes of Democrats than to the more rosy views of Republicans.

Basic Indicators

Gallup routinely measures two basic indicators of consumer views of the national economy: ratings of current economic conditions, and views as to whether the economy is getting better or getting worse. The trends on both are presented in these graphs:

[numberonepal]

It is really too bad there is no FreeRepulicTV.

Yes, yes it is.

[Mase]

So we borrow money at 4.72% but I can earn 6% on a CD. Sounds pretty horrible. The fact that all this money flows here for less than 5% should tell you that our economy is the best place for them to park their money right now. If inflation were really as high as you imply, no one would be accepting these rates for their money. Maybe the market is smarter than you think.

I can still get a 30 year mortgage for 6.5% - a very low rate by historical standards - which means that the future expectation for inflation is very low. The bond market isn't always right and global events that could change this however, I'll believe the markets take on this long before I believe someone FR who wants me to buy into conspiracy theories about the feds cooking the CPI and the PPI reports.

[numberonepal]

It is the general take of most I talk to that the economic numbers look good but they feel like they are getting squeezed.

Sounds to me like you're squeezing yourself. That's a good thing I think, and I try to do the same. Actually the more success I have, and the more money I make, that feeling of uneasiness about the future ripens. I think it's rightly so that a man should feel like that, especially if he has struggled with finances at one time or another. I'm old enough to know now that money comes and goes, so it's best to think about when it goes while it's coming. Capiche?

[numberonepal]

Pensions are sooo 20th century. They're history. X'ers and Y'ers can count them out. They'll have to manage their own retirement plans.

[steve86]

I believe someone FR who wants me to buy into conspiracy theories about the feds cooking the CPI and the PPI reports.

I don't know what you mean by conspiracy theories -- it's all documented -- in the public domain. I take it you don't read much in the way of economics.

If inflation were really as high as you imply

I'm not implying anything; I'm stating it! The producer contracts in my area went up by 7%. That is not based on some inference or hedonic adjustment. It is an absolute amount. What's more the processors don't pay one more penny than they have to to keep the farmers in business.

If inflation were really as high as you imply, no one would be accepting these rates for their money.

As Benanke stated last night, even the Federal Reserve doesn't understand why long-term rates stay relatively low. I wouldn't assume you have the correct interpretation.

[Mase]

...it's all documented -- in the public domain. I take it you don't read much in the way of economics.

Like I said, all those tens of thousands of people who buy and sell bonds for a living must all be idiots because they don't realize they're losing more than 2% a year on their investments. Is that what you're selling here? I know enough about economics to understand that most people who think they know more than the markets really don't know as much as they think they do. I also know that anyone who knows more than the market should be extremely wealthy. Are you still working BearWash?

I wouldn't assume you have the correct interpretation.

I could be wrong but when people start buying 30-year notes that yield less than 5%, I'd say that's a pretty unambiguous market signal that the future expectation for inflation is pretty low. Even Bernake would have to agree with that since he has stated on many occasions that he trusts the markets.

[steve86]

Are you still working BearWash?

Caught you on that one. I retired at 44. However, most all of my money is in retirement funds so I don't spend much.

[Mase]

I retired at 44.

Good for you. Wish I could say the same. All that good news notwithstanding, are you still going to try and tell us that you know the rate of inflation better than all those smart folks who make their living buying and selling bonds? If so, how is it you see it but they don't? You have to admit, there are some pretty sharp people, who have access to a lot more information than you and me, employed therein.

[Citizen of the Savage Nation]

The truth is a three edged sword. There is the truth as you see it, the truth as I see it and usually the truth as it really is. Ones perceptions is ones reality.

Bingo. Problem is, our nation is largely made up of idiots, so that's why we get poll resuts like this. If only every Tom, Dick, and Harry who thinks the 'economy is bad' would simply spend more time at home and less time on the roads (gas prices not high enough for 'em?), in the malls, in the casinos, and generally just out and about everywhere I seem to go, the better things would be. Better parking spots are always welcome. But being the nation of idiots that we are, just wait until the economy gets REALLY bad...like 1991 bad, then these saps will be begging for the golden days of today.

I'm not even that old, yet I distinctly remember 4 time periods where the economy really was terrible (late '70s, 1982, 1990/91, 2002-2002), and if anyone can't recognize the difference between today and the economies of those days, they have issues.

[Paulus]

Thanks RipSawyer. At least your not living alone in the alternative reality. We are practically neighbors.

[steve86]

Well, all I can say to that is that perceived inflation is only one factor going into the purchase of bonds. And perceived inflation in the U.S. is a subset of that. Remember that many of the foreign bond investors are from Japan, where inflation has been non-existent. For those investors and others, inflation hedging isn't the game they're playing. Foreign central banks purchase and sell U.S. treasuries to influence respective currencies. Bond buyers domestic and abroad of the higher-rated bonds are after security. Some are after capital gains thinking rates are going lower (regardless of what they expect for inflation). And I think you kind of explained it best yourself in an earlier post when you alluded to the few percent bond holders would lose in real term if inflation is higher. But they're still ahead by 4.71 or so compared to cash!