Posted on 07/07/2010 7:09:51 AM PDT by SeekAndFind
Want to be invited to A-list parties? Want people to think you are smart? Then don't smile and don't say anything positive--especially about the economy. Pessimism has become so pervasive that people will believe just about anything, as long as it is negative.
Over the July 4 weekend, after a jobs report that showed 83,000 new private-sector jobs were created in June, the Drudge Report had not one but two headlines that compared the U.S. economy of 2010 to that of 1932. In other words, the U.S. is back in Depression. This is a complete overreaction and is indicative of the severe case of economic hypochondria that seems to have gripped the nation and the world.
One symptom of this disease is that common sense is suspended. The simple explanation is tossed aside and data releases are dredged and sifted to find the most dire possible explanation for any economic information.
For example, every 10 years the United States Government conducts a census, and every 10 years the government hires hundreds of thousands of very temporary workers to help in the effort. Some time between April and June total employment goes up and down by an amount that often swamps the underlying trends of employment.
In May total payrolls increased 433,000, but then fell by 125,000 in June. So rather than explain this to people, the Pouting Pundits of Pessimism said things like, "All the jobs in May were government jobs." And then last Friday, after the June jobs report, they said, "Jobs fell for the first time in seven months." Both of these reactions were misleading.
They could have said, "Once we adjust for the Census, private-sector payrolls increased by 33,000 in May, and then accelerated in June to 83,000."
(Excerpt) Read more at forbes.com ...
In a few years we will wish that it was 1922.
... make that 1932.
Authors contend :
While both months were disappointing when compared with previous recoveries, the data shows six consecutive months of private-sector job creation.
The authors then attempt to tackle the under counting of those unemployed argument :
When 805,000 more people said they were looking for a job in April, the pessimists said, “See how many people had been discouraged ... the unemployment rate will never fall as they start looking again.” And in June, when the labor force fell by 652,000, they said, “This is the only reason that the unemployment rate fell.”
This is crazy. It defies common sense. Economic data is volatile, so quarterly data might be better. And in the second quarter the U.S. added 357,000 private-sector jobs—more than 50% greater than the 236,000 added during the first quarter.
Authors then point towards other indicators ....
* New orders for durable goods, a leading indicator, are up 10% at an annual rate in the past three months. Excluding transportation, they are up 25%. If we look at just machinery orders, they are up 63% in the past three months and 23% in the past 12 months. This is not a depression.
* Fears of a repeat of 1932 are based on a faulty comparison with history. In 1932 the M2 measure of the money supply fell by 16.5%—the third of four consecutive yearly declines between 1929 and 1933. Meanwhile Herbert Hoover pushed through the largest tax hike in American history. The lowest tax rate rose from 1.5% to 4% (at $1 dollar of taxable income), the 6% rate (which kicked in at $10,000) rose to 10%, and the top rate more than doubled from 25% to 63%. WE ARE NOWHERE NEAR THAT RATE.
* Today the M2 measure of money is growing, and tax rates, while scheduled to go higher in 2011, are nowhere near the levels of the 1930s. And there is no Smoot-Hawley Tariff Act.
* Productivity is so strong that the economy is growing despite massive increases in the size of government.
* The U.S. is creating jobs, even if the rate of growth is less than previous recoveries. Profits are still rising. In fact, analysts are still raising earnings estimates.
* The Stock market has so much negativity priced in that it is cheap on just about any basis. Based on forward earnings, the PE ratio for the S&P 500 is under 12. And our capitalized profits model shows that stocks are severely undervalued.
Authors contend :
While both months were disappointing when compared with previous recoveries, the data shows six consecutive months of private-sector job creation.
The authors then attempt to tackle the under counting of those unemployed argument :
When 805,000 more people said they were looking for a job in April, the pessimists said, “See how many people had been discouraged ... the unemployment rate will never fall as they start looking again.” And in June, when the labor force fell by 652,000, they said, “This is the only reason that the unemployment rate fell.”
This is crazy. It defies common sense. Economic data is volatile, so quarterly data might be better. And in the second quarter the U.S. added 357,000 private-sector jobs—more than 50% greater than the 236,000 added during the first quarter.
Authors then point towards other indicators ....
* New orders for durable goods, a leading indicator, are up 10% at an annual rate in the past three months. Excluding transportation, they are up 25%. If we look at just machinery orders, they are up 63% in the past three months and 23% in the past 12 months. This is not a depression.
* Fears of a repeat of 1932 are based on a faulty comparison with history. In 1932 the M2 measure of the money supply fell by 16.5%—the third of four consecutive yearly declines between 1929 and 1933. Meanwhile Herbert Hoover pushed through the largest tax hike in American history. The lowest tax rate rose from 1.5% to 4% (at $1 dollar of taxable income), the 6% rate (which kicked in at $10,000) rose to 10%, and the top rate more than doubled from 25% to 63%. WE ARE NOWHERE NEAR THAT RATE.
* Today the M2 measure of money is growing, and tax rates, while scheduled to go higher in 2011, are nowhere near the levels of the 1930s. And there is no Smoot-Hawley Tariff Act.
* Productivity is so strong that the economy is growing despite massive increases in the size of government.
* The U.S. is creating jobs, even if the rate of growth is less than previous recoveries. Profits are still rising. In fact, analysts are still raising earnings estimates.
* The Stock market has so much negativity priced in that it is cheap on just about any basis. Based on forward earnings, the PE ratio for the S&P 500 is under 12. And our capitalized profits model shows that stocks are severely undervalued.
The problem is good news don’t sell $100 newsletters. :)
Forbes magazine helped elect Obama. They helped make one of their money manager columnists rich. He became one of Obama’s closest advisors and earliest funders. Thanks Forbes.
I agree that we are not headed toward another 1932. However, our nation is not as resilient as it was in 1932, so I’m afraid if we even have a third of what we had in 1932, we might not withstand it. IMO.
It's 1930.
There are some incredibly dangerous people out there eager to convince investors that debt doesn't matter; it never has to be paid back, government can print money and expand credit without any negative consequence, as long as everyone joins the party and throws all their money back in the stock market. When you hear people talk like that: do yourself a favor: turn off the TV and read The Road to Serfdom instead.
No the problem is an usurper islamo-marxist is still in control and the US public are fools brainwashed by TV.
I think that this year they are spending a lot more than usual on the census, hiring more people, and making sure that more are part timers because three people working 15 hours a week helped Obama's unemployment numbers much more than one 40 hour a week full timer.
Now we have a $1.3T deficit, 10% unemployment, and DJIA flirting with 10,000. And it's not 1932?
Journalism needs to grow up. If you use hyperbole when a Republican is in the White House, then be prepared for hyperbole when a Democrat is in the White House.
I wasn't one of them because I know elections have consequences.
It’s 1775 & 1860.
Smoke and mirrors. Lies, damnable lies, statistics...slice and analyze anyway you want. Bottom line: I can’t sell my house or retire. Indications are that I’ll soon lose the house. At this point, I’ve grown weary of people urinating on my shoes and telling me it’s raining. No. Happy days are not here again. Yet.
Not quite. At least in 1930 U.S currency was still backed by gold. Now it's simply fiat money. Might as well start printing it with Obama's portrait on every denomination.
The reason I feel certain about the coming yearning for 1932, or even 1922, is not economic. We’ve thrown our nation in the garbage, and this will be revealed slowly but certainly in the unhappy years to come.
What about the 100,000 illegals that enter each month? It’s good to know we have them (almost) covered. We need to create 150-200 thousand jobs per month to even begin to climb out. At that rate, we would be back to where we were in about 10 years. Without illegals, maybe half that length of time.
No won’t happen, nothing to see here, no worries. The ‘One’ has everything well in hand and happy days are just around the corner. Big bowls of green shoots and skittles and all you can eat. Did you see that story about Lindsay Lohan getting 90 days? Is American Idol on tonight?
By this time next year. Watch and see. Massive tax increases on the way. Businesses taking their profits this year instead of pushing them into next year. That won't help hiring next year one iota. The list goes on and on. There is absolutely nothing on the horizon that will prevent economic collapse starting about the 2nd quarter of next year.
Pouting Pundits of Pessimism = Nattering nabobs of negativism?
Hmmmmm.... I don’t know, maybe the fact that Fannie and Freddie “forced” a bailout to save the economy from total destruction has something to do with the pessimism? Especially since NOTHING has been done to prevent the same thing from happening again.
I don’t know... the fact that $1 trillion dollars did absolutely nothing for creating jobs... maybe that has caused just a tiny bit of negativity.
Or the fact that the federal government felt it necessary to take over the health insurance industry in the name of, “saving the economy”. Or taking over financial institutions and car companies to also “save the economy”.
I don’t know. Maybe just maybe the hijacking of the flow of money through a bogus financial reform package in the name of “saving the economy” is causing a little uneasiness as well.
Or the future prospect of state, federal, and local taxes flying through the roof, to “save the economy” has caused just a little gloom and doom.
Unemployment through the roof... Europe facing a HUGE uphill battle... Elected officials as corrupt as banana republics... an aging population expecting gold plated benefits... two wars... oil disasters... border drug wars...
You’d have to be a real fool to stand there calmly and think the future of this economy is candy and roses.
Are you saying that I am dumb? I have two degrees, one of them is in electrical engineering.
no one is claiming that the economy is “candy and roses”.
no one is claiming that the economy is “candy and roses”.
1932 nope .... we’re at about spring 1931 levels when they were still thinking they could pull out of a deflationary death spiral back in the day ... the ultimate reality of how f#$%ed we actually are has not hit yet.
yet they ignore the vast amount of people who are just giving up every month...not even continuing to look for work and on top of that...no discussion of the cost of stimulus, etc...
Each one of these jobs is costing an enormous amount of money to create and when the stimulus ends it will all crash.
It is more like 1932 than not...
And if my mother had wheels, she'd be a bus. Based on actual (trailing) earnings , the PE ratio for the S&P is about 19.
Me too. McCain sickens me and MCCain - Feingold gave the Dems control but electing the usurper has and will cause irreparable harm.
That’s true. But our government is making the same mistakes: using easy money (”ZIRP”) to try to pull forward demand rather than create conditions favorable for sustainable economic growth (low taxes, reduced regulation, stable monetary policy).
In 2012, many will be longing for the ‘good ole days’ of 2010:
1) gas was 3.00 a gallon rather than 15.00
2) there was no 3 hour wait just to enter a grocery store in order to select one of two items on the shelf
3) water ran all day
4) the north had heat for the winter and the south had air conditioning in the summer
5) you could still swim in the Gulf
In 1932 how much of our debt was owned by China?
This article is BS! We’re about to enter a “3rd wave” of foreclosures and short sales that will crush traditional home sales by being priced 25-30% lower. Most people are at least partially dependant on their home for retirement. Can’t retire as you intended if you’re under water with your house, your taxes skyrocket with 2011, cap and trade increases your utilities and everything else and Obamacare is put into play.
Now we have a $2.4T deficit, 17% unemployment, and DJIA flirting with 8,000.
And it’s not 1932?
Oh sure, everything is just hunky-dory, that is, unless you happen to be one of the 15 million American citizens who’ve lost their jobs and have little prospect of every finding one again. Other than that, happy days are here again, right Forbes?
Good. What do you think the result of the federal government taking over so much of the economy is?
Wait until the Census numbers are released, blue states get more congressional seats and congressional districts are remapped to make sure Conservatives and Republicans can never win. Unemployment numbers have nothing to do with this year's Census. The data collected will be used to crush us once and for all.
Don’t criticize the Dear Leader! Some eggs must be broken if you want to make an omelet.
Look at Mao, he had to starve and kill millions to achieve the communist paradise that is China.
And what about Stalin? A few million dead are a statistic.
Obama hasn’t even started the re-education camps yet, so give him a break.
So suck it up and keep quiet (later we will be able to add “or else”)
People don’t know that Fed Chairman Ben Bernanke never had a normal job in his life.
All he did was “analyze” things. And now, being the “expert” in the Great Depression he likes to call himself he blames it on there not being enough credit.
Well guess what. You can’t force banks to lend to people.
So, the only solution that lends itself to Ben’s thinking is for the government to borrow money from the Fed itself, a private for profit bank.
They made a $50B profit last year. Of which 95% (so they say) went to the government. Do you really think the government used that $47.5 B to pay down debt? No way. Who got the other $2.5B? Old European Royal families? No one knows since the Fed cannot be audited. Why? Because not enough Senators and Congressmen supported Ron Paul with his bill to audit the Fed. But why? Who knows, but it’s certainly strange.
I’m just not bullish here. No reason to be. No one is getting a job and no one is buying a house. If there is a small blip up in house prices, I’d expect that to be normal, and then they’ll tank again until they are a “really great deal” at which point you can buy a house that used to cost $300,000 for $100,000.
What we’re actually doing is repeating the very same mistake that Japan made in the 1990’s which caused their lost decade(s).
“He who does not learn from history is doomed to repeat it” (George Santayana )
Hi, I like your comment. Where do you find the info on the deficit, unemployment rate and DJIA? Thanks. I wanted to share this info. with a democratic acquaintance.
RE: What do you think the result of the federal government taking over so much of the economy is?
Here’s something we can look forward to in answer to your question -— THE GOVERNMENT WILL GET BIGGER IN 2011 IF THINGS DON’T CHANGE IN NOVEMBER.
The top marginal income-tax rate is set to increase on the first day of 2011 to 39.6 percent from 35 percent. The phase-out of itemized deductions will lift that, effectively, to 40.8 percent. In 2013, the 3.8 percent Obama health-care tax on investment income will kick in, making the top rate 44.6 percent.
This tax hike will push us into double-dip territory for two reasons.
First, it will hurt small businesses. In fact, it’s already having that effect. While some of the income in the top bracket is wage and salary income of high earners, a big chunk of the money is the profit of small businesses. If you lift the top rate, you depress small-business activity, which in good times is often the engine of job growth.
According to the latest ADP National Employment Report, goods-producing small businesses — those with fewer than 50 employees — have reduced their total payroll employment by about 20,000 jobs each month this year, including in June. (A corresponding rise in jobs at small service businesses is less revealing, since people get haircuts in good times and bad.)
So companies affected most by Obama’s planned tax hike are shrinking, while big businesses — primarily subject to the corporate tax code — have been adding jobs.
Why are small businesses battening down the hatches? In May, the National Federation of Independent Business asked small business owners about the most important problem they face. Twenty-two percent named taxes, up from 19 percent a year earlier. Sales performance was the top worry, cited by 30 percent, unchanged from the prior year.
The other way the tax hike will rekindle the recession is through its treatment of dividends. Absent action by the Democratic majority in Congress, which seems increasingly unlikely, the current 15 percent top tax on dividends will rise to the top income tax rate —39.6 percent in 2011, which, again, will grow to 44.6 percent.
This massive increase will reduce the desirability of equities, significantly harming the stock market, while giving firms a powerful incentive to pay dividends this year, while the rate is lower. Businesses may well focus on paying out cash in the second half of this year — not a terrible thing, but not as helpful to the recovery as spending the money to expand their operations.
If history is a guide, shareholders are unlikely to go on a consumption binge with their dividends — certainly not one big enough to compensate for the drop in business investment, which could well be enough to push growth in gross domestic product into negative territory in the second half of this year.
It is no surprise, given the dramatic changes in taxation and the winding down of stimulus spending just over the horizon, that the U.S. economy is getting weaker. The correct policy response is to extend the Bush tax cuts for all income levels, giving small businesses and shareholders cause for renewed optimism, while enacting spending cuts to preserve budget discipline.
The alternative idea, to tax the economy into oblivion and then try to revive it with more Keynesian spending, is tragically wrong-headed (BUT THEN, THIS IS OBAMA’s PLAN).
As we’ve seen, the small businesses that are necessary to create a lasting recovery will be contracting while government reacts to any new stimulus.
There are two ways to stimulate an economy that is in trouble:
1) with tax cuts or
2) with increased government spending.
Declaring early and resolutely that he would extend the Bush tax cuts would have given Obama a chance to try both.
Instead, Democrats hoped that higher government spending would offset the suffocating prospect of tax increases. It hasn’t worked.
THAT, IS THE LONG WINDED WAY OF ANSWERING YOUR QUESTION.
I’ve had it on my wall for quite a while. I believe it’s accurate, although I don’t know if all three data points lined up together at precisely the same time. If you want to confirm, you can google the bits. 2006 and 2007 were pretty good years — although the Democrats and the media treated them as if we were on the verge of collapse.
Here in Ga. boiled peanut vendors have taken the place
of executives selling apples on the street corner.
Although I still think a bunch of Obama look alikes
selling apples at intersections would make a good
photo op before November.
I did some research. Turns out I was a bit off on the deficit —
The Democrats seized control of Congress in 2006, largely on the belief that the economy was in serious trouble.
Kerry and Edwards (and many other Democrats) talked about 2004 being the “worst economy since Hoover”.
The Washington Post (and many other Democrat papers) talked about a :”jobless recovery” in 2004.
http://www.washingtonpost.com/ac2/wp-dyn/A50822-2004Jan26?language=printer
But what was the reality?
Budget deficit of $248B in 2006
http://www.dallasfed.org/research/eclett/2007/el0704.html
US unemployment at 4.6% in 2006
http://www.contactomagazine.com/biznews/unemployment2006.htm
DJIA Peaks at 14,164 on Oct 9 2007
http://en.wikipedia.org/wiki/New_York_Stock_Exchange
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