Economic False Dawn

I have said on numerous occasions that, despite the current predictions coming from the MSM and the White House, our economy isn’t on the verge of recovering. I have several reasons for saying this, including the high unemployment rate and the fact that the problems that caused the recession haven’t been corrected.

If you haven’t heard of Vox Day, I recommend reading what he writes. He’s very good, and quite intelligent. The piece he wrote today, for example, makes the case that our current rebound is just the “false dawn that precedes the darkness.”
http://www.wnd.com/index.php?fa=PAGE.view&pageId=109679

Contrary to the belief of mainstream economists, economics is not a giant confidence game in which the government can fool enough people into feeling sufficient consumer confidence to generate a self-fulfilling prophecy of economic growth. Even as the composite leading indicators and GDP numbers turn positive, real measures of economic activity are pointing in precisely the opposite direction. International shipping has begun to slump again. After a three-month rise spurred by an aggressive stimulus program, steel prices have begun to fall once more in the world's largest steel-using country, China. Nearly 40 percent of the stocks traded on the New York Stock Exchange are the worthless stocks of four zombie corporations being propped up by the federal government, BAC, C, FNM and FRE. Total U.S. loans and leases are down 4.6 percent for the year, an initial sign that the inevitable deleveraging process has begun. The percentage of failed bank deposits in 2009 are rapidly approaching three times the percentage of failed bank deposits in 1931, and the FDIC has been forced to request a $500 billion credit line from the U.S. Treasury to stave off looming bankruptcy.

The map is not the land. The statistics are not the economy. This is not a recovery; this is the false dawn that precedes the darkness.

I urge you to read the rest, as it is quite enlightening. Vox points out ways that the government has been taking actions specifically targeted to artificially inflate the GDP numbers without causing actual economic growth.

Due to the way GDP is measured, there are a variety of ways that GDP can increase and perceived economic growth can show up in the statistics without an improvement in the labor market. As I explained in a previous column, imports count against GDP, so if Americans stopped buying imported Mercedes and Nintendos for some reason, this would be reported as incredible economic growth and a vast increase in societal wealth. The reality, of course, is that a complete cessation of import buying would indicate that something has gone seriously wrong with the American economy and the American consumer's ability to purchase goods and services. Another way is for the government to borrow and spend money, a third way is for the Federal Reserve to increase the money supply, and a fourth way is for the government to provide incentives for Americans to make purchases with consumer loans.

Sound familiar? Imports are down, and our government is doing all of the other three things that Vox lists. These inflate the GDP numbers to sound impressive, but the reality is that unemployment is high and getting higher. Real growth can’t occur without new jobs being created… unless you somehow believe that our economy can grow robustly WITHOUT increasing the number of workers in the marketplace.

Be prepared. Months ago, several noted economists predicted this could likely be a double-dip recession… which means we’d have a period of recovery before experiencing a deeper plunge. There are signs that this is still a strong possibility.