Friday, May 29, 2009

Happy News for Weimar America

Silver linings everywhere, says MSNBC:
The data lend weight to the growing notion, supported by more than 90 percent of economists in a recent survey, that the deepest recession since the 1930s may be drawing to a close. . . .
"The developing trend signals this recession — the longest and deepest of the postwar era — is losing momentum," Wachovia economic analyst Tim Quinlan said in a note to clients. . . .
In another mostly positive sign, the tally of newly laid-off people requesting jobless benefits fell this week, a sign that companies may be cutting fewer workers.
But the number of people continuing to receive unemployment benefits rose to 6.78 million — the largest total on records dating back to 1967 and the 17th straight record week, according to data released Thursday.
Please note this Associated Press graphic that accompanied the MSNBC story. If, as the MSNBC headline says, that's "Evidence . . . recession may be ending," I'd hate to see evidence the recession was continuing. The economy is still shedding jobs at a rapid pace and the percentage of people who are unemployed is still rising.

MSNBC's "90 percent of economists" consensus-mongering is offensive, as if economics were a popularity contest. Deb Cupples observes that Thursday, one top economist saw things much differently:
"One of eight U.S. households with a mortgage ended the first quarter late on loan payments or in the foreclosure process in a crisis that will persist for at least another year until unemployment peaks, the Mortgage Bankers Association said on Thursday. . . .
"'We clearly haven't hit the top yet in terms of delinquencies or the bottom of the housing market,' Jay Brinkmann, the association's chief economist, said in an interview.
The Wall Street Journal tries to put a happy face on the bond-market jitters:
Federal Reserve officials believe the recent sharp rise in yields on U.S. Treasury bonds could reflect a mending economy and a receding risk of financial catastrophe, suggesting the central bank won't rush to react -- even though some investors see danger in the government's rising cost of borrowing.
Bond markets continued to gyrate Thursday after a sharp run-up in 10-year Treasury yields the day before. The bond market pushed yields of 10-year Treasurys down to 3.674% from 3.70% Wednesday, but they remain well over mid-March's 2.5% level. Yields on mortgage-backed securities continued to climb, pushing 30-year fixed-rate mortgages to 5.44%, the highest since early February.
Now, compare those facts to the giddy light-at-the-end-of-the-tunnel tone of the MSNBC story. Is it possible that somebody at MSNBC doesn't get the significance of the upward trend in interest rates, and what it means for recovery of the housing market? As Instapundit noted Wednesday, Megan McArdle explains the inevitable impact of soaring deficits:
Eventually the treasury has to roll that debt or pay it off, and if interest rates spike, that can prove catastrophic -- just ask Argentina . . .. If the longer-yield debt again registers weak demand, the administration is going to have to address this problem.
They'll "address this problem" one way or another. Let's just hope they don't go the Mugabe route.

UPDATE: Over at the American Spectator, I tell this story:
In March 2008, I attended a panel discussion where an economist for a private investment firm explained that rising bankruptcy rates pointed toward an impending financial crisis -- which was exactly what happened six months later. At last night's annual gala for the America's Future Foundation, I ran into the same economist, who shook his head and said of the current policy, "They're trying to re-inflate the bubble!"
It's insane.


  1. Geez, McCain, you're up early. Now how about some Lady GaGa commentary and reciprocal linkage!

  2. Silver linings as per MSNBC?

    What do we expect from what is essentially a propaganda organ of the current administration? It falls in line with Obama's recent confirmation of coming "away from the brink". What a bunch of hacks.

    Markets don't go up in straight lines, neither do they come down in a straight line.

    Let's not repeat the mistakes of the late 1920s, where the central banks were too busy to suppress interest rates by flooding the market with treasuries, leading to the inevitable crash.

    Is it bothering anyone in the administration that eventually, the Chinese (or any other Treasury investor) will pick up on the fact that the value of treasuries is being artificially inflated?

    Eventually banks will be laden with worthless Treasuries, the Chinese will demand higher yields, and the spiral will continue.

    Gird your loins!

  3. the deepest recession since the 1930s I lived through the 1970s and was a working stiff during that time. Try selling this bill of goods to someone else. A more correct statement would be that it's the deepest recession since the last rea leftist was in office. Clinton, being a narcissistic pragmatist, doesn't count in this regard.

  4. New York Times, 20 January 2011:

    "Despite double-digit unemployment, rampant inflation, an 8% contraction in the economy during the past year, and an increasing number of 'Obamavilles' in major American cities, President Obama remained relentlessly upbeat in a press conference exclusively scheduled today for government-approved journalists. "Prosperity," he declared, "is right around the corner."

  5. I'm no economist and I don't intend to become one, but I can't help but notice as I check around that most of the optimism is coming from people whose job it is to be optimistic.

    The people whose job is to be right have very little good to say.