Wednesday, June 10, 2009

Economics: 'The Current Weirdness'

In a private e-mail exchange, one very shrewd financial analyst used the phrase "the current weirdness" to describe the economic moment we're in. "[T]he overall story in the media is wrong, which isn't unusual," said my correspondent. The problem is that our situation is so unprecedented, even the most astute observers are somewhat mystified.

What provoked the "current weirdness" remark was something I wrote about the possible influence of hidden inflation in the financial markets:
This chart, from CNN/Money, shows how crude oil prices have increased 49% since March. Interestingly enough, rising petroleum prices mirror a rise in the stock market during roughly the same period. The Dow Jones Industrial Average, which closed at 6,547.05 on March 9, closed Monday at 8,764.49 -- a 34% increase.
If analysts worry that rising oil prices could jeopardize recovery, why would this spike in petroleum coincide with a rising stock market? One possibility: Inflation. . . .
The Dow gains of the past three months may also be a product of inflationary pressures -- the price of stocks going up because the dollar is worth less. And maybe this explains those uncountable jobs "saved or created" while unemployment keeps going up.
Treasury Secretary Timothy Geithner says "the global storm is receding." Expect a new storm if investors become convinced that inflation is fueling a Ponzi recovery.
Please read the whole thing. If even shrewd analysts are puzzled by "the current weirdness," the rest of us need to be paying attention.

(Cross-posted at Right Wing News.)

UPDATE: When Von at Obsidian Wings talks about Obama's deficits, note the reaction:
Other commentators argue directly or indirectly that Obama's deficits don't matter because Bush also ran deficits (albeit smaller ones). That's illogical: two wrongs don't make a right; if anything, Bush's irresponsibility counsels for greater -- not less -- responsibility on the part of Obama. Attacks on me as a purported Bush supporter also don't change the facts . . . They additionally overlook the fact that I never voted for Bush.
Allowing political beliefs to cloud your vision of economic reality is a major problem. Given my oft-stated belief that Obamanomics is doomed to failure -- It Won't Work, The Fundamentals Still Suck, Economics Is Not a Popularity Contest and we're on The Road to Weimar America -- I'm obviously inclined to believe that the light at the end of the tunnel is an oncoming train.

Nevertheless, while diligently auguring for auspices of doom in the economic entrails, I'm trying to check my pessimistic biases at the door and entertain the possibility -- however remote -- that the inherent dynamism of the American economy can overcome even the Keynes-on-steroids interventionist approach of Obama, Pelosi and Reid. We may yet muddle through somehow.

Conversely, idolators in the Obama temple cult viciously denounce heretics like Von. To disbelieve in the miraculous power of Hope, to doubt the unicorns-and-rainbows promises of painless Change, is to invite banishment to Outer Darkness. We recall the fate of Soviet scientists who questioned Lysenkoism in the Stalin era.

If faith in The One requires the faithful to ignore all dispositive evidence, what is the likelihood that the faithful are right and the heretics are wrong?

5 comments:

  1. When Obama is in his 8th term as Emperor-in-Chief and we're all huddled around our burning houses to stay warm, Barry's true believers will still be blaming all their problems on Bush. It's actually quite creepy, this way beyond a man-crush thing.

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  2. I think oil prices might also be explained by expectations that the economy is improving - IF the economy is getting better, that indicates greater future oil consumption, which will fuel speculation on oil futures, which will force prices higher.

    Note that none of this depends on the economy ACTUALLY getting better. It's just what oil speculators think might happen.

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  3. Nevertheless, while diligently auguring for auspices of doom in the economic entrails, I'm trying to check my pessimistic biases at the door and entertain the possibility -- however remote -- that the inherent dynamism of the American economy can overcome even the Keynes-on-steroids interventionist approach of Obama, Pelosi and Reid. We may yet muddle through somehow.

    I have hope too.. but it's going to be a LONG and tough two years before any real check or balance might be possible.

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  4. "The current weirdness" is SO very apt. As a center-left kind of guy (aka "realistic liberal"), I'm just in fog right now. Does anyone in Washington have the "smarts" and "cajones" to get up in front of we regular Joes and Janes and EXPLAIN everything financial with charts, presentations, animations, etc? That is what is scaring the heck out of me. ALL this cash flying around and I don't know who, what, where, when, and why!

    I through with Blame Bush. How about "Blame Everyone So We Can Suck It Up And Make The Hard Choices". My wife and I have already downsized our life considerably. We have gotten ourselves into good physical shape as well. Why? Because like it or not, hard choices are coming and we all better be up for it. Dreamers need not apply at this time.

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  5. As someone who trades for a living I'll just say that it has little to do with supply and demand. It's an inverse play on the weaker dollar. It's actually up abt/ 100% from the bottom and down 50% give or take from its last top.

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