PrintOctober 21, 2008
Strange Economic News
Every breaking story about the economy is just chock full of bad news. Or should I say bad speculations? When it comes to real data, the bad news would rather play hide and seek.
The last quarter we have real data for was the second quarter -- the one that ended in June. And GDP growth then was 2.8%. In fact, it was positive for the first two quarters this year (January through June), and the only two quarters we have real data on so far. That, my friend, is not a recession -- yet.
And the latest unemployment report? Unchanged in September . At 6.1%, not great, but it could be worse and at least it didn't go up. Also, oil prices are falling, almost like a bubble popping.
And now what do we hear? The latest leading economic indicators went up when they were expected to go down. The AP reported that the Conference Board's monthly forecast of future economic activity rose 0.3 percent, a better reading than the 0.2 percent drop expected by Wall Street economists surveyed by Thomson/IF.
It sure seems like every time a stock index goes up it is attributed to something the government did -- bail somebody out, buy some private assets, ease some rate, etc. But every time it goes down it is attributed to something in the real economy -- the unemployment report, for example.
But funny thing, after the big $850 billion bailout was signed into law, the S&P 500 index fell every single day for five days straight, for a cumulative loss of 18% in just one week. But news reports didn't blame it on the bailout. The losses were attributed to this or that piece of economic data, like unemployment holding steady. Huh? Talk about an elephant in the room.
On this Monday, the market was up 4.8% in one day. The reasons given were the prospect of another government stimulus package, that the bailout was reviving credit markets, or that the Federal Reserve was fixing to do some more good stuff.
But something else happened on Monday: the latest economic indicators were released, showing positive and better than expected numbers.
I'm beginning to suspect something: there ain't no damn recession.
I could be wrong, of course. But now, after the government has signed onto $1.8 trillion worth of bailouts, announces some new government goodie almost every day, and all but ushered Barack Obama into the White House, it's no longer the same ball game.
If I didn't know better, I'd say we just handed a trillion bucks of fun-money to Hank Paulson and his successor for no good reason.
