Economic & Political Uncertainty

As usual Rate-Watch’s Lou Barnes is spot on with his political and economic analysis. We’re going nowhere fast.

The dominant economic/financial commentary has us in strengthening recovery, and a serious minority says we are near new recession. Both are correct and mistaken.

Begin at the very beginning, circa 1990, when the entrance of China into global markets began to undercut Western wages. We were still so rich that we didn’t notice. A dozen years ago we found it easy to borrow to maintain our standard of living, until the whole shebang hit the wall from Anaheim to Athens.

In the last five years the Fed and European Central Bank have prevented a collapse of the financial system, buying time until we get our affairs in order by other means, which we have not gotten around to. We are in Central Bank ICU, and all the beeping and hissing and hoses and lights and dials has us confused and forgetful about how we got here, and no, we’re not just going to hop out of bed and jog five miles. It is very good news that new unemployment claims have fallen near normal at 350,000 last week, but that is not the same as hiring (next Friday we get that).

Our twenty-year decline in real wages may have concluded, and maybe not; new jobs when they come may pay better, likely not.

Consumer confidence reached the highest level since March 2009, but it hasn’t been a fun three years.

Orders for durable goods had a terrific Nov-Dec, and then tanked 4% in January.

Auto sales had a terrible January and red-hot February.

The ISM manufacturing index was supposed to continue a positive run from January’s 54.1 and instead plunked to 52.4 in February.

January personal income rose a tepid .3%, and spending only .2%.

An astounding number of “analysts” see a housing recovery (NONE at the Fed). Case/Shiller’s newest home price index stone-dropped 3.8% in the last 90 days of 2011. CoreLogic reported yesterday that 27.8% of mortgaged households are under water or nearly so, no progress at all. Connecting the two stories in a miracle of arithmetic, falling prices create more underwater households. Got that, cheerleaders?

Nothing above describes self-sustaining recovery, or new recession. Just ICU. To escape — get our affairs in order by other means — requires our own concerted action by public policy. No part of our political process (except the Fed) got anything done last year, or the year before, or will this year.

This is an election year. Oh, boy. By mid-year 2011, Mr. Obama had lost by 2:1 the confidence of the independents who put him into office. Then, Tea Party misbehavior in the budget battle, and six months’ revelation of the Republican underbelly in all its nomination-season glory, and independents now favor Mr. Obama 2:1. Still,

Mr. Obama sees the world through a golden haze of self-congratulation. Saved the country from Depression II. (The Fed had that done before you sat down). Now uses Ron Reagan’s “America is back!” (Pardon, sir; but back where, exactly?) Hard Lefties are a pain: Nanny-State intrusion, and grabbing at wallets not their own.  But, from William Jennings Bryan forward, given a choice between a guy with too-bright eyes and a special pipeline to the Almighty, and anybody else, we’ll take anybody.

The doubtlessly capable Romney lacks the charm of Richie Rich and will have to drag a Hard-Rightie ball-and-chain wherever he goes, even though they hate him. We are a democracy, and the next nine months’ circus will be about us.

Foolish partisanship among candidates is a reflection of us. Candidates who will not speak to real issues in authentic ways… they won’t until their focus groups and polling say we want them to.

There is nothing wrong with our system, just us, and our refusal thus far to acknowledge that twenty years ago the world moved on without us. Compete in the world, and live within our means: if we look interested in that discussion, there is no telling what competition of ideas might break out among candidates.

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