Government spending and the façade of a successful economy

Baltimore, Maryland – I’ve got to admit it’s getting better…
A little better all the time.

– The Beatles

Another Monday…another week… Are we getting better?

And what will this week bring? More evidence that things are improving?

On Friday we got word that consumer sales had fallen in May…from the month before. That is, they didn’t get better; they got worse.

It was no big deal except that the there’s supposed to be a recovery. And May was important. Because the major stimulus efforts are coming to an end. Economists wanted to see how the economy would hold up without the government holding it up.

Well, it didn’t hold up very well.

If the government gives you money to buy a house or to trash your car, well…if there’s enough money in it you go along with the gag.

But what kind of economy is it where the government gives you money to buy things? It’s a phony…a fraud…an imposter…

…the government is impersonating a successful economy.

And where do the feds get any money in the first place? One way or another they have to get it from you and other citizens/investors/taxpayers – the same people who didn’t want to buy the thing in the first place…

There is no question that many of the numbers were getting a bit better since the big blow up in ’07-’09. Unemployment was still getting worse, but not as fast as it had been. Housing prices seem to have stabilized after a big drop. And consumer spending had been gradually recovering.

The big question was whether the numbers would continue to improve as the feds’ stimulus programs tapered off. Was all that spending really stimulating the real economy…or just simulating one?

We got a preliminary answer on Friday.

Numbers are notoriously dishonest and unreliable. The 5 is obviously crooked. An 8 just takes you round in circles. And the zero? It claims to be nothing at all. But if it is nothing, why have a symbol to represent it? Something funny about it.

Numbers tell one story one month and another the next. One month the economy is in decline; the next it’s growing.

Remember, too, that the numbers are controlled by goons working for the Federal government. Can you trust ’em? We don’t.

We don’t trust any numbers. Not even the ones we made up ourselves.

But getting back to the markets, George Soros says they are ‘eerily’ similar to those during the lead up to the Great Depression. At first, of course, people didn’t know what to make of it. The US had the strongest economy in the world. It had surpassed Britain as the world’s biggest economy before the turn of the century. By 1929, the US had the world’s biggest trade surplus…its tallest building…its most profitable businesses and fastest-growing wages.

Imagine what it must have been like at the turn of the century. You get off the boat in New York. Your mouth drops open. There was not a single commercial building in the Old World that rose above 6 or 7 storeys. And here were hundreds of buildings up 20 storeys…30 storeys…reaching up so high, they called them ‘sky-scrapers’…

…People were building railroads and bridges…and new ‘auto-mobiles’…and electrifying the cities…

…and there just seemed to be no end.

This was the place to make your fortune! Everybody was talking business. Everybody was getting rich. And some were getting super rich.

It must have been like China today!

Then, when the US market cracked in 1929, people thought it just a temporary set back. They couldn’t understand or believe that the economy that had been such a great success for so many years could suddenly lose traction and begin slipping backward. They thought it was improving… They thought it was getting better…

Did you read those comments we quoted last Thursday?

Take another look. They show you how hard it is to realize when things have turned a corner…when they’re NOT getting better any more….

“While the crash only took place six months ago, I am convinced we have now passed through the worst – and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.” – Herbert Hoover, President of the United States, May 1, 1930

“…by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent…” – Harvard Economic Society (HES) May 17, 1930

“Gentleman, you have come sixty days too late. The depression is over.” – Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930

“…irregular and conflicting movements of business should soon give way to a sustained recovery…” – HES June 28, 1930

“…the present depression has about spent its force…” – HES, Aug 30, 1930

“We are now near the end of the declining phase of the depression.” – HES Nov 15, 1930

“Stabilization at [present] levels is clearly possible.” – HES Oct 31, 1931

“All safe deposit boxes in banks or financial institutions have been sealed…and may only be opened in the presence of an agent of the IRS.” – President F.D. Roosevelt, 1933

If we had more time, we’d find quotes from the current era too. Right now, we can only remember a couple of lines from Henry Paulson. When the “subprime” mortgage debacle began, he said it was “contained.” And then, when it became obvious that it wasn’t contained at all, he told the public that he couldn’t imagine any “scenario in which the public would be called upon to bail out Wall Street.” Practically the next day, Lehman Bros. went broke and the biggest taxpayer-financed bailout in history began.

And now, these same people tell us that the economy is improving…that it is getting better. And they’ve got the numbers to prove it!

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