Building Confidence? Not in Greece

File this under small blessings: the index that measures real estate construction business confidence increased again. This is five straight months of gain. The mood of despair that marked so much of the last few years is finally, and very slowly, lifting. Please re-read that: the mood is changing very slowly.

The index has now risen to the giddy heights of 29 in February. That’s up from 26 in January, and is the highest level in four long and incredibly difficult years. The after effects of the bubble may be working off at last.

Of course it would be absurd to consider this achievement good. The index needs to hit at least 50 before we can allow the tears of joy to well up. The last time we were in that territory was back in the darkening storm year of 2006. But to get to 50 we need to get past 26. Which we have now done.

There is a strong argument to be made that we have now developed a housing shortage in some parts of the country. The collapse of construction has left us with a dearth of new homes – insufficient to keep up with population growth. So the prospect is becoming more sure for a slight burst of building as households gain in confidence, employment picks up, and as interest rates stay low. The post bubble decline in prices adds to the more advantageous market conditions, and, no doubt, is also adding to builder confidence.

As I said: this is a small blessing. But it is non-trivial. The economy is showing broad based signs of recovery. Far more so than during the false dawns we have experienced since the crash. This one is for real. Albeit it frustratingly slow.

Meanwhile – and of-topic – spare a thought for the Greeks. Their economy is still shrinking at an alarming rate. It has declined for four straight years and shows no sign of growing any time soon. The drop from its last peak is now over 14% of GDP. That counts as a depression. It is certainly depressing to contemplate. Unemployment is rising, businesses are disappearing, and prospects dimming by the day. The policy response is making all this much worse. There will come a time – if it has not already arrived – when the platitudes of the media will no longer suffice. The only reason to continue to shrink the economy is that the alternative, a default, is worse. But the social cost of either is getting perilously close to being even. At that point people would be indifferent between the disaster of current economic policy and the disaster of outright collapse. No one should blame them for rising up and choosing default. At least in the ensuing chaos they stand a chance of ridding themselves of the tight knit cliques and rotten closed shops that brought about the decline. The people of Greece have been ill-served by their backward looking leadership and out of date social institutions. Overthrowing the system may be the most constructive way forward. Advocates of red blooded capitalism will surely agree: what’s not to like about some creative destruction? Especially when its the oligarchs being destroyed.

Or am I confusing Greece with US bankers?

I can dream can’t I?