Quiet Does Not Mean Well
As we drift slowly deeper into summer it is worth reminding ourselves that quiet is not necessarily a good thing. There has been nothing here in the US to compete with the extraordinary display of policy ineptitude throughout Europe. So our news has lurked somewhat offstage in the shadows of anonymity.
So it ought. The news has not been very good.
Take consumer confidence as an example. Today’s announcement by the Conference Board that its confidence index drifted down to 62 in June is surely not a good sign. This is the fourth straight month of decline and indicates that consumers are well aware of the continuing malaise that spreads across the economy like a morning fog. Only unlike that fog there is no sun to burn it off. Instead we linger in the damp clamminess of political inaction and astonishingly stupid, misguided, leadership. Remember, also, that the Conference Board’s measure of confidence routinely measures in the low to mid 90’s when things are going well. We are a very long and dreary way off those heady numbers. And while we remain thus stuck the political environment will only get more, not less, volatile.
The employment numbers have been truly terrible lately, so, presumably, consumers are simply responding to the general and steady trickle of rotten news. Wages are stuck. House prices have bounced slightly, but not much. Job prospects are grim. Investment languishes at low levels. State and local governments are trimming jobs like crazy – we have fired just over 300,000 teachers since the crisis began. Our banks are still weak. The economy is operating well below – by some measures around 5% – its capacity, meaning we are leaving about $1 trillion a year of wealth unearned. That’s a lot of income being left unearned. The list goes on.
It is this listlessness that we can legitimately call a depression. We are drifting through a prolonged period, in the current case about four years and counting, of below par growth associated with high long term unemployment, low investment, and a steady attrition of our prospects. We are well and truly rotting in place.
In the US the cause of the rot is mainly political. We have a dysfunctional political system incapable of engendering strong action. There are so many checks and balances that we cannot move at anything more than a snail’s pace. There is always a Senator or Congressman willing to stymie anything constructive, and our system gives them the power to confound the majority with any number of clever ruses, procedural gimmicks, and ideological bloody mindedness. Our system was built assuming some form of consensus, in the absence of which it just breaks down in a politicized bickering heap.
One of the ironies of our mess is that the policies that created the crisis are precisely those advocated by the group claiming to be most harmed by it. This produces the oddity of a highly vocal and extreme reaction from the already reactionary and extreme. They vector further away from the middle leaving the rest of us no hope of getting a consensus and thus no hope of breaking the deadlock that grips our politics.
It takes courage to break extremism. And our leadership lacks courage.
This is not so in Europe.
There the leadership is steeped in courage. It is courageously – to a devastating fault – stupid. It is defiantly destroying nation after nation. It has abandoned all sense of social justice and is hell bent on protecting its own self esteem. Having careened down an ill advised policy route, notably budgetary austerity, it now doubles down endlessly and avoids any semblance of retreat. After all that would to be to admit its error. And these are self-confessedly the great and tough minded elites of the various central banks and ruling political parties who know – absolutely know – that the only way foreword is to bludgeon the citizens of Europe with a withering bout of budget cutting, ‘restructuring’, and wage loss sufficient to protect the creditworthiness and reputations of the nations of whom those citizens comprise the citizenry. With youth unemployment hovering above 40% in some places it cannot be long before social unrest and political extremism sweeps in to upend the elite. Until then, the ruling class will courageously defy the evidence that it is hopelessly wrong and plunge on in the hope that the confidence such defiance surely will eventually inspire arrives, like the cliched cavalry, to turn the tide. And parenthetically save the elite’s well padded rear end.
I think Britain is the poster child of insanity at the moment. It’s leadership is pressing on undaunted with a series of policies that no manner of contrary evidence seems capable of convincing them of their error. And a massive error it is. By some measures this depression is worse than that of the 1930’s in Britain. That ought to be pause for thought. It isn’t. The government there marches on deeper and deeper into it self inflicted disaster with debt and deficits both going in exactly the opposite direction than that promised to the public suffering the consequences of the error. History, hopefully, will not be kind to the fools, and their inflated egos, in charge.
Meanwhile people suffer. Quietly for now. For how much longer that quiet remains I do not know. It is a shame, a horrible and tragic shame, that social upheaval may be the only way to convince the idiots comprising our elites of their error.
Yet it may come to that.
So that quiet pervading the economy is an illusion. It is not a good sign. Prepare for worse.
