The 'Claude Rains' recovery

There is no economic recovery, and there will be no economic recovery this year and probably not next. Yet the media, mainstream economists and the Administration insist we are in the midst of one. Things are definitely getting better, at least according to them. This concerted propaganda effort is reminiscent of a major Madison Avenue advertising campaign designed to wear down the resistance of the targeted buyer. The campaign is not based in reality. Its success is dependent upon three things: 1) constant repetition; 2) the public's short memory span; and 3) the public's economic illiteracy.

As time passes, however, more data appears and contradicts the "advertising" message. Spinning the data becomes harder and harder to do. Daryl Montgomery provides an excellent article detailing the inconsistencies of the data with the claims of a recovery. He states:

A number of economic reports in the last few days indicate that the U.S. economy has not only not failed to recover from the recession, but continues to fall deeper into a hole. Banking, consumer confidence, employment numbers, durable goods and the housing industry - each representing a different aspect of the economy - are all sending out troubling signs. Despite the onslaught of negative data, mainstream economists continue to echo the official U.S. government view that "the recovery is still on track."

For an old movie buff, each spinning provides a "Rains moment." No, supporters do not express "shock" when data is outside their desired parameters. Rather they use institutionalized double-speak to provide their cover. Negative results are "unexpected," "likely to reverse next month," "due to seasonal adjustments," "highly unusual," etc. etc. Whether the reporters and analysts are Rains fans or not, their shtick looks like it originated in the movie Casablanca.

The campaign is failing with the public. The continued repetition of the data is drowning out the "Joe Isuzu" government campaign. To paraphrase that great economist, Marx (Groucho, that is), "what are you going to believe, the data or what I am telling you?"

Montgomery concludes his worthwhile read:

There is little evidence that the U.S. economy has recovered from the recession or is going to recover from the recession anytime soon. The support for the recovery viewpoint comes from government statistics that have been highly manipulated. All governments, of course, want to present a rosy picture of their handling of the economy for political reasons and it is much easier to make the numbers better than it is to actually make the economy better. Eventually the public catches on to this game, however. The recent consumer confidence numbers indicate that the American public is no longer buying the public relations story, but is starting to pay more attention to the realities they have to face on a day to day basis.

Monty Pelerin www.economicnoise.com