Wednesday, January 19, 2011

Asinine Elitist Blindness

Caroline Baum at Bloomberg has a remarkably asinine view of increasing US GDP while unemployment remains high:

In her columns, she writes:
Bloomberg columnist
Caroline Baum
The pieces just don’t add up. Credit card debt outstanding has fallen 27 straight months for a total decline of $177.2 billion. The unemployment rate has been stuck above 9 percent for 20 months. Average hourly earnings rose 1.9 percent in 2010. Personal income rose less than 4 percent in the 12 months ended November. About 23 percent of homes with mortgages are worth less than the amount of the loan. Faced with these not insignificant hurdles, what did the U.S. consumer do? Why, he spent like there was no tomorrow.
[ . . . ]
There’s another possibility that would better explain the inconsistency between weak job and income growth on the one hand and robust spending on the other.
“I think a credible case can be made that income and employment are being understated,” says Joe Carson, director of economic research at AllianceBernstein.
Then Ms. Baum goes on to “prove” this by using Treasury data on withheld income tax receipts, which rose 17%. Then, in order to strengthen her case, she questions whether the Bureau of Labor Statistics—which a lot of commentators, including The Hourly G, credibly argue severely under-reports unemployment—might in fact be over-reporting unemployment.

In other words, according to Ms. Baum, with rising spending and rising Treasury tax receipts, the unemployment might really be getting better, as the recovery takes hold!

Hurray! . . . is Ms. Baum’s thesis.

There is, of course, another possibility—and a rather obvious one at that:

The wealthy are earning more and spending more, even as the poor, the working poor and the middle classes are less well off, and the pool of unemployed workers is expanding. 

All we need do is look at this Dec. 23 article—from Bloomberg, Ms. Baum’s home—to see that her thesis might be . . . well, let’s just say a bit off the mark:
Sales at U.S. Wal-Mart stores open at least a year fell 1.3 percent in the quarter ended Oct. 31, the sixth straight quarter of decline, as traffic shrank from last year.
So much for spending more. 

As to earning more? Well, why is it that there are more people on food stamps than ever before? About 14% of the U.S. population, to be precise: 43.2 million people. 

Maybe the well-to-do, the rich and the very rich are earning more and spending more. But the hoi polloi?  The uncleaned rabble? Not so much—and just about every metric proves it. 

Maybe Ms. Baum doesn’t realize it, but she does sound like a cheerleader for the ancien rĂ©gime.

And we know how those poor unfortunates ended up. 

9 comments:

  1. "...the inconsistency between weak job and income growth on the one hand and robust spending on the other."

    Some of those who have foresight, and still have some cash, are spending it for staples to be placed in storage, because they foresee that the exchange value of the dollar is diminishing, and likely to go down much more in the next year or so.

    And most of these people want to get the most for their money, which often means buying foreign goods -- hence little contribution to job growth in the US.

    ~Laozu

    ReplyDelete
  2. In Cuba, circa 1960, when people realized that their money was going to be stolen, they spent their pesos very quickly.
    It looked like the economy improved, for a while.
    Then all they had was "given to the people" aka stolen.
    Maybe people in the US are now realizing that inflation is coming.
    Many are buying precious metals and staples as a precaution.
    In addition since true inflation is running at about 7% that will make it look like the economy is improving.
    Maybe Ms. Baum is confusing this activity with an improved economy.

    ReplyDelete
  3. GL - you are also missing the option that increased spending is provided via loan defaulting, spending the money the banks usually get, thus boosting retail and tax receipt and supporting employment (or preventing further collapse).

    What I think we are seeing is a delayed recession caused by mass-default spending raising aggregate demand. The Consumer Metrics Institute data still show that a recession in an online spending sense is actually still occurring. I think this is due to credit , which is required for online purchases, is no longer available, as it was.

    The result is spending is maintained because people default on maxed-out cards, and just spend the loan or C-card payments - but not online. They go instead to a real store and buy from discount sales, rather than spend online. The discounts are good because the economy is actually shot to hell.

    And the banks are going broke as a result.

    But the Fed makes sure they don’t actually implode. Thus the zombies still walk the Earth, even with mass defaults.

    The bankruptcy rate is not rising (lagged, as it was after the 2001-2002 Tech-wreck equity collapse recession, and others previous), simply because people have not lost all faith in the whole corrupt system, due to the TBTF criminality.

    So they don't even bother with the legal formalities of BK processes. They don’t see credit default as sordid, or improper, for the very same reasons. TBTF, Fed and Govt corruption.

    And let’s not forget, the total absence of formal accounting in the USA of any credible sort for the bankers, so what the heck is a ‘loss’ to them, when they aren’t even counting anymore, and don’t give a damn about having a credible balance sheet?

    ReplyDelete
  4. Yes, I hear the hiss of the files across the edges of the sharp implements.

    ReplyDelete
  5. I know of 3 couples (friends) who have not been paying their mortgage for a year. Thats an extra $3500 per month they have to spend.

    This is happening all across America, so many people are not paying and spending the proceeds.

    It is only a matter of time before it all ends, and they have to face reality, and that includes Banks, Government, States, Wall Street etc.

    Again its spending without the means...

    ReplyDelete
  6. GL!

    love the new hourly g! keep it up, man!

    aight, so if my workplace is a viable microcosm of shit going down across the u.s.a. (and i really like to think it is), then i can relate a few things here to miz baum

    (however, any objections on the grounds of "anecdotal evidence" are totally sustained, as i am open to the possibility that my own experiences may differ from the greater reality around me -- i'm calling it as i'm seeing it)

    "Credit card debt outstanding has fallen 27 straight months" -- this is not because everyone has suddenly taken their family-movie-night-money and thrown it at their credit cards instead .. .. this is because people are just saying "screw it" and deciding not to pay their credit cards or *insert other line of credit here* at all -- chargeoffs (when a bank decides they can't collect on a debt or a negative account balance, and writes it off as a loss) are sky-high, i have seen this firsthand .. .. anything that claims that americans are _willing_ to lower their standards of living for any reason is bullshit

    "Average hourly earnings rose 1.9 percent in 2010." -- this happens when employers let go of their low-wage, entry-level staff .. .. i am seeing this with a good frequency as well, so when it comes time to crunch the payroll numbers, _the_average_wage_goes_up_ because the lowest earners have been cut loose and no longer count in the payroll numbers! i have yet to see any of the higher-ups around here bite it, so with far fewer low-wage earners around to weigh down the numbers, of course the average wage goes up!

    “I think a credible case can be made that income and employment are being understated,” -- wow, dude .. .. just .. .. wow .. .. i laughed so hard when i read that, you really dug up a gem here man!

    what's next? "the solution lies in passing legislation that requires all celebrities to autograph pieces of property until asset values have risen to a sufficient level"?

    even if they do that, i suspect we still have farther to fall dude

    cheers

    -- j.j. from pittsburgh

    ReplyDelete
  7. Sorry. I don't think you remembered that the ancien regime returned in full triumph on 1814, 'having learned nothing and changed nothing'.

    The Bourbons ruled in pomp and luxury until 1848, and after another Napoleonic interlude they almost returned to power.

    The ancien regime only ended when the last Bourbon died without issue in the 1870s.

    The current asinine elitists still have a long way to go. Sorry.

    ReplyDelete
  8. In December 1958, the Cuban peso traded one to one with the US$. By 1961, it traded on the black market 28 to one.

    The only real currency today is silver and gold. everything else is fiat.

    ReplyDelete
  9. Well, Rick, that was because of a little chap named Fidel.

    ReplyDelete

Knock yourself out!

The cult of stability is a culture of death.