Big news yesterday:
“Jobs report dashes hopes on recovery,” says the International Herald Tribune this morning.
Yes, dear reader…once again, we’re right and they’re wrong!
You’ll recall from yesterday, the feds said that their monster stimulus program would hold unemployment below 8% in 2009. The year’s not half over and the rate is already 9.5%.
Then, they said the numbers were getting better each month – inevitably leading to a recovery by the end of the year. They predicted a loss of 365,000 jobs in June – considerably fewer than in May. Instead, the figures – even after they had beaten them up – said 467,000 jobs had gone, which was considerably more than May’s figure. The important thing is that the trend that economists thought they were watching – which was leading to a recovery – has been broken. Instead of fewer job losses, we have more.
Ha ha…we laugh at them. We mock them. We turn up our noses to show our contempt. We turn our backs and point to our…oh, never mind…
But wait a minute. What are we saying? Hold the self-satisfied congratulations, please.
Yes, we were right: there ain’t no green shoots. But we’re not vain and stupid enough to think we know what is actually going on. Only morons think they know what is going on. And the more sure they are – the bigger dopes they are.
Where, exactly, is this economy headed? How is it going to get there? When?
Damned if we know. (And damned if we don’t!)
Okay, now…shush…now that we’ve thrown the jealous gods off our case…we whisper to you: well, we actually DO have an idea of where this economy is going…which we will reveal to you, dear reader, in hushed tones, little by little. For starters, you have to realize: this is a depression. It is not a recession. In a recession, an economy gets a cold and has to take a little bed-rest. In a depression, an economy drops dead. Businesses go broke. The whole structure of the economy changes as the corpses are dragged away and new enterprises take their places.
Economists were 100,000 off on their jobless predictions because they still don’t really understand what is going on. We knew the predictions of a recovery were dumb. This is a depression – meaning, it is a major change of direction…not merely a pause in an otherwise healthy economy. After more than half a century of debt expansion, debt is contracting. Businesses, households, investors and the government need to adjust. And that takes time – a lot more than the 20 months of recession we’ve had so far.
It would happen a lot faster of course, if the feds weren’t fighting it every step of the way.
“Rise of the Zombies,” is a headline in today’s Financial Times. It tells a familiar and predictable story: the feds have propped up businesses coast-to-coast. Instead of being allowed to fail, they are kept alive by the government…and continue to take resources that could be redirected to more promising competitors.
But don’t bother telling the feds that. They don’t care. The old, worn out zombie businesses still make campaign contributions and employ voters. The businesses of tomorrow don’t. The present votes. The future does not.
for The Daily Reckoning Australia