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Of Green Shoots and Broken Windows

By Rick Ackerman Posted on September 23, 2009, 4:12 am EDT Last Updated September 23, 2009, 7:01 pm EDT

Our memory stumbles whenever we try to recall any recent sightings of “green shoots” that would support the officially promoted illusion of a U.S. economy in recovery.  Actually, this vision is more of a hallucination than an illusion, since one’s mind needs to venture beyond the pale of rationality, light years beyond the fringe of statistical evidence, to conjure up supposed signs of sustainable growth. Does “recovery” square with the reality that you, personally, see all around you?  Indeed, whatever picture the government and the news media want us to see will be unconvincing at best, since a hundred million Americans are each day living the anecdotal evidence that flatly contradicts what we are being told.  How many of the 50 million homeowners who are underwater on their mortgages, for instance,  jumped for joy when it was reported yesterday that home prices in the U.S. rose 0.3% in August?  Optimists would say it’s the trend that matters, but realists would point out that at that rate, it will take a decade for prices merely to return to where they were before the housing market collapsed.

Window

Someone in the Rick’s Picks forum said the news media were in cahoots with the government to sell us on the idea that America’s worst downturn since the 1930s has ended. Speaking as a former newspaper reporter and editor myself, I have a more boring theory — that journalists are simply too lazy intellectually to pursue a story line that doesn’t perfectly fit the Administration’s script. With some cursory background reading in Econ 101, they could nail Greenspan and Bernanke to the wall for their lies and sometimes appalling economic ignorance. But that would be a far more difficult story to write than the ones that flow so easily from the government’s press releases and speeches. Journalists’ other big problem is that 95% of them are hard-core liberals for whom Big Government, warts and all, will always be the answer.

Bastiat’s Parable

Many of the reporters I’ve known have been very intelligent, but where economics is concerned, they seem incapable of understanding Frederic Bastiat’s so-called broken window fallacy. Bastiat’s parable, written in 1850, describes (from Wikipedia) “a shopkeeper whose window is broken by a little boy. Everyone sympathizes with the man whose window was broken, but pretty soon they start to suggest that the broken window makes work for the glazier, who will then buy bread, benefiting the baker, who will then buy shoes, benefiting the cobbler, etc. Finally, the onlookers conclude that the little boy was not guilty of vandalism; instead he was a public benefactor, creating economic benefits for everyone in town.”

And so it is for all those who continue to see Government as America’s economic benefactor — nay, savior. Would someone please explain to such as the New York Times, the Wall Street Journal, and other zealous purveyors of green shoots where, exactly, the fallacy lies.

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  • Rich September 25, 2009, 12:07 am

    Bastiat’s Broken Window of course puts to lie the Academic Shibboleth that FDR taking US into WWII got us out of the recession, and exposes the harvest of simultaneous wars in Afghanistan, Iraq and Pakistan with a broken US economy…

    Speaking of Henry Goldman Pulitzers (he got his law degree before Bloomberg) and editors spiking stories at the order of media mogul owners or advertisers, Julian Robertson gave an excellent half hour interview with Erin Burnett of CNBC.

    JR sees 15-20% interest rates, still fighting the last war of inflation, not realizing that when we add nominal rates to the -33% drop in durable goods imports and production (DRYR down -53% since May), we have the highest real iRates in history. He used the phrases Pay the Piper and Almost Armageddon to describe how codependent we are on China and Japan.

    With Baltic Dry Index down -49% since June, China, Japan, Russia and the House of Saud UAE may tire of carrying USA trade and budget deficits and turn their trade surpluses toward domestic spending.

    Thus JR’s reco to buy the Norwegian Kroner, 10th largest oil proiducer, 4th largest oil exporter, 2nd largest pension fund, and richest country in the world with just 4 M people.

    We respectfully disagree. Our opinion is we may see another Leo Wanta style currency operation benefiting the dollar…

    Regards*All

  • Larry September 24, 2009, 2:42 am

    IMO it is just simple. Follow the FED! If they are easing(now) buy. If they are raising interest rates sell. When the Fed is easing or 0% short term interest rates now =buy PM. In 1980 it took 15% short term interest rates to kill the PM bull in 1980! We now have near o% short term interest rates! IMO keep it simple(kiss) buy pm when every one and his brother expects the correction!

    IMO with today’s 0% short term interest rate policy! I believe in KISS (keep it simple). I would never fight the FED with 0% short term interest rates! I believe in do not fight the FED. Everyone and his brother thinks a that PM are too high! That’s a why I am a buyer here. Let the Nerd’s figure it out

  • Corey September 24, 2009, 1:32 am

    I work in several big named stores in: home improvement/pharmacy/nationwide pet store, and I tell you, I don’t see any recovery happening. AND I live in an area where real estate has actually held up quite well. People aren’t falling for what the media is trying to “report” to them.

  • Robert Haymond September 23, 2009, 5:26 pm

    I’ve always enjoyed your columns, Rick, just for the literary merit alone and, of course, for your cutting comments, ability to see below the surface and the often sardonic humour. I used to ask myself: “Why doesn’t Rick write articles for bigtime magazines such as the Atlantic Monthly or Wall Street Journal (contrary as his views would appear to be)?” From today’s column we learn that you are a former journalist so it should come as no surprise with respect to the highly literate nature of your offerings although, of course, your efforts are still heads above the normal renderings. With appreciation, Robert Haymond.

    &&&&&

    Thanks so much for your kind words, Robert.

    Concerning why I stopped writing articles for big-time publications, it simply doesn’t pay well enough. Turning out a cover story for, say, Wired magazine, requires travel, a good month of research, and time spent writing the article. The freelance life works only if you are as prolific as Joe Queenan (who is in a class by himself).

    Nearly all of the reporters I knew from the early 1970s who had major-league talent eventually became lawyers. They realized early on that a reporter’s salary would never support a family. RA

  • david September 23, 2009, 4:10 pm

    Just a nit-pick, Rick, but to the greater general issue, nonetheless.
    For the mainstream media not to be in cahoots with government would not every journalist within it have to be intellectually lazy or feeble? More likely, passionate journalism has probably fled that big top scene for smaller alternative media where the chances of truth-based publishing could not possibly be worse.
    Besides, the following points are repeated in support of the idea of there being a “conspiracy” which, in effect would be no more than the expression of the mechanics of self interest writ large within a system of capitalized social power. First point: the Federal Gov has already shown us all that they are indisputably in league with Da Big Banks (clearly no effective separation of Law and Power within the U.S). Secondly, ALL major media are owned by a handful of corporations – corporations who have (or have had) enormous lobbying power with the government.
    As far as I can see the burden of proof would logically have to lie with those who propose anything but collusion. Media corporations have, at the very least, an interest in maintaining the Government by Banker’s View of the world – the alternative (the truth) would probably hurt those Media Conglomerates as much as the bad news of reality would any other large company that benefits from the Current Social Order – and which company might also be advertising its product or services in said media.
    “Buy Doublespeak now – more flexible meanings and less bothersome connection to reality; who wouldn’t want to talk this way?”

  • Ben September 23, 2009, 8:21 am

    ” Does “recovery” square with the reality that you, personally, see all around you? Indeed, whatever picture the government and the news media want us to see will be unconvincing at best, since a hundred million Americans are each day living the anecdotal evidence that flatly contradicts what we are being told. ”

    Well, let’s see… In the past hour, I’ve read three articles pretaining to unemployment.

    The first was about another sandwich-boarder landing himself in chains by offering to work for free. According to the story, this is why so many people are out of work… They just won’t be “outside the box thinkers” like this guy is! (And nevermind that without pay… ah, skip it. I’m pretty sure that anything said that is even remotely intelligent would be lost on these people!)

    The second story was about how a bad resume can hinder one’s attempts to regain employment status. According to this one, people are just too stupid to know how to write a good resume, and thus do not land all those outstanding jobs out that there just waiting to be taken. You here that? People are just writing bad resumes! (bitter sarcasm: Resumes are supposed to be in sandwich-board form, clearly stating that one will refuse to accept a paycheck. Either that, or a brick through the window, which will eventually see the job-seeker called, once enough are broken. One must get with the times, man! Think outside the box!!!)

    And finally, the third story. Seems a lot of poor seniors are having to exit retirement to hunt for a job because they’re just not making it on what little they have. The author made a thinly-veiled revelation in suggesting that age discrimination may be to blame (thus begging the question as to why blame was even mentioned at all, seeing as how nothing in the story said they weren’t finding work)

    So my conclusion is that this recovery is a recovery of total stupidity and denial, replacing that (shred of) pesky common sense and reality-comprehension that once stood in the way of, well… the recovery!


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