December 19, 2011
I think most people are simply oblivious to the enormous dangers the world economy faces. Oh, I think we will all get through Christmas and New Years without a meltdown, but all bets are off in 2012. A new acquaintance of mine told me last Friday, “Isn’t the economy getting better?” I just looked at her and shook my head in the negative. Then she said, “I guess if it was getting bad, the media wouldn’t tell us the truth.” I shook my head in the affirmative. My new friend is 75 years old and gets a Social Security check every month. She’s pretty sharp, but I don’t blame her for being misinformed. She gets her news the old fashioned way—from the mainstream media (MSM).
There is no wonder so many are in the dark and completely unprepared for the next crash. The front page of USA TODAY, last week, touted a headline that read: “Are We There Yet?” The article said, “The economic signs are encouraging, but we’re a long way from a comeback.” It covered recent upticks in auto and home sales. It also said the unemployment rate recently fell to “8.6%.” The USA TODAY story went on to say, “Although the decline was partly due to a 315,000 drop in the labor force as discouraged job seekers simply gave up, employment is up an average 321,000 a month since August, according to the Labor Department’s household survey. Most encouraging: Much of the hiring appears to be by small businesses, which typically fuel job growth in a recovery.” Wow, the fact that 315,000 people “simply gave up” seemed completely glossed over. Why did more than 300,000 people give up? Maybe it’s because there are precious few jobs. And what about the 400,000 people every week filing unemployment claims? Never let the facts get in the way of positive spin to please the advertisers. The USA TODAY story closes with a business professor who said, “I have a lot of confidence in the future.” (Click here for the complete USA TODAY story.)
I am happy for him, but for a little balance and more accurate reporting, maybe the newspaper could have also quoted an economist who wasn’t so optimistic? John Williams of Shadowstats.com can provide that balance. In his latest report, Williams calls the recent unemployment numbers “nonsensical hype,” and “. . . help-wanted advertising has been in monthly decline since May of this year.” The report goes on to say,“November retail sales and industrial production both showed renewed faltering in the U.S. economy, reflecting the impact of the structural impairment of consumer liquidity. Although the headline CPI inflation number was flat for November, underlying detail showed the still spreading impact of high oil prices. Inflationary pressures continue to be from Federal Reserve polices, not from strong economic activity. As the Fed increasingly is pushed to support the banking system, the central bank’s actions should accelerate the pace of U.S. dollar debasement, as well as the pace of rising U.S. inflation and precious metals prices.” (Click here for the Shadowstats.com home page.) Inflation, by the way, is running at 11% annually. (According to Williams, that would be the true inflation rate if it were calculated the way Bureau of Labor Statistics did it in 1980 or earlier.)
The economy is so weak, the Fed is going to be “pushed to support the banking system!” That means the Fed will print money to continue bailing out the banks, and not just the banks here, but overseas as well. The Fed recently opened up a new round of bailouts for European banks with what are called dollar swaps. The head of the International Monetary Fund (IMF), Christine Lagarde, warned last week of the global damage that could happen if the sovereign debt crisis in the Eurozone spun out of control. FT.com reported,“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating.” (Click here for the FT.com story.)
One escalation could be the long rumored credit rating cut of French sovereign debt. The Guardian UK reported over the weekend, “France could be stripped of its triple-A credit rating before Christmas, raising new doubts about the survival of the euro, analysts have predicted. Standard & Poor’s – one of the three top rating agencies – is expected to cut France’s rating within days, in a move that would weaken its ability to raise funds on financial markets.” (Click here for the Guardian UK story.) A rating cut to Europe’s second largest economy is not a sign of a turnaround—quite the opposite.
Finally, the USA TODAY story mentioned housing making a significant comeback next year. The story said,“After adding virtually nothing to — or subtracting from — economic growth in recent years, “You’re talking about housing finally being a meaningful contributor to the overall economy” in 2012, Mesirow Financial’s (Diane) Swonk says.” I guess the editors didn’t think it was important to mention the gigantic ongoing foreclosure crisis in the U.S. On the same day as the USA TODAY story was published, CNBC reported, “Despite a seasonal slowdown in overall foreclosure activity, and a process still bogged down and backed up by the “robo-signing” processing scandal, the U.S real estate market is about to be hit by another surge of bank repossessions, according to a new report from the online foreclosure sale site RealtyTrac. As banks resubmit millions of documents and courts begin hearing cases again, the backlog of over four million delinquent loans will start surging through the pipeline again.” (Click here for the complete CNBC story.) What effect will these foreclosures have on home prices and retail sales? I’ll bet it will not be positive for new home sales.
Listen, there is nothing wrong with putting positive facts or quotes in a story, but when you ignore something as big as a foreclosure crisis with “more than four million delinquent loans,” you are not writing an unbiased story. You are creating propaganda that gives a completely false picture of the economy. If you are reporting the news, your job is not to make people feel good. It is to give them the facts and analysis that delivers a clear picture of what is truly going on. The MSM is simply not doing its job. In the next meltdown, the excuse “Nobody saw this coming,” will not be credible and neither will the MSM. After all, that was what they said in 2008.
This article was posted: Monday, December 19, 2011 at 4:33 am