Wednesday, July 07, 2004

Dept. of Idiots: Lemming Economists Rush Cliff

Now you would think if you've been reading oldman's blog about the economy, that the picture is very clear despite otherwise distorted statistics and the outlook is stangant to gloomy. Threats from monetized inflation to debt service to speculative asset inflation all threaten to take out the legs from underneath the economy. Various sources from both the real world and from the world of economic statistics support the notion that the economy is poised for a slow slide at the very least.

This would all seem very obvious and there isn't any need to belabor the point right? Well you would be wrong. The news out there isn't that things are rocky. No, according to the consensus they're not just okay they're great!!! (ABC-news)

Analysts: Banner Year Ahead for Economy
Economy Appears Headed for Biggest Growth in Two Decades Despite Spike in Interest Rates

The Associated Press

WASHINGTON July 7, 2004 — The economy appears headed for a banner year despite a springtime spike in energy prices and a recent increase in interest rates.
In fact, many analysts are forecasting that the overall economy, as measured by the gross domestic product, will grow by 4.6 percent or better this year, the fastest in two decades.

There were strong 4.5 percent growth rates in 1997 and 1999, when Bill Clinton was president and the country was in the midst of a record 10-year expansion.

But if this year's growth ends up a bit faster than that, it will be the best since the economy roared ahead at a 7.2 percent rate in 1984, a year when another Republican president Ronald Reagan was running for re-election.

"We are moving into a sweet spot for the economy with interest rates not too high, jobs coming back and business investment providing strength," said Diane Swonk, chief economist at Bank One in Chicago, who is predicting GDP growth of 4.8 percent this year.

President Bush is highlighting the improving economy at every opportunity while Democratic challenger John Kerry has focused on what he calls a middle class squeeze of rising health and tuition costs and laid-off workers forced to take lower-paying jobs.

Who will win on the all-important pocketbook issues? Economists aren't sure.

"It is unclear whether voters will remember the past year and the better jobs created during that period or the past four years," said Mark Zandi, chief economist at Economy.com. "It will be a close call and that is one of the reasons the election could be so close."

Assessing the economy at midyear, most private economists are sticking with the optimistic forecasts they had six months ago, even though inflation, driven by surging energy prices, rose higher than expected and the Federal Reserve started raising interest rates last month.

"We are looking for a darn good year despite the fact that we had a big jump in oil prices and interest rates are going up faster than people thought would occur," said David Wyss, chief economist at Standard & Poor's in New York. [emphasis added]

Did you hear that? This is a "sweet spot". It's going to be a "darn good year". No, 1998-1999 was a good year. This is a middling to stinking year. The irony is that the journalist quotes Zandi, who if you will recall in Businessweek just gave the lowdown with his assessment that if you don't have a job already, you're "stuck". Who the hell is blowing smoke at this story? The byline is Associated Press, so I suppose no individual will have to stand behind this story later.

Where do they get stories like this? Where do they get journalists willing to write them? Where do they get economists willing to blather about what they clearly have no clue about? GDP was revised downward for the last quarter. That indicates a loss of momentum, not a speeding up! The other statistics don't support it either, and reports from the ground level and corporate jobcutting vs. hiring don't support it either. Will some companies make fat profits? Sure. But Target and Walmart are already going wobbly on sales estimates. That does not constitute a "banner year" for the economy.

This is why the oldman is blogging about these topics. It makes sense when it comes out of my mouth, but then I stare in disbelief at people who have degrees in economics spitting out what is really horrible advice. And these aren't novices, these are chief economists for firms!!! These are the kind of people that give economists a bad name.

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