As economic diaries duel daily here at DailyKos, there seems to be an increasing disconnect between competing camps.
On one side are the Green Shoots crowd, who look at traditional economic recoveries and focus on Leading Economic Indicators to show that we're at an inflection point where economic growth may resume.
In contrast to them are many who feel that the news we're getting feels downright Orwellian.
In Orwell's classic Nineteen Eighty-Four, we met a Ministry of Peace fighting an endless war, a Ministry of Love in charge of torture and a Ministry of Plenty tasked with rationing. Every claim of rising living standards made by MiniPlenty was false or exaggerated.
Orwellian propaganda comes easily to mind. War is peace. Freedom is slavery. Ignorance is strength.
In our era, the Oceanic government would add a slogan - Debt is Wealth.
Even those who see green shoots sprouting in the wasteland to the Great Recession admit, quite frankly, that there's a huge difference between an inflection point, where economic activity starts increasing, and a recovery that starts creating new jobs. Here's a representative comment from bondad.
So overall things are improving. However this does not mean we are out of the woods. There is no reason to think the expansion will be strong. As I have stated growth above 2% won't happen for awhile and we can expect unemployment (which lags GDP growth) to be high for the foreseeable future.
There's another camp that sees our current economic situation as more of a reset or collapse, very different from any other postwar economic cycle. There are many skeptics, with many strong arguments.
The Ministry of Plenty
The skeptics are deeply distrustful of many of the basic numbers that come from the nation's economists, including the inflation reports, the unemployment numbers, statistics on the money supply, et cetera. And they have plenty of reason for their lack of faith. Employment numbers have been skewed for years by the Birth/Death adjustments, Inflation has been systematically underestimated, and statistics on the money supply are suspect since the government stopped reporting M3, the broadest measurement in 2006. I could go on, but there's a tremendous distrust of the lords of finance, kleptocrats who invited us to the dance, only to steal our shoes and amputate our feet.
A Collapse, Not a Recession
Beyond distrusting reports, some yellow shoots folks see fundamental problems that make this economy very different from past recoveries.
The arguments vary, but they center on the causes behind both the bubble and the downturn, where the level of leverage was so extraordinary, and the economic activity lost was so great, that we're looking at a major reset of our economy as we deleverage. We borrowed and spent exorbitantly at every level, on an individual level and a corporate level, here and globally, in a frenzy of greed-based insanity. We've nationalized some of that debt, but it remains, and the economic activity it spawned won't come back. Now we're tracking a Great Depression Scenario and ultimately The Economy is Worse Than You Think
I'm in the reset/collapse school of thought, but my viewpoint is heavily influenced by my extreme pessimism about the California economy, where I don't see a single sector that's turning. The huge job losses in finance, insurance, real estate, construction, manufacturing, transportation, et cetera, are gradually moving into another leg down as schools, local governments, retailers, restaurants, and service industries scale down to accommodate lower demand, in a cycle that shows no signs of ending.
Debt is Wealth
Unfortunately, California had a strong percentage of our economy based on something called mortgage equity withdrawal, people borrowing against their homes, serially, and spending the money. Nationally, this House as ATM phenomenon peaked in Q42006 at 9% of personal income, but it was at a much higher level in California, NV, AZ, and FL and some regional bubble markets where the bubble inflated bigger and faster, with a lot more phony equity to tap.
As MEW tapered off in 2007, and screeched to a halt in 2008, many homeowners lost a big earner in their household that had reliably been bringing money in every year. Then they started losing jobs and getting paid less for the jobs they had. That's one reason why the Golden State is in such financial turmoil. State tax revenues have been going down since Q4 2006 at an increasing rate, with sales taxes down 12% and income taxes down 20% in recent reports from the state controller.
State and local governments are responding by cutting spending far more than the stimulus dollars coming in, which then lowers overall economic activity, so more people lose their jobs and homes, and we keep spiralling downward.
There's another group of arguments that center around the fact that our economy was built on inexpensive energy, and as the supply of easy-to-exploit petrochemicals has reached its peak production, while demand continues to increase, we have a completely unsustainable growth-based development model that will strongly limit growth. Peak Oil will throttle any recovery in its crib,
The Jobless Recovery
Finally, as one in five Californians, Oregonians, and Michiganers is either unemployed or underemployed, with no sector improving, there's a group of people who get really angry because they can see that a rising stock market, increasing consumer confidence, and a decline in the rate that we are losing jobs is completely irrelevant to what they call the real economy. After losing millions of jobs, what the hell difference does it make that we are now losing fewer jobs every month?
They may own no stocks, or have them tied up in retirement accounts, so they don't feel any richer when the markets go up, and they live in terror of losing their their jobs, health insurance, and their homes, frequently in that order.
They are struggling, and everyone they know is struggling, so it's like the economic news of imminent recovery is Orwellian double talk coming from the Ministry of Truth.
And so we beat on, boats against the current...
If you expected a prescription for action or a wow finish to this diary, I don't have one.
Personally, we're moving to a new frugality in our family, trying to adapt to a world with less, where we use and waste less energy, water, and stuff, grow more of our own food, move around using human power more frequently. We're debt free, our grown sons are debt-free, we're affluent, but we're still scaling back for a lower consumption of the world's resources, It's a different life, better and healthier in many ways, with some great little bonuses like the fresh smell of line-dried sheets.