Mission & Name
US Foreign Policy (Dr. El-Najjar's Articles)
Prospects of a quick economic recovery
are but fool's gold
By Ben Tanosborn
ccun.org, May 10, 2009
Hoping for better times – for some, even the return to
make-believe “yesterday” – has now become our prescribed daily medicine
dispensed through the mainstream media by our government via injections of
economic news or commentary. Confidence-building little white lies,
misleading insinuations or, often, absurd interpretations of statistical
data by Bernanke, Geithner, Summers, even Obama himself, are meant to keep
us, the blind citizenry, faithful to a bankrupt system… subservient to the
rulers of capitalist imperium.
And the gold rush is on with the
O’niners – those who see 2009 as the stabilization year for the markets and
the beginning of a running of the bulls in New Pamplona – seeing nothing
beyond the specks of gold in the global economic pyrite that surrounds us.
Never mind the reality of specks of arsenic in that pyrite, or the
irrefutable fact that pyrite simply isn’t gold – regardless how many fools
fail to see the distinction.
The economy is looking up, we are
being told by government and a few “experts” with identifiable loyalty to
causes or industries (such as Lawrence Yun, chief economist for the National
Association of Realtors), and behind every new sad story in the recession
there are those “glimmers of hope,” those encouraging signs that indicate
some magic imminent recovery… usually in the form of self-created indices
involving consumer confidence, inter-bank trust, and a deceitful stock
market. And to those three, coloring them to suit the optimists’
outlook, you may add figures involving housing starts; single-family home
prices; corporate earnings; jobless benefit claims; or inventory levels.
The idea is to show a silver lining for every cloud that appears on the
Any student of operations research, and I happen to have
received my early training in that particular field, would tell you that
most self-proclaimed experts on these indices use incomplete information,
often unable to distinguish between intervening and causal variables, to
render an opinion – preferably optimistic, because that’s what people wish
to hear – particularly if it appears historically supportable as it’s often
the case with financial and real estate markets.
single-family market, for example, an apparent deceleration in the rate of
price decline for homes should have little or no implication for an increase
in optimism… not when we may look at prices 1 or 2 years from now 10 to 20
percent lower, perhaps more. Nor do we have any clue as to what
“should be” the true inventory of houses in the market as many should be
sellers, i.e. retirees, wait out what they estimate to be a bad time to
sell. So that the reported 10 months inventory, as high as it may
appear historically, is not a reliable number… 12 to 16 months probably
closer to the reality of the marketplace. And, of course, we continue
to talk in terms of housing units, when the reality is that we should be
thinking more in converting to units of space-utilization since the average
home in a future economy is likely to shrink in size considerably.
Just as we have done with single-family dwellings, we can apply the same
type of analysis to corporate earnings… and the apparent positive take-off
to the fact that the deterioration of earnings has slowed down. So?!
Or, the absurd way of measuring unemployment, or the determination of
“appropriate” inventory levels, or even liquidity and confidence in the
To me, the most telling and significant index why
things won’t get much better in the short term is in our reliance on our
non-productive financial sector. We produce few goods and
too-expensive services (healthcare at the head of the list)… and six years
ago financial firms were taking 40 percent of the total corporate profit.
Yes, twice the percentage of 15 years before! The same firms that now
are being rescued by the people who have no clue in which direction the wind
Our post-mortem of the
financial collapse the United States has undergone, we are being told –
particularly by politicians and economists with a more liberal outlook, does
indicate that such collapse had to do with the nation’s failure to regulate
derivatives and hedge funds thanks to the deregulatory surgery performed by
villainous, conservative Senator Gramm a decade ago which in effect removed
Depression-era laws separating banking, insurance and brokerage activities
As much as Gramm and the idiotic duo at
the White House which failed to stand in his way (Robert Rubin as Secretary
of the Treasury and Bill Clinton as a president who did fail to veto such
rapacious legislation) are partially to blame, the problem is far more
complex than that, and has to do with America’s capitalist system being in
essence an immoral system which has thrived almost solely on limitless debt.
Since Carter left the presidency, every one of the administrations,
Republican or Democrat, with the consent of the Federal Reserve, has pumped
up an unrealistic, artificial demand by making money easily available,
herding people into debt at high interest rates.
Why do I say
America’s capitalist system? Simply, because ours, in contrast to that
capitalist system exercised by most industrialized nations, particularly
those in Europe, is predatory in nature… much to the other end of the
spectrum of what capitalism in a social democracy should be all about.
And that brings me to all these positive assertions of late by our president
and instiller of economic confidence, Barack Obama. Truth be said, he
is as credible in economic matters as all past presidents… which is to say,
for better or for worse, he is married to a system that has been for long in
need of an overhaul. An overhaul that no dweller of the White House
will dare confront.
The optimists are quick to see the light at the
end of the tunnel; but those that I call the O’niners, have it all wrong.