-- Posted Friday, 18 September 2009 | Digg This Article
| | Source: GoldSeek.com
Rick’s Picks
Friday, September 18, 2009
“Phenomenally accurate forecasts”
Is the economy recovering? Nowhere is there more confusion on this topic than in the pages of the Wall Street Journal. Anyone scanning just the headlines might think we’re on the cusp of a solid rebound: retail sales are up, home sales are starting to move, and the Fed chairman thinks the worst is behind us. It is only when one burrows into the newspaper, particularly the op-ed pages, that a more sobering picture emerges. The facts well behind the headlines can be pretty blunt, if not so say downright grim.
Yesterday, for instance, we read an opinion piece, “The Stimulus Didn’t Work,” by three think-tank heavies. The essay was labeled as opinion, but it got much closer to the truth than anything we’ve seen on the front page. The authors make clear that when income and consumption are plotted on a graph that takes government transfers and rebates into account, the effect of last spring’s stimulus was almost negligible. Remember those tax credits -- $400 for individuals and $800 for many households? And how about the $250 checks that were mailed out to retirees? Well, they caused barely a blip in consumption. This is true even if you control for the fact that oil and gas prices were higher.
Keeper of the Flame
The authors would have sounded even more pessimistic if they had examined the effect of the stimulus, not on consumption, but on capital investment; for that is where a true recovery would begin. Instead, they have taken the stimulus at its political face value, measuring its impact as though higher levels of consumer spending alone would have been a constructive result. This is most surely the premise of all the headline news, and it fits with the Journal’s steady mutation under Rupert Murdoch into a tabloid newspaper. More and more, the front page wants to tell people what they’d like to hear, while the editorial pages have acted as Keeper of the Flame. It seems clear enough to us which is getting the story right. Is there a sentient reader out there who cannot see this for himself?
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not b construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2009, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Friday, 18 September 2009 | Digg This Article | Source: GoldSeek.com
