Seeing the World Through Rose-Coloured Glasses

Here is Dean Baker making fun of the media that continues to cite "experts" who got it wrong and are most likely still getting it wrong. He is amazed that the media fails to recognize that it is talking to "experts" who have shown they have no expertise:

It seems that the people who could not see an $8 trillion housing bubble are now optimistic about the economy's prospects. That's what the Washington Post tells us.

The article points to strong bank profits, respectable March retail sales, and a modest rise in exports. While it is possible to say that all the numbers could have been worse, these data do not provide much grounds for optimism.

In the case of bank profits, much of the profit was driven by a surge in mortgage refinancing which produces large fees for banks. This surge will continue for the near term, but before long most of the people who are able to refinance their mortgages will have done so. Banks have also opted not to declare large write-downs of bad loans in the current quarter. They have apparently decided, possibly for political reasons, to defer write-downs of bad debts for future quarters.

It is important to put reports on chain store retail sales in some context. First, the same store sales are higher relative to overall chain sales because the chains have opened fewer new stores over the last year and in some cases actually have fewer stores in March of 2009 than in March of 2008. More importantly, there will be some upward bias in the chain store sales overall since there are fewer alternatives stores in 2009 than in March 2008.

Many stores that might have provided competition for the chains in March of 2008 no longer exist in March of 2009. Therefore, we should expect to see an increase in chain store sales even if there had been no change whatsoever in overall retail sales.