Smoke & Mirrors

Here is a bit from Robert Reich's blog where he talks about the illusion of recovery. The fat cats of Wall Street are well on their way to recovering, but Main Street and ordinary people are still mired in the worst recession since the Great Depression:

Are we finally in a recovery? Who’s “we,” kemosabe? Big global companies, Wall Street, and high-income Americans who hold their savings in financial instruments are clearly doing better. As to the rest of us – small businesses along Main Streets, and middle and lower-income Americans – forget it.

Business cheerleaders naturally want to emphasize the positive. They assume the economy runs on optimism and that if average consumers think the economy is getting better, they’ll empty their wallets more readily and – presto! – the economy will get better. The cheerleaders fail to understand that regardless of how people feel, they won’t spend if they don’t have the money.

The US economy grew at a 5.9 percent annual rate in the fourth quarter of 2009. That sounds good until you realize GDP figures are badly distorted by structural changes in the economy. For example, part of the increase is due to rising health care costs. When WellPoint ratchets up premiums, that enlarges the GDP. But you’d have to be out of your mind to consider this evidence of a recovery.

Part of the perceived growth in GDP is due to rising government expenditures. But this is smoke and mirrors. The stimulus is reaching its peak and will be smaller in months to come. And a bigger federal debt eventually has to be repaid.

So when you hear some economists say the current recovery is following the traditional path, don’t believe a word. The path itself is being used to construct the GDP data.

Look more closely and the only ones doing better are the people and private-sector institutions at the top. Many of America’s biggest companies are sitting on huge amounts of cash right now, but that says nothing about the health of the U.S. economy. Companies in the Standard&Poor 500 stock index had sales of $2.18 trillion in the fourth quarter, up from $2.02 trillion last year, and their earnings tripled. Why? Mainly because they’re global, and selling into fast-growing markets in places like India, China, and Brazil.

Go read the posting to get all the details.

This graph from Calculated Risk summarizes how bad this recession really is:


To put it simply: this recession is deeper and longer than any since the Great Depression. That is why it is being called The Great Recession. It isn't as bad as the Great Depression, but it is far worse than anything since in over 70 years. And if the Republicans had their way, this would be the second Great Depression. The Republicans are the Hoovers and Mellons of today, i.e. fools who call for "remedies" that would make things far, far worse.