The United States Of Denial

Source: Decline of the Empire

This is just embarrassing. There is no other word for it. We can a sense of what’s going on from Annie Lowrie’s Feeling Better About the Economy from the New York Times Economix blog.

Looking at the news these days, you’d be hard pressed not to acknowledge that the economy is getting better.

On Thursday, the world’s investors got some reassurance that Greece will not crash headlong into disorderly default, after Greek political leaders agreed to yet more austerity measures meant to clear the way for $173 billion in new loans from the International Monetary Fund, the European Commission and the European Central Bank.

American homeowners got good news, too. Federal and state authorities agreed to a $26 billion settlement with five major banks. About a million families will have access to refinancing or reduction in the principal left on their home loans. Another 750,000 families who had their homes foreclosed on will receive checks of about $2,000.

That’s not all. In recent weeks, new claims for unemployment benefits have fallen to their lowest level since 2008. The jobless rate has dropped to its lowest level since February 2009. A survey of job openings is tracking up. The White House even said that the gloomy unemployment forecasts in its annual budget, which will be released next week, should be considered “stale and out of date,” given that they made the forecasts before so much good news started rolling in.

Annie goes on in this vein. Do you know where Gallup’s underemployment rate stands? It’s 18.7%, meaning nearly one out of every five Americans are unemployed or working part-time but need full-time work. But that’s just one example. All of the “good news” is questionable or deceptive or to use a catch-all category, just not very damn important. At currrent “growth” rates, it would take years and years and years to return to a semblance of what the economy was in 2007 when consumption was artificially inflated by the Housing Bubble.

Even the ever-optimistic International Monetary Fund sees A Bleak Outlook For Long-Term Growth.

The American economy’s reported 2.8 percent growth in the fourth quarter, at an annual rate, was seen as mildly encouraging. But it meant that over the previous 10 years, the economy had grown at a compound annual rate of just 1.7 percent. Until the current cycle, there had been no similar prolonged period of slow growth since the Depression.

[My note: Regarding that 2.8% growth in Q4, we need to wait for the downward revisions.]

The International Monetary Fund’s latest forecasts indicate that there is not likely to be a pickup in growth anytime soon, either in the United States or other large industrialized countries.

As the accompanying chart indicates [below], if the fund’s forecasts of 1.8 percent real growth in 2012 and 2.2 percent in 2013 prove to be accurate, the 10-year American rate at the end of 2013 will have fallen to 1.5 percent, lower than any figure shown on the chart. But it will still be a little above the 0.9 percent compound growth rate in the decade from 1929, the year the Depression began, to 1939.

The United State is still broke, which means these anemic growth rates, if we do that well, simply hasten our bankruptcy. Credit is said to be expanding, but it is student loans that are expanding. Even worse, middle-aged people are now taking on large amount of student debt they can never pay back in the hopes of getting a good-paying job which surely will not be there. (I’ll comment on the job re-training scam later this week.)

Now, I could go on like this for a long time and still not be anywhere close to finished, but let’s return to the main theme, which is embarrassment.

I have tried to explain this embarrassment in various related ways in the two years I’ve been writing this blog. For example, there is the boiling frog analogy in which social conditions deteriorate so gradually that people adapt to the new, ever-worsing situation. And then there is the obvious tendency of humans to think short-term. We also must not forget that humans are by nature delusional optimists who always see the glass as half-full even when there’s hardly any liquid left to drink. And of course humans in the general case want to believe that Ignorance Is Bliss.

And of course we are in an election year, so there is the cynical manipulation of the public by elites running TV adds in support of political puppets who will do their bidding. The astonishing amounts of money being spent tells us that those elites know there’s a lot at stake. In this high-risk game of musical chairs, there are (at least) 10 Americans for every place to sit. The United States is falling apart, so it’s important to have a chair when the music stops. This is what I was trying to get at in last Sunday’s post The Rapture (And The Left Behind). Perhaps that metaphor didn’t work for some of you,

There is always the question of whether the manipulators believe their own bullshit. I think they do more often than we think. After all, delusional optimism is probably more prevalent among the powerful few and their lap dogs in the media, not less. Does Annie Lowrie (cited above) believe her own nonsense? You bet she does!

The astute reader will immediately notice that all of the human traits mentioned above are mutually self-reinforcing. Taking only two examples, short-term thinking clearly reinforces the overheating frog, and delusional optimisim and ignorance go hand-in-hand.

The bottom line is that we live in the United States of Denial.

What have we learned? At a minimum, we should all now realize that pretending everything is OK is always going to be preferable to facing up to our mounting problems. When times are good, self-destructive human traits are hidden from view. It’s only when times are tough that we see what we are really all about. I’ve said it before and I’ll say it again: when the going gets tough, sticking your head in the sand beats facing the harsh light of Reality everytime. That strategy seems to work right up to the moment when it doesn’t.

Read more at Decline of the Empire