If you repeat a lie often enough, people will believe it, and you will even come to believe it yourself. The propagandist’s credo appears to have deep roots at the Wall Street Journal, which has been shilling hopes of better economic times since The Great Recession supposedly ended in 2009. The newspaper’s editors extolled and glorified that wishful lie with a hat-trick of turbocharged headlines on page two of Friday’s edition. The first of the three celebratory articles, Americans Get Richer, And Pare Their Debt, reported that the net worth of U.S. households rose by about $1.6 trillion, to $84.9 trillion, in the first quarter of 2015.
This is hardly a Horatio Alger tale about how hard work, diligence and persistence in the face of adversity made some Americans richer. Rather, it is implicitly the story of how the nation’s wealthiest households simply sat back and savored the good life as their homes and stock portfolios magically grew in value. They have the Fed to thank– not only for 3% mortgages that have force-fed real estate valuations, but for the near-zero-percent financing of more than $1 trillion of corporate buybacks in 2014 alone. In case you didn’t know, this perpetual-motion machine, one of the modern miracles of high finance, has replaced fuddy-duddy capital investment as the preferred means of driving earnings growth.
Trampled at Bergdorf’s?
Completing the Journal’s ostentatious “Hip-hip-hooray!” for the economy were two separate articles that were linked typographically, one beneath the other, by ellipses, presumably to further the impression of pent-up demand about to explode: “Shoppers Splurge in Spring Spree…And Robust Hiring Should Fuel Their Fire”. Will we be reading three months from now about shoppers getting trampled at WalMart, Kohl’s, Target…Bergdorf‘s?
You’d have to be older than 50 to recall a time when capital investment rather than consumption was the most important metric of economic strength. Somewhere along the way, the news media, and most economists, also stopped paying attention to the fundamental fact that growth drives consumption, not the other way around. These days, even Nobel Prize-winners seem oblivious to the truism that when real wages are stagnant, as they have been for nearly 30 years, any increase in consumption can come only through more borrowing.
Bottom line, we are implicitly borrowing against the inflated value of our homes and stock portfolios — not just to put our kids through college, but to pay for groceries, health insurance and other necessities of life that used to be much more affordable.
The post Phony U.S. Recovery Accelerating appeared first on .