It’s an article of faith that "The Big Lie" just doesn’t work in our society. Nevertheless, the level of jawboning [1] [2] [3] that has cropped up recently to support Goldilocks, the soft landing, and a perception of US economic strength has been astonishing, to say the least. My worry is that either a whole lot of commentators who know more about this stuff than I ever will have completely lost touch with reality — or I’m in serious trouble. 
Perhaps only time will tell …
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Notes and References
[1]: "The Economy Is Stronger Than All the Rate-Cut Bettors Think", by Donald Luskin, SmartMoney, January 26, 2007. [thanks to the starp-eyed Doomer who e-mailed me that the 2006 dates on all the references looked, well, stale; better review the cheques from last week too! JM]
"… the bursting housing bubble has been an entirely self-contained event that hasn’t in the slightest poisoned the rest of the economy.
Here’s an amazing fact about the economy. Housing pulled down GDP growth in the second and third quarters of last year, and made it look as though the whole economy was slowing down. But if you remove housing and look at the rest of the economy without it, those same two quarters were the fastest growing of any in the last two years.
Housing hasn’t dragged the rest of the economy down. Quite the contrary. It has been a mask of weakness that has concealed the enormous strength of the rest of the economy.
[2]: "Interview: Gramley says next Fed move is up - Former Fed governor says economy is out of the woods", by Greg Robb, MarketWatch, January 26, 2007.
Former Fed governor Lyle Gramley says the next move by the Federal Reserve will be to hike interest rates. Gramley, a governor on the Federal Reserve Board from 1980-1985, believes the economy is out of the woods and should settle into a sustainable moderate growth path this spring.
…
Gramley: "… I think we’ve seen increasing evidence that this period of slowdown is not going to result in a recession or anything close to it, but a soft landing. Therefore the Fed has been justified in its view that the economy would soon return to trend growth. So there will be no more reductions in interest rates needed. The only question is whether or not the Fed will have to raise rates.
…
Gramley: "I don’t think the drag from housing is over yet. I think we’re getting closer to the bottom. Sales have basically been going sideways for five months. Inventories are no longer rising. Applications for loans to purchase houses are going back up again now. And I think the most important conclusion to draw from that is that concerns that home prices would fall out of bed have largely been alleviated."
[3]: "U.S. Economy: Home Sales, Durable Goods Orders Rise", by Courtney Schlisserman and Bob Willis, Bloomberg, January 26, 2007.
Sales of new homes and orders for durable goods jumped in December, suggesting the weakest parts of the U.S. economy are on the mend.
Home purchases rose 4.8 percent to an annual pace of 1.12 million, the fastest since April, the Commerce Department reported today. Orders to factories for goods made to last at least several years rose 3.1 percent, the department also said.
The figures indicate that housing and manufacturing are past the worst of a downturn that prompted some economists to predict a recession and interest-rate cuts by the Federal Reserve. The reports also suggest that central bankers, who meet next week, will signal they’re reluctant to either lower or increase borrowing costs.
Don’t let self-doubt get to you, stick with your own powers of reasoning. These MSM media reports on housing are reminiscent of the classic Shakepeare line “full of sound and fury, signifying nothing”.
Just to give an example, let’s unpack what Gramley is quoted as saying:
Applications for loans to purchase houses are going back up again now
This is just flat out wrong, purchase apps have been falling the past three weeks, after rising for most of Nov. and early Dec. See calculated risk or cnnfn.com for the true story.
Sales have basically been going sideways for five months
Only if you look at seasonally adjusted number is this statement factually correct. The NSA numbers tell a different story, actual sales not imaginary ones are falling.
And this is coming from a former Fed Governor, who presumably holds advanced degrees in something. Personally, when I read comments like this it gives me the impression that economics is more akin to astrology than a real science.
Another part of the problem is that the information age we live in gives us too much information. The other day I was reading a story on Bloomberg about the bond market which managed to contradict itself within the same few paragraphs (bonds are going up! no, wait, they are going to fall.) The great thing about the blogs is that they have the power to harness the logic of many to cut through all the confusion.
The main stream media have had their day, it’s over now and the sooner we all realize that they are dinosaurs the better off we’ll be.
DrFeelgood -
Thanks for the kind words. I’m only starting to straighten out the apparent contradiction (the released 2006 figures are down, the December ‘06 figures, perhaps seasonally adjusted(?), are up perhaps because Dec was very warm in the US). Meanwhile FOMC seems frozen at 5.25 and until they unstick folks confidently predict rising rates to one group and falling to another depending on context. Even within the bubble community both hyperinflation and severe deflation are predicted.
Anyway I’m glad I’m not alone in my confusion, and perhaps many people pooling their common sense can start seeing what is really happening.
By the way …
Thanks once again to the Doomer who communicated about my putting last year’s dates on all those references from yesterday’s stories … (oops!)
It seems to be day for introspection, as both you and CRisk stike similar themes. Reasonable self-doubt is a good thing, especially when dealing with the future. As I’ve chided often, there are no facts about it.
I have been in a strange position here. In my life and when dealing with professionals I am classified as a “very conservative” investor (money not politics) and a stern “bear”. I suspect that is hardly your view of me. While such things are a matter of perspective, I try to follow the “moderation in most things” view.The center of the waterway is usually the safest to travel.
There are many on both sides who are just biased by self interest, the realtor commission mongers and investment shills, and those selling gold, and guns and gloom for profit. Neither are in the waterway.
In additon to the self-interested, we have the unrealistic extremists. While one side sees great profits in Beanie Babbies, penny stocks and “collector” trinkets, the other sees financial and social collapse in every change, every bit of news. Some in this later group hate our free-market system, or feel they have not been fairly rewarded. They express sympathy for those in need but also seem to lust for a “doom” that can only cast far greater numbers into far worse circumstance. Some seem almost pathelogical in their one sided approach to facts, and their unwillingness to consider that a long history of failed predictions of doom may actually be a pattern they should heed. It is their near enchantment with imminent ruin, often in the face of credible evidence to the contrary, that marks their problematic opinions. Frequently they retreat to conspiracy theories that by sound definition are untenable, yet difficult to disprove because they are made of only smoke, rumor and refracted light. This later group has taken hold naturally in the virtual world of e-opinion.
This site has helped many in these rough and uncertain waters of the recent real estate markets. You have marked true depth and warned of bad currents. Of this you should be proud.
And, as I think you also know,in my view you have occasional taken detours to the landfalls populated by those with fringe views regarding the future health of the US financial, social and political system generally. You have provided a forum to some who are preaching views that can only fairly be characterized as extremists. Some are practiced decievers. From their shore, the center of the waterway may look like boosterism in support of some “big lie”. The pathology necessary to actually believe the entire MSM, government, and academic community in the US participate in such a “big lie” escapes naming, but it is not normal or sound as I understand those terms. To have self-doubt when visiting that shore is a very good thing. The future may be difficult, but contemplating, let alone advocating, a future where slow old guys like me are just easy protein for others in a decaying world, stikes me as both unproductive and socially irresponsible.
On balance the good here so far outweighs the other it is a pleasure to visit the site. Many of the sources I would not characterize as mainstream are still reasoned and add value, MISH comes to mind here. But remember, while the river is wide, it does have rocky shores. And those who inhabit the forests beyond are unlikely to help us reason together, for it is reason itself they lack.
The collective is of one mind, and has one agenda; to keep the train rolling at all costs. The collective is very large and very strong. This prevents them from seeing the forest for the trees, and keeps them from reporting on the broken rails ahead, and elaborating on the affect.
Cramer and Kudlow are two names that come to mind, when I think of the collective. They and many others establish a forward momentum, which is not easily stopped, despite the obvious pitfalls that lay ahead. They tend to lull us into a false sense of security, that everything is OK, and that everything will be fine for ages to come, and we believe them.
I understand the power of the collective, and its ability to stave off the hard times, for long periods of time. And when train wrecks occur, such as the NASDAQ bust, their’s hardly a scratch. But I know that this just puts off the pain for another day.
It just seems to me, that the Piper is on his way to be paid. And believe me, he will be paid, in our lifetime.
Mike aka Sage-
You know we have recently been getting more disclosure from Cramer. I saw him on Bloomberg or one of those, saying that high gas prices were hurting some luxury development he was involved in. (I think 2.5M+ homes?) Apparently the super rich don’t like paying a couple of extra bucks for gas.
As an English teacher of mine once put it, “You dance with the fella what brung ya.” Most of the “analysts” we see in the media are paid spokesman for their industry, and it always pays to remember that bias.
[My disclosure- as a renter, I remain short on SF housing!] : )
While I recognize the idea that “where you sit is where you stand” and various permutations of that old saw ring true in many cases, the idea that a monolith of relatively uniform opinion exists in the “mainstream” because “most analysts we see are paid spokespersons” stretches it more than a bit.Expressed opinion in the MSM, especially on econmic matters, is actually quite wide. Just think recently of the “spread” between an obvious biased and error ridden report on foreclosures by a “public interest group” on “affordable housing” which was given broad coverage andthe opposing views from mortgage trade groups. To this add the facts and opinions of regulators, academics and more broad market analysts, it hardly looks like a narrow,sectarian view of the issue.
With regard to the existence of some “collective”, this “they” and “us” stuff always devolves into untestable myth. And if it actually comes down to that put me with “them” who not only believe, but actively work to keep things advancing AWAY FROM DOOM. If you prefer the other side, I can only wonder why?
Ultimately the MSM does not discuss “fiat currency” or predict 1920s style depression as imminent. If you decide to believe it is because of some capitalist collective (an ironic oxymoron) or the “hired gun” effect so be it. Some of us believe they avoid such topics and predictions because they are known to be the product of ignorance, and sometimes the province of …evil, I have no other word for it.
History is full of examples of mass media opinion narrowed by force, a necessary prerequiste for “the big lie”. We current see movement in that direction by Comrade Chavez and a far more creepy movement back into that darkness in Russia. To suggest that financial reporting in the US shares much in common with these examples exposes, in my view, serious questions regarding the judgment of more than the MSM.