During a quarter century of analyzing and forecasting the economy, I have never seen anything like this. No matter what happens, no matter what data are released, no matter which way markets move, a pall of pessimism hangs over the economy.
It is amazing. Everything is negative. When bond yields rise, it is considered bad for the housing market and the consumer. But if bond yields fall and the yield curve narrows toward inversion, that is bad too, because an inverted yield curve could signal a recession.
If housing data weaken, as they did on Monday when existing home sales fell, well that is a sign of a bursting housing bubble. If housing data strengthen, as they did on Tuesday when new home sales rose, that is negative because the Fed may raise rates further. If foreigners buy our bonds, we are not saving for ourselves. If foreigners do not buy our bonds, interest rates could rise. If wages go up, inflation is coming. If wages go down, the economy is in trouble.
This onslaught of negative thinking is clearly having an impact. During the 2004 presidential campaign, when attacks on the economy were in full force, 36% of Americans thought we were in recession. One year later, even though unemployment has fallen from 5.5% to 5%, and real GDP has expanded by 3.7%, the number who think a recession is underway has climbed to 43%.
This is a real conundrum. It is true, bad things have happened. Katrina wiped out a major city and many people are still displaced. GM has announced massive layoffs. Underfunded pension plans are being handed off to the government. Oil, gasoline and natural gas prices have soared. Despite it all, the U.S. economy continues to flourish.
Read it all.
Meanwhile, Bizzyblog dissects this economic conundrum, and demonstrates why public opinion polls should be taken with a grain of salt. Just because a lot of people believe something is true, doesn't mean it is.
Why all this pessimism? Well, while pessimists often consider the glass half empty quite naturally; much of the economic and political pessimism in this country has to do with denial; and much of it has to do with the fact that any good news means that Bush's policies are working well--which, by definition, makes the Left and the MSM despair.
For people with insight, depression or despair can be a motivating force for them to change their life; or their way of thinking; or even their basic premises about the world. But from what we have seen of the Left and the MSM in the last five years, Bush successes and their own sour reaction to it only stimulate them to pump out even more from their propaganda mills. They are getting increasingly desperate as they opine increasingly delusional rants (hat tip: SC & A).
Wretchard at the Belmont Club discusses the "battle of the narrative" that is going on right now concerning Iraq--but he might just as well be talking about the narrative of the economic reality which the Left is determined to distort also.
Blackfive says that the results of fighting on the ground are foregone: what remains is the 'battle of the narrative'. But how do you win a 'battle of the narrative' except with words? Ironically the sheer success of the US Armed Forces in keeping the civilian population from a direct experience of war ensures they will only learn about it through vicarious means: network news, the major newspapers and magazines. Movies. And in that department the OPFOR has Blue radically outnumbered. Any rational observer calculating the correlation of words would have to say that in that battle, Blackfive's narrative hasn't got a snowball's chance in hell. The side with the most power over words has determined that Iraq is a defeat. And yet ...
The problem with using words to trump reality is that it wagers everything on a monumental bluff.
The economic situation by all indicators is excellent. The Iraq War and reconstruction in Iraq is going well (I can hear the outrage that will be precipitated by my saying that--nevertheless it is true); and unless the despair being artificially manufactured and promoted causes us to commit political suicide-- our strategic initiatives in both Iraq and Afghanistan will be successful.
I used to think that the Left was stuck in the 90's, but now I realize they are actually stuck in 1984 or a similar Orwellian reality.