Whistling past the Graveyard

Here we go again, folks. This time it’s CNN, but you can pick up this cheery, breathy forecasting foreplay on almost any front page in the country.  

Economists: Recovery is firmly on track By Chavon Sutton, staff reporter NEW YORK (CNNMoney.com) — Leading economists are upbeat about the U.S. recovery, forecasting steady growth over the next two years as businesses grow and jobs return, according to a survey released Monday. “We see a healthy expansion under way, although it will take time to reduce economic slack and repair damaged balance sheets,” said Lynn Reaser, president of the National Association for Business Economics, which conducted the survey of 48 top economic forecasters in late January and early February.  

And it may well be firmly on track, but the track is headed into the station at full throttle. These ‘seers’ and sayers of sooth are the same dudes who cheer-led at least three bubble economies and are now hip-deep in a fourth. Put down the fiddle, boys. Nero’s already been there and done that, but Rome still burned.

 . . . forecast is for the economy to grow 3.1% in both 2010 and 2011, an estimate that is essentially unchanged from the 3.2% target in NABE’s November survey. The group’s estimate is a marked improvement from last year’s survey, which had forecast that the economy would contract.  

Amazing. They don’t predict three to three and a half, our economic booster-class shaves this shaky economy down to tenths of a percent. In the year between forecasts, investment banks have (once again) run off with all the money, while

  • Industry struggles, finally winding down their inventories, but with fewer customers than a year ago.
  • Unemployment is off the map if you include those, conveniently left off the roles, who have run past their benefits.
  • Mortgage defaults continue at a pace last seen in 1933.
  • Credit-card and student-loan defaults are crippling the earnings of all banks that are not ‘investment banks.’
  • Long-term national debt is too large a figure for anyone to accurately identify.

Essentially, we sit at the doorstep of 1931. “When the Wall Street Crash of 1929 struck less than eight months after he took office, Hoover tried to combat the following Great Depression with volunteer efforts, none of which produced economic recovery during his term.” Sound familiar? 

Unfortunately, leading economists seem not to realize that the market took five upticks, major enough to rate as bull markets, between 1929 and mid-1932. It would drop, then recover half to a third of the drop over a period of months, then drop again and repeat. We’re doing that now and celebrating each recovery as the end of the crisis.

  . . . Most economists surveyed expect the recovery to be led by businesses. The NABE estimates that corporate earnings will grow 15% this year, which will spur hiring and ultimately bolster household spending.  

Businesses? Corporate earnings? Ultimately? You got a time-line for ultimately? Ultimately, we’re all dead. How ’bout General Electric as a ‘leader out of the swamp?’

(Wall Street Journal) General Electric Co. asked its battered investors to hang on another year, saying Friday that it could return to growth and potentially boost its dividend by 2011 as the conglomerate recovers from a recession that hollowed out profits and shook confidence in the company . . . GE posted a 19% slump in fourth-quarter profit, weighed down by poor results at its entertainment and finance units . . . redeploying resources to cover losses at GE Capital and is shrinking the unit . . . offloaded a security business to focus on more-lucrative industrial operations.

Sounds to me like a 19% slump and a 15% gain, is still a 4% net slump, chump. But maybe that’s just me. Retail, manufacturing and service industries (nearly the only industry we have anymore) are all pretty much underwater and clawing their way toward the light. A 15% gain is meaningless, unless you know that corporate earnings are basically healthy–and they’re not, they’re patched together by creative accounting and deferred costs.

 . . . “Overall, our economists believe we are on a fairly healthy growth track and their will be no double dip recession,” said Reaser.  

Likely we’ll just soar past that to triple-dip and the conjurers will be off the hook.

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