The Three Legged Economic Recovery Propaganda Stool

The Stock Market and the Inflated/Spun Real Estate Market and Job Numbers

The false economic recovery story is based on a rising stock market and positively spun poor housing and jobs data.

The media’s spins bad economic data by using words and phrases like “lofty” “robust” “accelerating” and “strengthening” to describe the tepid job and real estate markets.

The stock market is held aloft by a zero interest rate policy, stock buy backs and central bank buying.

Podcast Summary

Intro/Weather Talk: 0:00-3:00

Discussion of the Polar Vortex and Perfect Storms impacting the economy.

Reuters: New Home Starts At Lofty Levels!

3:00-4:55 Discussion of the media’s incessant positive spin on poor economic data including last week’s interpretation of poor new home start numbers describe as “falling but still at ‘lofty’ levels

Chart showing new home starts from  1960-2015

New home starts are at multi-decade lows, yet Reuters reports them at “lofty levels”.

New home starts and new home sales are at thirty-forty year lows and are only “lofty” when compared to 2009.

Chart showing new home sales 1960-2015

New home sales are at levels last seen thirty and forty years ago when the population was 35% lower.

Bad economic data is constantly dismissed. Bad real estate numbers are repackaged as “consistent with a ‘recovering housing market'”. Good top line employment numbers are touted as evidence as a “evidence of a strengthening labor market” when indeed they are not as the labor participation rate is at multi-decade lows, wage growth is non existent and much of the job growth is in part time jobs.

The Three Legged Economic Recovery Propaganda Stool: A Higher Stock Market and Spun Real Estate and Job Data

4:55-6:45 Nearly all of the economic data in recent months has been subpar and about 80% of the reports have missed expectations. No matter! The main stream media (Reuters, Bloomberg and AP) have latched on to higher stock prices, and spun real estate (home prices are rising!) and employment data as evidence of a strengthening U.S. economy.

The Fed Changes its Tune on “Unexpected” Data and Developments

6:45-10:09 Discussion of how the Fed is now expressing concern about the rising dollar, the labor market (based on data from the Bureau of Lying Statistics), perhaps not being as strong as the reports may indicate, global uncertainty, stretched stock market valuations, low inflation as reasons to continue to be patient regarding when interest rates may be raised. None of the above were not unknown or evident when the Fed started talking about raising rates months ago.

Predictions on what Janet Yellen might say in her testimony this week-hemming and hawing about the possibility of raising rates but nothing definite, expressing concerns about the economy while insisting it is strong. After she is done the stock market will rally.

How is the Stock Market Valued?

10:09-12:15 discussion of the disconnect between reality and the stock market. Analysis of the data vs. the spin.

12:15-20:35 Discussion of the real estate markets in the north east San Francisco, NY and Washington DC metro area and the impact of the stock market, venture capital and government jobs on those markets. What happens if the stock market crashes? End of recovery/more Fed intervention.

Obama – A Modern Day FDR?

20:35 -23:10 discussion of the economic legacy of Barack Obama and his desire to claim he avoided another Great Depression and how the media is complicit in that narrative. Stock market is high, interest rates are low, dollar is strong and the unemployment rate is down.

Global Warming and Deflation- A Connection?

23:10-24:00 In the 1970’s the Fed slayed inflation with higher rates. Today the Fed is battling deflation with lower rates. In the 70’s inflation was a threat and there was global cooling hysteria, today there is a deflation threat and there is global warming hysteria.

Brian William and Bill O’Reilly

24:00-28:20 Media distractions and credibility are discussed in the context of the ‘battle’ claims of TV broadcasters Brian William and Bill O’Reilly. The distraction is that the credibility of the content of TV reports are not an issue, just the claims of individuals. Weeding out “false claims” by reporters is designed to make it look as if the media is concerned about the truth. Reporters who might wish to cover a story that is critical of an advertiser’s industry of the government and the network might not allow the truth to be told.

Central Bank Credibility

28:20-32:45 Discussion of central bank credibility in the context of the Swiss National Bank surprise decision to drop the Franc/Euro Peg.

Why hasn’t the stock market crashed? If it does most people wont be able to get out quick enough to avoid substantial losses. Buying precious metals will also be more expensive. The time to buy insurance is not when the flames are coming out of the windows.

Mandatory Retirement Accounts/Change of Tax Treatment of Retirement Accounts

32:45-35:20 discussion of the future of retirement accounts and future tax treatment.

Dollar Demand

Less Demand for the Dollar?

35:20-39:15 discussion of current factors that may reduce demand for the dollar:
-Less need for countries to keep as many dollars in reserve to buy oil if oil prices stays low;
-if debts are reneged on or forgiven or restructured dollars are not needed to pay the loans; and
-if fewer countries use the dollar among themselves and use instead local or regional currencies.

The Fed still has a bad balance sheet. What happens when/if(?) they decide to sell? The demand for the dollar may decrease -but the value of the dollar not necessarily collapse. Russia and China have recently reduced the level of U.S. Treasuries they hold. Russia only has about $86 Billion in U.S. Treasuries or about one month worth of QE3 dollar printing. If demand for the dollar drops the Fed may have to step back in. Whether the dollar strengthens or weakens the Fed will always intervene.

Media/Congressional Coverage of Fed Testimony

39:15-42:25 discussion of the lack of penetrating questions for the Fed and the Fed chair. The Fed obfuscates and hits print when told. Discussion of the lack of potential for any meaningful rate hikes.

Reasons the Dollar is Strong

42:25- 48:40 Because the Fed is no longer doing QE even though they did it for nearly six years and printed $4 trillion, the Fed is considered “prudent” and the dollar now strong. The U.S. has not solved its fiscal issues, has not cut spending, its deficit has increased and new programs like Obama Care have been created. The U.S. is NOT the “cleanest dirty shirt in the laundry pile.

Comparison of Russian (small debt) and U.S. debt positions and general discussion of debt. Discussion of valuations of companies that don’t make money vs. profitable small businesses.

Convincing People

48:40 Every day that goes by that the whole scheme is still afloat people stop listening because the crash hasn’t happened yet.

The Three Legged Economic Recovery Propaganda Stool

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Further Reading

Here Comes Gen Z to Rescue the Housing Recovery

The Dark Side of Higher Home Prices

Waiting For Household Formation

Mandatory Retirement Accounts

Swiss Drop Franc Euro Peg

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