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Why Economists Don’t Know Their Ass from a Donkey or a Recession from a Depression in the ground

Someone needs to put the nail in Coffin:

Another recession is pretty unlikely,” said Samuel Coffin, an economist at UBS Securities in Stamford, Connecticut, who correctly predicted the gain in retail sales. The report “suggests a very strong start to the quarter. We’ll continue expanding at a better pace.” (Bloomberg)

Here is an economist so blind that he’d pin the donkey’s tail on his own ass and smile at the pain. He is right only in one peculiar sense: “Another” recession is unlikely solely because the first recession — The Great Recession — never ended. So, the next economic collapse won’t be another recession, but a deepening of the present one.

Why this is STILL The Great Recession

The credit defaults that brought down the U.S. during the Bush administration struck Europe. That created a harmonic vibration through Europe that is still growing. Europe this month is reeling now more than ever and ready to fall. If Europe falls, it will certainly fall onto the U.S. Without any doubt at all, the U.S. is not strong enough in its economic structures to withstand such an impact. Because all of this precipitates from the events that caused the 2008 recession and is due to the same enormous debt overload, it is all the same event! It is cause and effect played out slowly because the titanic pieces have a lot of inertia — major dominoes slowly falling one on another, returning in a circle to knock the first domino that fell as soon as it appears to have recovered.

With such economic frailty plainly visible EVERYWHERE, Samuel Coffin flaunts a blindness that is astounding. He boldly predicts a “another recession is pretty unlikely,” failing to recognize the irony that the only thing right about his statement is that the last recession never ended. He thinks it ended because the numbers (economic statistics) improved. It did NOT because the cause of our present economic problems is still the same.

It should be the cause that defines a recession or depression, not the numbers, which are merely “indicators.” That is where economics has fallen apart as a profession. It is now all about indicators and computer models. The old timers who understood fundamentals are gone. If the cause of the problem is still present, even though the symptoms have improved, there is no recovery. If the cancer is still there, it doesn’t matter much that you feel a little better at the moment.

Great recessions and great depressions do not just blow over

The difference between what should be called a “recession” and what should be called a “depression” is that a recession is short-term. The word “recession” should be used to denote a correction of market speculations that ran too high. The overpriced items on the market come down, and the market reaches a new equilibrium after awhile. A depression, while it may also correct speculations that ran too high, occurs when there is a breakdown of the entire economic system. It is a core failure — a system failure — not just a correction of prices. That is what we have now. Indicators cannot tell you that this is a depression because depressions are long-term and must be perceived by understanding causes, not effects. Indicators are immediate effects that indicate other problems may be coming.

In a recession, the engine runs out of fuel, and all momentum us lost. The indicators show that the engine has stalled. They are right. In a depression, the engine is broken and must be REBUILT. The indicators still show that the engine has stalled, but they cannot tell you that it is incapable of restarting without repair. Time will not bring recovery, as it does in a recession. Additional money will not bring recovery. Only repairs — economic reconstruction with better principles — can bring continued recovery.

Because he doesn’t understand these things, Samuel Coffin proclaims we’ll continue recovering better than ever even though we have not started recovering at all. A storm in Europe just toppled administrations that have been in place for as long as seventeen years in less than that many days. How likely are we to expand when the rest of the world contracts? Nearly everyone in Europe, including Germany’s PM, Angela Merkel, is stating the euro crisis is the worst Europe has seen since the Great Depression. The Greek contagion has spread to Italy, causing its government to fall. Now France and several other nations are trembling in the wings. So, why would Coffin in the face of so many massive failures and pending failures all around us, proclaim the U.S. will continue to expand at a better pace? Such a hope is almost inconceivable. Yet, how to buy ambien in mexico Coffin sees hope because is not looking ahead; he is obsessed with staring down at gauges, which look kind of nice at the moment. Thus, with less understanding of how to run the economic numbers than Coffin has, I can predict the future better than any economists are doing because I am looking ahead … and around … and observing fundamental principles at play, not numbers and indicators.

So, I defy the economic gurus and predict with confidence that a deepening recession is actually more likely than ever, not “pretty unlikely.” (To be technically accurate, I should say “deepening depression,” for an event that began in 2008 and only gets worse in 2011 is clearly a depression.) No recession has ended since 2008 for the simple reason that all of the causes of that recession still exist. Any old-school economist (if there are any with blood still in their veins), who is not obsessed with numbers and formulas, will recognize this is true for the basic reason that nothing has been resolved structurally in our economy. Thus, the mere fact that consumers spent a little more, which Coffin crows about, does not mean anything. It merely tells how consumers feel. It is simply a gauge of feelings.

It is, on the other hand, simple logic that our troubles cannot be over until we correct the problems that created them, and we have not. We still have…

  • An overload of consumer debt (which the U.S. only continues to encourage by all means possible in order to rev up the stalled engine).
  • An overload of national debt (which nearly all nations now find disables them from stronger reaction to each new economic problem that hits).
  • An economic system where economic expansion is still based almost entirely on expansion of debt, rather than accumulation of wealth. (What you owe you do not really own, even if you get to enjoy having it.)
  • A huge number of foreclosed homes that still need to be liquidated but cannot be without writing down their prices more (unless we go back to the loose credit principles that created the mess in the first place).
  • Banks riddled with fiscal faults with overstated values (because they have not written down the values of their collateral homes as much as those homes will need to come down if they are to sell).
  • A lack of clear, intelligent regulations to prevent repeat economic bubbles of rampant speculation, and a stock market rigged to foster rampant speculation, rather than business investment based on sound economic reasons.

Here is why economists have their heads in their own holes:

Currently economists determine when an economy is in recess versus when it is in recovery, not based on fundamentals of the economy, but on economic indicators of the moment. Coffin is staring at the little gauges he loves, and glibly reporting that all is well. His tachometer shows that the revolutions of the economic engine are slowly gaining speed. Because he is a gauges man (a numbers man), he does not see the huge oil leak that is flooding the concrete under the engine as it begins to run faster. Even his oil pressure gauge will only tell him there is a leak in the oil pan AFTER the oil pan is empty.

In truth, it matters not in the least that the engine is running faster now if it is leaking oil at such a rate that it will soon run out. You see, the crack in the oil pan was never fixed; but, so long as the numbers are good, the economists are happy: “The old engine is running again; we should all be happy.” Someone who is not obsessed with numeric gauges, sees the oil leak and says, “Oh, oh. Trouble,” for obvious reasons.

Neither does Coffin look down the road as he drives. His eye is on the tachometer, and it matters to him only that the engine is running faster and faster. He doesn’t see that a brick wall, which looks a lot like the Berlin Wall, crosses the road immediately ahead. Impact is imminent, but Coffin is happy that the engine is running faster now. When pall bearers carry Coffin off in something by his own name, his corpse will still be smiling, as he will have never seen what hit him.

The fundamentals of the economic engine can be a total disaster, but so long as the engine is running faster, economists will state that all is well. They have forgotten about economic fundamentals and are now all numbers people, raised to love their computer algorithms.

Pardon me, while I pin this tale on the economic ass.

 

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