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Saturday, September 3, 2011

What group of nerds got to officially declare 'Recovery"?

For over 2 years, every politician, economic 'expert' and corporate media-ite have been using one word to describe the US economy since 2009--  Recovery.

And it doesn't matter the statistical facts regarding joblessness, home value depreciation, weakened GDP number, destruction of the middle class or any other piece of data screaming continual on-going recession.

It is a "Recovery" and until told other wise, that's how it will be.

But who told them it was a Recovery in the first place?  Who or what great power made the official declaration interpreted by all in lockstep as being clear-cut, unequivocal and irrefutable?

The answer lies in a group called the National Bureau of Economic Research (NBER), and more specifically, within this group is a smaller group called Business Cycle Dating Committee (BCDC), composed of just 7 men, mostly from Harvard.  And these seven men sit around a table, look at stats and graphs and pie charts, and determine when recessions begin and end.  And amazingly whatever the BCDC declares, it is treated as dictum.

~ BCDC members studying economic data  (I'm pretty sure)

Here's a clear example:

Imagine there was a committee of 7 meteorologists who sat around a table and declared when rainstorms officially began and ended.  And based on some data, the 7 weathermen said that a rainstorm will start tomorrow at 2p and end at 6p.  But when you looked out your window at 8p, it was still raining hard.  So it must be raining right?  Well No-- its not.  It can't be raining because a small group of meteorologists Officially declared in a meeting that the rain would end at 6p.  You can see the rain..touch it.. taste it.. splash around in it.. but the board of weathermen said the rain stopped... so it did.

So in essence, this small group of 7 nobody nothings comprising an official 'board', makes a declaration in June, 2009 that the recession of 2007 is over!  Done..  Presto.. Ta-da!!

And what information was this based on?

Well you see, a trough in business activity occurred...

Umm.. Huh??  What is a trough?

In economics, a trough is the lowest point in a business cycle. And this group of brilliant minds felt that one occurred in June 2009 and from this, the recession was officially over.   And thus a recovery begins...  They also declared that if/when the economy headed back to a recession, it would be called a 'double-dip' and thus no one would be allowed to connect the 2nd recession to the 1st as being one continual on-going recession.

So why would this small committee make such a declaration?

Well, you see everything is political.   Did you know what makes an official 'recession'?- 2 quarters in a row of negative growth.  Did you also know what it is called if a recession lasts at least 12 quarters (3 years)?

It is officially called a Depression.

~ The man in the painting is not depressed; he is "recovering"- you'll see

And how do you stop a Depression in terms of public discourse even though you're truly powerless to stop a Depression in a real sense?   Answer:  You play semantic word games.  A "Recovery", even if short lived allows the ongoing recession to be broken up into two distinct recessions.  This means recession #2, or the 'double dip' occurred more recently and you bought additional time before 3yrs passes on recession #2 and the word Depression is uttered.

This may seem like complete idiocy (and to a degree you're correct), remember politicians and Wall St. survive through public confidence.  A politician is more likely to get elected if the nation is in recovery than recession, and certainly more likely in double-dip  vs an outright Depression.   And the more confidence people have in spending money and investing, the more money corporations and Wall St will make.

Word choice is very important to these groups.

For two years, the powers that be also sold the American people this pack of bullshit called "jobless recovery". As if you really can have a nation return to prosperity and normality while a manufacturing base is decimated and millions of people are either jobless, working part time when preferring full time, and/or being paid 15-25% less for their labors than in pre-2008.   Many still stupidly believe jobless-recovery exists.  Many others are waking up to the truth that the term is as accurate a depiction of reality as saying a woman is "half-pregnant".

We all know there's no recovery.   There never was one.  We know it even if we wish to believe in hope and optimism.  Because in order for there to be an economic recovery, those with the power to make it happen, actually have to want it to happen.  And corporations and Wall St have had Zero incentive.  If they hire too many workers, it will mean no more free Fed stimulus money.

~ This man is happy. What a warm smile.  He knows there's no recession..

And the politicians really don't care.  Despite anything spoken by the President next Thursday, the truth is up to this moment, not a single piece of real job-creation legislation has been submitted by Obama or by any member of Congress.  There's been bailouts and other stimulus, sure.. but specific targeted job creation?  Nothing.  And Republicans have absolutely no incentive to pass anything the President proposes, especially if it may help Obama get reelected unless they can force concessions on lowering corporate taxes or making Bush tax cuts permanent in exchange.

Economics really is not that complicated when you break things down the simplest components. Its much like weather-- if you want to know the truth, open your window and look at the reality of things for yourself.   If people have jobs and can pay their bills, then the economy is progressing.  And if people are getting raises, moving up the economic ladder and building up nesteggs, the economy is thriving.  And when people are out of work for 6mths.. 12months.. even longer.. and have given up.. and properties are foreclosing left and right, and everyday people are having to cut back on shopping and live on tight budgets to make every penny count, you know that is Not recovery.

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