Believe it or not, there was actually some good news in yesterday’s meh employment report. Hourly earnings increased by 0.2 percent. Other than that, imagine you were rooting for UT last night – after Colt McCoy went down with the bum shoulder. In other words, you should have known how this was destined to turn out.
However, expectations were not well pegged to reality. The idiots who set our expectations were actually shocked. The experts expected a gain in employment, 85,000 jobs got terminated. Experts expected U3 to go into single digits. It remains at 10%. The lack of reality, in the face of ugly truth, tells a sordid tale. Economist R. E. Lucas, proponent of The Theory of Rational Expectations, would view this as a failure.
And this surreal lack of acceptance of where we are at economically leads to serious trouble for us down the line. In accordance with Lucas’ thinking, this inability to see the world for what it is leads to two significant bad outcomes. Policy makers do not know the extent of the problem and policy makers do not acknowledge that their current selection of remedies will not cure the raging disease.
The expectations prior to this report were both unrealistic in the face of empirical evidence and calculated to support a political agenda. This held true without reference to whether the policies resulting from the agenda would actually do more good than harm to the American economy. Examples of poor economic predictions follow below.
“As the U.S. economy emerges from the worst recession since the Great Depression, it is now clear that the U.S. labour market is on the cusp of a turnaround,” said economic strategist Millan Mulraine at TD Securities in Toronto. TD is forecasting a gain of 25,000 jobs.
Others made the laughable claim that census hiring would infuse the economy with cash and lead us to greater prosperity by priming the pump. I wish I were joking when I typed that, but here goes the prediction below.
In a report this week, Scotia Capital economists Derek Holt and Karen Cordes predicted the census hiring would “severely distort” the jobs market and pace the United States to create a total of 2 million jobs this year. That's sluggish for typical post-recession periods, but much better than most forecasters expect.
And I astound myself by saying this, but I actually think Nouriel “Dr. Doom” Roubini is being too much of an optimist.
Nouriel Roubini of Roubini Global Economics said it could be 2014 or 2015 before unemployment in the United States falls back to its “natural” level of 5 per cent.
What happened here was not just another inventory recession of the typical kind. The world economy has changed since 1995, the United States economy stopped evolving after the commercialization of the Internet. In fact, many parts of the US economy (e.g. The Industrial Mid-West.) Really stopped evolving around 1955.
This recession/depression/perpetual funk is what I call a realignment recession. This is what happens when the rest of the planet follows Darwin’s advice and evolves while the United States does not. The reasons for our technological and economic senescence vary and are primarily neither GWB’s nor BHO’s fault.
They nevertheless exist and sit squarely on the plate of the political figures in charge of Versailles Upon The Potomac. The problems I believe we face follow below.
The United States infrastructure is aged between 15 and 150 years. Our power
Generation system, our limited access highways and our phone and rail systems were built as our nation first industrialized and then digitalized. This occurred between 1860 and 1995.
The newest and best infrastructure we have, The Information Super Highway, is 15 years-old. By way of comparison, a US Army Helicopter is expected to have a useful life of 20 years. Capital assets can only be depreciated under MACRS a maximum of 25 years. Virtually every backbone asset our society relies upon has outlived its predicted usefulness.
It speaks profoundly well of our nation and people that most of our roads, rails, phones and airports still technically function. We built the heck out of it and of that, we as Americans should feel genuinely proud. But now we have to overhaul, redesign and rebuild it.
Nations such as Korea, China and Australia built their national infrastructure backbones between 1950 and 2010. They reap the benefits of newness and advanced technology. We modernize to match them – or we go the way of Victorian England.
Yes, the Sun could one day set on the American Empire. No, the Chula Vista Dog Walk and The Austin Frisbee Golf Course are not good enough infrastructure replacements to justify the expenditure of $800Bn.
The vast, ineffable and total failure of the stimulus package to address this fundamental and colossal short-coming is not an opportunity to bash any individual, but rather a necessary bench-mark by which we evaluate the fundamental value of an entire paradigm. We need to ask ourselves a question. Can the state really jump-start and drive the entire economy?
If we need an entire technological revolution to reconfigure our key infrastructure and bring America back from obsolescence to technological parity on the bleeding edge, the Chula Vista Dog Park and The Mississippi Doorknob Boondoggle just ain’t getting’ none. Let us leave aside the inherent corruption of the domineering American Congress. Both Tom Delay and Harry Reid have bipartisan earmark evil to answer for in Hell when the ball game is over. Even if both men were honest like Abe, top-down, centralized decision making in Washington DC would doom the American experiment to predictable and tragic failure.
The Educated People® can believe whatever they care to. No statist society, in the Modern Historical Era, has created anything beyond misery, sloth, demoralization and death. Since Francisco Franco arrived in Spain, what has Spain done for the world? Since Vladimir Lenin arrived in Russia, what have the Russians done for the world?
The aforementioned nations have done what you can expect out of Barack Obama’s stimulus plan – jack! Progressivism, Liberalism, Social Democracy, Communism, Fascism whatever name you want to put on the desire of tyrannical people to centralize all power and decision-making in some drab, soul-sucking, amoral Kremlin always kills creativity, productivity, faith and belief.
We can expect our next jobs report to suck too- and the one after that, and the one after that and also the one after that. Statism leads to stultification not change. Totalism leads to death, not fecundity. We don’t manufacture things in America and we don’t create new jobs in America.
We choose “progressivism” over progress and until our electorate massively revokes that entire school of philosophical thought we as a nation shall continue to die. We will die one town, one city, one family one agonizing piece at a time. We should adjust our expectations for our economy, our personal success, our place in the world and the fate of our immortal souls accordingly.
Unless, of course, we have the courage to start demanding change in 2010 and 2012 and for the rest of our history as a nation. We are still America, Dammit! And we have the power to fight back and change our currently horrendous rational expectations.