To The Barkers: Answer This Question
Sunday, November 15. 2009
Posted by
Karl Denninger
"The recession ended in June": Dennis Kneale
"The recession was definitely over in September": Any one of a number of people.
Ok. Let's say that I accept all this at face value, even though while driving through my definitely-beach-oriented local town here this afternoon I noted even more closed-and-gone storefronts than there were a couple of weeks ago, and last night at the local open-air mall, although the evening was absolutely gorgeous, you could have fired a 155mm Howitzer down the "main drag" without killing anyone - because there was almost nobody there, and literally not one shopping bag was in evidence.
I simply have to ask the pundits and the carnival barkers, of which CNBC is the worst (but certainly not the only sinner) the following - why do we need any of these programs
if in fact the economy is growing again:
Zero interest rates from The Fed. Isn't 2%, 3%, 4%, 5% more consistent with economic growth? If indeed the economy is expanding, why do we need "funny money"?
$8,000 home-buyer tax credits. And not just first-time credits either - those were recently expanded, and the NAR has said quite clearly that "but for this program housing would collapse." Is this consistent with an economic recovery?
FHA underwriting mortgages at 3.5%, their default rate is going parabolic, their reserves are down to well under half of the mandatory minimum and there is no evidence in sight that their performance metrics are improving. With the aforementioned $8,000 "credit" and the FHA's willingness to monetize it, you can once again buy a home with "zero down", just as we did in the bubble. Is this consistent with an economic - and housing market - recovery?
The dollar carry trade. It's obvious and starting in June of this year the correlation between the dollar's move and the S&P 500 became nearly 100% on an inverse basis. Consumer confidence numbers were far below expectations Friday, yet as soon as that hit the dollar, the market rose - into worsening economic data. Again, is this consistent with an economic recovery?
"Cash for clunkers" - and oh, by the way, what happened to auto sales when it ended? Is the near-vertical drop-off in GM's sales as soon as the program ended consistent with an economic recovery? Is a claimed 10m expected 2010 units consistent with economic recovery when in 2005 and 2006 the industry sold nearly 17 and 16 million vehicles, respectively?
29.9% interest rates on credit cards via "jack-up" letters and other outrageous actions. Again, is this sort of gouging consistent with economic recovery?
Declining consumer credit demand. I've published the graph before and will reproduce it below. Is this consistent with economic recovery?
Continues with charts: http://market-ticker.denninger.net/a...-Question.html