"There are only two ways of telling the complete truth—anonymously and posthumously."Thomas Sowell

Thursday, May 12, 2005

Bad News Bears

Reviewing some economic news of the past few weeks:

1. The price of oil has fallen by ten bucks a barrel – from roughly $58 to $48 -- ever since Goldman Sachs analyst Arjun Murti predicted it was heading for $105.

2. The U.S. Treasury announced that April tax receipts were astonishingly strong, leading experts to predict this year’s budget deficit has been overestimated by at least $50 billion.

3. Last month's surging exports and employment (previously called a "soft patch") mean the perfectly respectable 3.1 percent first quarter GDP growth is soon to be revised upwards towards 4 percent. So, while earlier reports said the pace of economic growth over the past 8 quarters had been running at a mere 4.3 percent pace (which gave Paul Krugman a “whiff of stagflation”), it was actually a bit better than that.

For Democrats planning to rehash Senator Kerry's 2004 nonsense about the economy to gain Congressional seats next year, all this goods news is very bad news indeed. Whenever reality goes against their theories, however, the Dems can count on The New York Times to “interpret” the news in imaginative ways.

Last Sunday, New York Times writer Daniel Gross warned of “The Perfect Storm That Could Drown the Economy.” I naturally assumed he must be writing about some other country, but apparently not. Mr. Gross presumably reads the sort of news we just reviewed. Yet he somehow sees in these same tea leaves “many obvious and worrisome portents” that could lead to a “major recession” or even a “full-blown crisis.” In fact, Mr. Gross imagines “some [U.S.] imbalances are eerily reminiscent of conditions that helped touch off recent economic crises: Mexico in 1994, Asia in 1997, Russia in 1998 and Argentina in 2002.” “What's more,” he adds, “a recovery would be comparatively slow in coming.”

I long ago stopped expecting New York Times reporters and columnists to accurately report the economics news. But you’d think they might at least try reading the economic news.


Jay D. Homnick said...

AR, I am so thrilled that you wrote this. I had been observing the selfsame phenomena with my layman's eye but hesitated to jump into the fray.

With your expertise behind it, the critique is devastating.

Truthfully, it is worth doing a study contrasting the 'momentum' effect of good economic news when the press promotes it (like when a Dem Prez presides) as opposed to when they squelch or at least muffle.

Tlaloc said...

"1. The price of oil has fallen by ten bucks a barrel – from roughly $58 to $48 -- ever since Goldman Sachs analyst Arjun Murti predicted it was heading for $105."

Indications are we have hit or will hit in the next couple years peak oil. That being the case oil prices will continue to rise (of course there will be fluctuations). Besides Goldman Sachs, Deutsche Bank also sees the potential of $100+ barrels of oil:


Other than oil you've chosen some rosy looking indicators but there are plenty of other warning signs. For instance flip from the economic page to the political page and read about the pentagon closing bases. Now take a wild guess why the states involved are terrified. I'll give you a hint it starts with "e" and ends with "conomy."

The real indicator of worth though is that Bush is still president. While he is we'll see more of the middle and lower class getting screwed, the wealthies (campaign contributors) getting tax breaks and corporations getting enough perks that they get by despite the economic situation.

Who ordered the Tort reform with the side of Bankruptcy protection?

Tlaloc said...

As another example of a less than inspiring economic metric consider that US real wages are falling faster than at any point in over a decade.