The Big Lie About The Economy

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It’s a dirty political trick that keeps getting played because it works — at least for awhile. The trick of lying about something over and over again, in as many ways as possible, in as many media as possible, until people start believing it. Even people who were originally skeptics. Even people who sense in their gut, feel in their personal lives, that the lie seems very, very wrong.

It’s the old Big Lie technique, today being used on the American public to convince us that the economy is improving, something that is most certainly not true for a growing number of middle class Americans. This Big Lie is being systematically promoted by Wall Street for its own benefit at the expense of Main Street, and being bought into by our governing class because this group of worthies lacks the will— or the ability — or the desire — to see through it

What are some of the bogus numbers that are part of this Big Lie campaign? Let’s start with employment.

The last report from the Labor Department found 195,000 new jobs created last month, and an average of 202,000 new jobs per month created in the quarter ending in June. Sound good? Yes, but only if you don’t look too closely at the numbers.

What we’re seeing today is a lot of lousy new jobs that will never produce middle class lifestyles for those working at them. More than 300,000 of the new jobs created in the last year were part-time jobs. Another 300,000 were second jobs people were forced to take because their first one didn’t pay enough to live on. And the full-time new jobs that are being created are not, by-in-large, middle class work, but low paid ones in box stores, the leisure and hospitality industry, non-professional hospital workers.

Then there’s real estate. Home sales are booming again and home prices are soaring. It this proof that the Fed’s quantitative easing is animating this vital part of the economy? They seem to think so inside the Beltway. In the real world the view is very different.

Overall, the percentage of home ownership in this country continues to fall. Young couples who should be buying homes can’t afford to do so because of things like college debt, and because of tougher lending standards by banks.

So who is buying all those homes today and jacking up the prices? Hedge funds and Wall Street private equity flippers. They tap the Fed money giveaway machine for free money, buy blocks of homes for cash, keep them until another hedge or private equity entity buys at a higher price. It’s the classic real estate crash-a-coming, flipper-based scenario in a basically unhealthy housing market.

The worst instance of Big Lie economics involves the gross domestic product, which has been rising — slowly, but rising nonetheless. Increasing the GDP has become the questing beast of policy-makers, which sounds like the height of wisdom because don’t we all benefit when the GDP rises?

No, most of us don’t. Only the top 1 or 2 percent have benefited from such growth in recent years. And a policy that boosts GDP growth without a concern for how these benefits are distributed, claiming that the growth itself is good for the country, is a very Big Lie indeed.

I believe that inside the beltway they deliberately fudged economic numbers to jolly up the American public after the crash of 2008. OK. Maybe that made sense back then. Maybe a Big Lie then was necessary to hold things together in an emergency.

Now, however, the Big Lie peddlers actually seem to believe their own lies. It’s not hard to do inside the cosseted confines where our very well compensated ruling class dwells. Alas, those of us who must try to survive in the real world economy don’t have the luxury of believing that if the lies are big enough, you can eat them, pay your rent with them, and use them as a down payment on a kid’s education.

(Now available from Amazon in print and ebook formats — Michael Silverstein’s naughty financial markets take down, The Devil’s Dictionary Of Wall Street.)

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  • Rambie

    Well said, they keep talking about how the economy is improving, yet many still struggle to keep our heads above water. The “Big Lie” is going to be very hard to sell.

  • dduck

    Wow, thanks MS, I thought is was worse.

  • Huxley

    I think some of the non disclosure on this stems from the fact that it is nothing new. For 30+ years we have drifted into this growing disparity between a wealthy elite and a middle class whose wages continue to fall behind rising costs of living. There is no reason that this recovery would follow any other path. Unions are still under siege–more so than ever in fact. Corporations and the wealthy still have the lowest tax rates they’ve had since Reagan’s time in office–so there still exists the motivation for top earners to make more and more knowing it’s not being taxed at post-WW2 rates. The half-full side of the argument is this: as the kicking and screaming over joblessness goes away, maybe there will exist the political room to take this on. Trying this 2 years ago would only give Republicans the excuse that it wasn’t the right time to tackle this because the economy was so fragile.

  • MICHAEL SILVERSTEIN, Wall Street Columnist

    Hi dduck,

    Actually it is much worse. I just don’t want to upset folks too much. It might generate a lack of respect for our Economic Masters, and those who service them in Washington and state houses.

  • http://seniorscan.wordpress.com gregorymhughes

    Huxley, You said it for me. However, what are possible solutions at this point. Our political system is overly influenced by corporations, special interest groups, and the wealthy. Some of us have seen this coming for many years, but it will take a critical mass or tipping point for significant change to be made since the wealthy class has so much influence. When regulations are adopted that they don’t like, they hire the smartest people to find loopholes. So, well intentioned policies do not produce the intended results. I’m afraid that it might take large, aggressive demonstrations to alert the politicians to the wants of the public and not just the wants of the ruling class.

  • STinMN

    In my little corner of the world I can honestly say that the economy is improving, despite the 0% to .5% pay increases given by my employer. 5 people have bought new/bigger homes including 2 first-time home buyers, we actually hired new employees this year for the first time in 4 years. They may have been entry level positions, but entry level engineers, buyers, sale & marketing positions are pretty decent starting pay (~$35k/year or better.) It has been a long time since I’ve seen this many new cars in the parking lot (a lunch time count put it at 7, with 2 more that I know about that weren’t there,) and people are actually taking summer vacations. I certainly wouldn’t say things are going great, but it is a marked improvement from earlier this year.

  • sheknows

    STinMN, I also have seen some “improvement” here in Omaha, in that most of the people I knew who were unemployed are no longer. More shoppers out, and prices are definitely going back up and homes are selling here too. I believe what is happening is the “phantom limb” phenomena, where you think you have something you actually don’t after it was ripped away from you.

    We hear so much about this improving economy that I believe people are spending again. Spending money that in truth they really don’t have. Nothing has changed in the lives of the people I know except they are giving more credence to this lie by making others believe it is true. One of my friends after a year of looking finally got a job for $8k a year less. Whoopie! In fact without exception, all three of them are now working for less money than they were.
    The new cars you see are like the ones I see. “better take advantage of those low interest rates while they last” is the rationale I hear, but they are purchasing a big ticket item with less purchasing power. Phantom limbs.

  • JSpencer

    Thanks Michael for your post. Those who don’t have to struggle for the bare necessities don’t understand how wide the chasm is. For them it’s an abstract and far away story that happens to “other” people. And it’s a story that isn’t much fun to think or talk about on either side of the divide so people succomb to distraction instead.

    http://billmoyers.com/segment/preview-distracted-from-democracy/

    the Big Lie peddlers actually seem to believe their own lies

    Don’t they always?

  • The_Ohioan

    My judgement on the economy resides mainly in the number of Semi-trucks I see on the highway during a trip. In 2009, you could drive for miles and miles without seeing a truck. No goods, means no services, means unemployment of the lowest economic class.

    That indicator, at least, has changed – semis are again taking forever to pass other semis on the freeway – slowing down us lead-feet. It may be that both wages and prices were inflated beyond a reasonable expectation before the crash. Neither will be likely to become so inflated again, at least for a while. Certainly home sales have picked up dramatically here in Michigan, but home prices not so much.

  • petew

    Mr. Silverstein,

    I must be watching different news reports than you, since lately,the good news in economic reports are almost always followed by counter-claims which bring up the economic disparities and illusions you mentioned–as reported by the large news outlets!

    Although jobs may not measure up to the standards most of us expect when securing unemployment, and although the housing market is perhaps artificially buoyed by speculators who flip houses for profit, isn’t the fact that even when business picks up on these fronts, it is actually better news than what we were hearing about the housing market several years ago? And, doesn’t the fact that Wall Street is doing well, even though mainstreet still may have a long way to go, at least convey good news about Wall street?—News that may still not have become a reality, if Obama’s financial measure had never been employed?

    It makes sense for business interests to want to project a rosey picture of economic growth since investors are much more likely to respond to a glass half-full scenario than a half empty one. But, given the obstructionist forces in Congress, it is very unlikely that Republicans would not constantly be critical, and willing to point out of every one of the disparities you mention. As the saying goes, you can’t sneak sunrise past a rooster, and similarly, you can’t expect the GOP to ignore negative economic reports–as they don’t, and have not, since the beginning of the recession!

    As I said, you must be watching different news reports than I, and, by those, I am referring to large mainstream outlets, which have always, been careful to report the half-empty scenario, in response to the many financial critics in Congress, as well as in response to numerous dissenting economists!

  • dduck

    Yipee, a new version of Glass-Steagal is being sponsored by a senator I like, John McCain and one I had severe doubts about, Elizabeth Warren. I have high hopes that there are enough honest and semi-honest people in Washington to give it a chance of passing, but at the same time I am almost as pessimistic about the current crew as I think MS is.

  • petew

    Just when John Mccain Marches in step with GOP policy to support special interests, he suddenly has the gall to be a bit of an authentic maverick and advocate for things that really make sense—one of which is to place necessary limits on the financial reach of Businesses that are too big to fail.

    God bless you Senator McCain—even if you fall hook, line and sinker for every bogus scandal that is aimed at Obama and other Democrats. Republicans like you are a dying breed, and without party members like you, The GOP would become nothing but a totally obedient mouthpiece of, and puppet for, big business interests!