The Automatic Earth—Ilarqi writes: The desire for instant gratification has apparently pervaded all aspects of the times we live in, including the collapse of our economies. Once you tell people that such an event is inevitable, they want it to happen as soon as possible, or they lose both their focus and their interest. Warhol’s 15 minutes of fame is a thing of the distant past, simply because it’s so boringly long.
In the past two years, nothing fundamental about our economies has changed in any structural way, and certainly nothing has improved. The damage has been done, whether you care to look or not. What has changed, though, are appearances. If you look at certain sets of numbers from a certain angle, you could swear the recession was over and recovery is here. However, if you’d step back and take some time and look again from another angle, and another, it’s obvious that no recovery is even remotely near. But most people are not patient enough, or just lack the focus, to take that step back, and take that extra bit of time to observe what happens around them. …
When in doubt, return to the long term basics. If you look beyond and underneath all the very tempting and persuasive make-up, there are two elements of the pig that will always remain the most essential, that decide whether it lives or dies: housing and jobs.
There is no such thing as a US housing market anymore, other than through government-run purchase and guarantee schemes. Fannie Mae and Freddie Mac have some $6 trillion in shaky loans on their books, and the shift away from them and towards the Federal Housing Administration and its finance arm Ginnie Mae has resulted in the FHA dropping way below its already insanely low 2% required reserves level (to 0.59%). These numbers, in all likelihood, represent only the mortgages involved. I for one would like to see what that does add up to in mortgage-backed securities issued. Not that I’m considering holding my breath.
And even with Washington (yes, that would be you) as the only player left in a market that has managed to draw in some 5 million überlosers in 2009 (thanks, Barracks O.), there are scores of stories about towns where only 1 in every 4 or 5 empty properties are ever put up for sale. Madoff got 150 years for his scam. And his didn’t run into the trillions.
As for jobs, we’ve covered the topic more extensively here than should be necessary to make you grasp its reality. The bottom line is that close to 1 million Americans are added to the unemployed contingent every single month, with the most rapidly rising contingent being the most long-term jobless. For whom Congress last week extended bare benefits by 14 weeks. Just lovely. And what are we, and they, going to do then? …
When talking about finance and the economy, the Automatic Earth obviously can’t completely ignore what happens with stocks and options and shorts and what have you. But that doesn’t mean they are what we focus on. They’re nothing but a poor and highly volatile indicator for the situation those people find themselves in who do not participate or “play” in those markets.
The state of our economies, whether US or elsewhere, cannot be determined by looking at daily stock exchange data. For that matter, and as sad as that is, it can’t be determined using government data either. We have no choice but to read between the lines of a seemingly endless array of words and pages, and look for the spots where the lipstick and the rest of the make-up start cracking. And crack they do, and crack they will. All pretense does. Which is good, when you think about it. After all, as Leonard Cohen puts it:
There’s a crack, a crack in everything. That’s how the light gets in.