Charles Hugh Smith: Why the "Nascent Recovery" Won't Last

04-27-2010 • Oftwominds.com/blog

Propaganda and "confidence-building" are constantly substituted for reality. The problem, we are repeatedly told, is a "lack of confidence." Consumers' and corporations' accounts are bulging with idle trillions awaiting "renewed confidence" to gush back into the economy, creating millions of new jobs and trillions in new wealth. Here is a typical example: Forecasters optimistic about economy, job creation How many MSM stories have you read which refer to the "162,0000 jobs created last month" as evidence that the "economy is turning around"? Dozens, if not hundreds. How many note that the 162,000 number is entirely bogus, boosted by temporary Census Bureau hiring and tens of thousands of fictitious "birth/death model" phantom jobs? The spin, hype and forced good cheer is essentially unlimited. As I write, stocks are up on news that Caterpillar reported an 11% decline in revenue to $8.24 billion, a huge "miss" since analysts polled by Thomson Reuters had forecast $8.84 billion in revenue. The "surge in profits" didn't come from sales; it came from squeezing costs, a strategy which has some upper limit of effectiveness on goosing the bottom line. Machinery sales surged 40% in the Asia-Pacific region, but of course no one explores the source of that "surge:" out of control spending on empty cities and luxury highrises in China. If that unprecedented real estate bubble in China ever pops-- and can any bubble continue forever?--then Cat sales will go into freefall. That's not "confidence building" so it goes unsaid, despite being glaringly obvious. 2. Tax/borrow and spend is alive and well. States and local governments gorged on the housing/stock bubbles in the last decade, adding billions to their annual tax revenues and spending in just a few years. California went from collecting $76 billion in 2001 to $96 billion in 2008--a 26% increase of $20 billion. Other than some modest increases in student test scores and another prison, the state has nothing to show for this gargantuan increase in spending. The high-cost status quo vacuumed up all that money and is now crying for taxpayers to pony it up, no matter what the consequences. Meanwhile, back at the MSM Propaganda Ranch, everything's rosy, of course: Here is the standard-issue "confidence-builder" on California's "nascent recovery", with a few editor's comments added: