Last Monday morning, we ran bonddad off dKos for the unforgivable crime of economic optimism. Later that morning, the usually readable Jerome a Paris tried to lighten the mood with a snark-filled diary entitled "A diary full of economic good news!"
But Jerome's snark failed because most of the economic news he called out actually is good news and not snark-worthy at all.
Stock markets have gone up massively!
Almost 50% in just under 6 months!
The negative spin is that since 10% of Americans own 80% of stocks, this is bad. It benefits rich people.
But saying rich people own a lot of stock doesn't tell us anything about the rest of America. What about the approximately 60% of American households who do own stock? Doesn't this rally help them too?
The simple fact is that most American households have a stake in the stock market. We own stocks in our IRAs, 401Ks, mutual funds, college funds and through employee stock purchases.
Surely we don't want to see 60% of American households stay poor just so 10% won't get richer. You can say what you want about inequity in wealth distribution and suggest any fix you want, but praying for a bear market to punish the rich isn't going to help anyone.
Cheap Homes Spur Sales Increase
The housing market is showing signs of life. How is this bad news? Because prices have fallen from the peak? That's not bad news. It's good news, both necessary and welcome.
We had a housing bubble, remember. House prices were too damn high. They had to come down.
The only alternatives were to bulldoze empty houses to make the surviving ones more valuable or try to reinflate the bubble with more cheap money. Neither of those are very good ideas.
People willingly selling their [houses] on the cheap are exercising their entrepreneurship and indomitable spirit of freedom! It's great news!
Unfortunately, there's no way to pop this bubble without hurting some of the people who bought on the way up. Jerome certainly has a point here. People who played by the rules and are now losing their homes are facing great personal tragedies. (I have less sympathy for people who bought McMansions they couldn't afford with no money down, interest only loans. They never really owned the house anyway. They were just renting from the bank.).
OTOH, what about the people who wanted to buy a home but had been priced out of the market by the bubble. Jerome ignores them completely. For them the return to sane housing prices really is good news.
Bonuses are back!
I'll give him this one. In a perfect world, bonuses for bankers should be a matter between the bank and it's share and bond holders. It really doesn't affect anyone else, so why get worked up about it.
If I have shares of a bank or other financial institution (which I probably do, see above) then I can complain. Otherwise, it's not my business.
But the Fed bail-outs have changed that. Now it's my tax dollars propping up those institutions and I'm getting doubly screwed. Once because of forgone returns on the shares sitting in my 401K and once on my 1040 form.
That sucks.
luxury car sales are booming!
Did I miss something? I thought we liked auto workers. Shouldn't it be good news that people are buying their products again?
Is the bad news in the word "luxury". Does Jerome want to see a boom in Chevy Areos? Not going to happen. Any recovery in big-ticket consumer spending is going to be lead by people with money and they aren't buying Yarises.
Besides, I bet the line worker doesn't care if he's making Honda Accords or Acura RLs. He's just happy he has a job.
Wages are down!
This one is bad. No bones about it. It is bad.
But at this point in a recession, could it be any better? During recovery, employment always trails other factors (like consumer spending on luxury goods or a return of the houseing market, just to pull two out of the air).
Businesses have to see increased demand for their products before they start hiring again. That's not going to happen till well into the recovery and until then wages will remain depressed.
With unemployment around 10%, we're in for 12 to 18 months of weak wages and rocky employment data.
Final score
Of Jerome's 6 points, 3 were good news, 1 was a mixed bag and 2 really were bad news. The glass is clearly more than 1/2 full.
If bonddad is right and we are at the beginning of a recovery, things are about as good as we could hope for them to be right now.
And that's good news too.