The Recession is Over . . . Again, Part I of II

Yesterday's Wall Street Journal carried yet another article announcing that the Great Recession is once again over. ("Bernanke: Recession 'Likely Over'," WSJ, 09/16/09, A2) By this time even the venerable Journal might be having some doubts over whether a "jobless recovery" signaled almost exclusively by increasing speculative frenzy in stocks qualifies as a "recovery" at all. They certainly didn't put the news on the front page. That top spot was reserved for articles on a new call for more troops in Afghanistan, the return of gambling "Day Traders" to Wall Street, and the anticipated cost of the looming health insurance mandates . . . oh, yes — and firefighting bookkeepers in California.

I have nothing against brave accountants. Being a CPA, I naturally assume that we are the bravest of the brave, and contribute more to the success of any endeavor than anyone else. We could have won the Second World War in months just by parachuting a few score auditors into Berlin, Rome, and Tokyo, and demonstrating to the Axis leaders that the presumed benefits of world conquest were more than offset by the cost inefficiencies and waste of resources.

In any event, the Wall Street Journal seems to be taking this latest announcement with just a grain of salt. It's been announced too many times. The Journal is even giving credit to the recent surge in the stock market not to any leading (or misleading) economic indicators, but to the speculators taking advantage of the increasingly wild swings in the market. If you know how to gamble, you can make money whether the market goes up or down.

The bottom line in this latest "recovery" is found in the subhead: "Fed Chief Doesn't Expect Many New Jobs to Appear Soon; Retail Sales Climb 2.7%." In other words, things are not getting better. Instead, we're seeing the usual Fall spate of purchasing as people finish off the Summer and return to school and jobs, buying their Winter clothing and school supplies and gearing up for the holidays.

Retailers are evidently more than a little worried, even given the "climb" of a whopping 2.7%. Last week, Wednesday, September 9, 2009, I saw my first Christmas ad — Carnival Cruise Ships, telling me to book early to be sure and avoid the rush, all to the tune of my least favorite "holiday" song that has nothing to do with any holiday: "Jingle Bells." I have seen about half a dozen other Christmas ads since.

While their choice in music might have something to do with the fact that I did not rush out immediately to book my holiday cruise, I would guess that many people are holding off buying anything that they don't have to until the job market improves . . . which Mr. Bernanke assures us will not be any time soon. Savings, in fact, have gone up, from zero a few years ago to 6.9% as of the end of June. This creates a definite problem. Capital formation — and thus job creation — is fueled not by government stimulus or speculative frenzy on Wall Street, but by consumer demand, as Dr. Harold Moulton demonstrated in his 1935 monograph, The Formation of Capital.

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