Expecting Nothing: How to Avoid Disappointment in a "Muddle Along" Economy

If voting changed anything it would be illegal.

— Emma Goldman


Today, we take a break from history. A breather. We pause to look at the here…the now…and the shortly thereafter.

Stocks were more or less flat yesterday. Not so for gold, though…which advanced about twelve bucks an ounce. The reason? Well, if you need one, you might like to chalk it up to downward pressure on the dollar index. And the reason for that?

My oh my, Fellow Reckoner…aren’t we demanding this morning!

Greenback selling might have been triggered by a “weaker-than-expected” vibe from the Philadelphia Fed business survey. The report showed, according to the wires, that “Factory activity in the US mid-Atlantic region shrank in August for the fourth month in a row.”

Or maybe it was the other, “weaker-than-expected” report…the one showing that housing starts in the US fell 1.1 percent in July, to an annual rate of 746,000, down slightly from June’s 754,000 pace.

But Commerce Department figures from the very same report also showed that building permits, a proxy for future construction, rose to a pace of 812,000, the most since August 2008.

So what gives?

Worse-than-expected…better-than-expected…and worse-than-expected again…

Well, what did you expect?

It’s a “muddle along” economy, as Bill likes to call it. Prices themselves are as unreliable as a skinny chef…or a fat sprinter. What the world wants is an honest indicator, not the tortured, Weekend At Bernie’s variety the Feds churn out…the walking dead…the smiling stiff…the hung, drawn and quartered statistics squeezed out of the dot.gov sausage machine.

Truth is, nobody knows what’s really going on…least of all those who, after causing, then missing, the current and ongoing crisis, were quick to nominate themselves as the saviors of the day.

“Commentators, economists and kibitzers focus on whether austerity or stimulus is the proper path to ‘recovery,’” observes Bill. “The argument is fraudulent. Neither will work. You owe more than you can pay, you can neither save nor spend your way out. When debt is bad, it is bad. Unpayable. Rotten. Worthless.”

It’s true, Fellow Reckoner. One side argues for more government…the other side argues for much more government. Neither is really committed to a solution that doesn’t involve pandering to the ballot box brigade of flag-waving, bumper sticker-sporting Obamney supporters.

Take Paul Ryan, for example, Mitt Romney’s…ahem…Number Two. Here is a man who voted for the TARP bailouts, auto bailouts, medicare expansion, housing subsidies and unemployment extensions…and who somehow has the conservative base praising him as some kind of penny-counting pinchfist.

That he also voted to make the Patriot Act a permanent fixture, to introduce a national ID card and for indefinite detainment, without trial, of US citizens, in accordance with the National Defense Authorization Act for Fiscal Year 2012 (signed by President Obama), might have won him some points with the far right…

…but it is his much-ballyhooed budget plan that’s really working them into a lather. And why not? After all, the Ryan Plan is a roadmap to a balanced budget. It just happens to be a very, very long road…one that reaches “balanced” in, oh…2050. Our mates over at The 5 have been on the story for some time.

“Pay no mind to the mainstream chatter about the ‘vast difference’ between Ryan’s budget proposal and, say, that of the Obama White House,” reports Dave Gonigam. “Sixteen months ago, we showed them plotted on a chart.

Obama vs. Ryan Budget Plans

“Hmmn…” Addison mused at the time. “Shall we raise the national debt by 84% in the next 10 years, or merely 62%? To even suggest the national credit card may be revoked long before then… well, that makes you a ‘kook’ in these parts.”

“Worse,” continues Dave, “Ryan’s numbers sit on a foundation of ever-shifting sands. Like the president’s figures, Ryan’s rely on crazy-optimistic projections of GDP growth — about 3% a year. For the last debt-choked decade, the average has been closer to 1.6%.

“Anything short of that magical 3% projection means the expected tax revenue won’t materialize and the debt grows even faster than on the chart. Never mind the hubris of believing your blueprint is so swell that every president and Congress for the next 38 years will stick to it.”

Reading this, you might feel compelled to write your local Congressman…or Tea Party organizer…or town Occupier. But it would be a waste of time. The government’s interests are as aligned with yours as a prison warden’s are with those of his inmates. Best to just let them get on with bringing the system down. What’s that saying again? “Never interrupt your enemy when he is making a mistake.”

Joel Bowman
for The Daily Reckoning