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Economists: They Can Add But Can't Put Two & Two Together

Submitted by Mark St.Cyr,

Once again I found myself bewildered while watching financial discussions on television. Normally I would name names or point out which show I was viewing for context. However, this is no longer needed. Now it seems the depth of understanding on the very topics these supposed “experts” are schooled in – is borderline dreadful if not outright deplorable.

As usual following the immediate reporting of released data on economic activity (e.g., jobs report, consumer spending, et al) the prerequisite panel of economists are touted onto the stage to espouse why the “numbers” show or mean what they believe based upon their “expertise and knowledge.” It would seem the makeup and breath of insight on these panels has more in common with what’s typical of a reality show roundtable interview rather than anything that approaches true reality.

Usually there’s one economist from the “outside” which means; doesn’t work directly for the show, yet is a professor at one of the “go-to” producer sanctioned Ivy league alumni. Another will be the “resident” lead economist (i.e., actually does work for the show) followed by the next in rotation “everything is awesome” fund manager to decree after every economic data point (whether good or bad) that stocks are clearly “reasonably priced” and poised to go even higher.

All one needs to do to follow along is forget your rational objective analysis at the door, have another glass of the proverbial “Kool-Aid™, and chant with the congregation panel “everything is just awesome!” Why? Because it’s in the “numbers!”

Over, and over again the “numbers” are touted as if they have the same intrinsic value today as they did previously. Today the most common example to show the lunacy of how numbers are viewed by today’s economists is the now laughable 5.6% unemployment rate when compared in actual intrinsic value terms as a measurement of economic health as a print of 5.6% represented just 5 years ago.

When you listen to most of these debates by economists using today’s “numbers” one can’t help but think any release of data must be taken as holy writ. Again, from what I’ve viewed more often than not has more in common with discussions of religious doctrine more than anything resembling economic insights. For if it’s “in the book” (e.g., a government data release figure) the discussion is over and anyone taking the other side is not viewed as a contrarian. Rather: as a non-believer or heretic that now must be converted or cast away in shame.

The latest example of this occurred when the household spending numbers were released. The data revealed U.S. household spending didn’t just contract – it fell off a cliff. As broken out in a quick detail format by Zero Hedge™ it tumbled the most not in a month over month comparison basis. But dropped the most since the so-called “financial recovery” began in 2009!

How could such a statistic even be possible since the markets are at lifetime, never before seen in human history highs, job creation that allows for an unemployment rate of 5.6%, and a recent GDP print of 5%? How can this happen when “everything is awesome!?”

I listened to many discussions by economists enthralled in the minutia of the details of both the consumer spending reports, and GDP figures and was left astounded on just how they added and viewed both the “numbers” along with what they should, or should not have produced.

The most perplexing meme enveloping most of these discussions were not just their initial reaction to the data points. But rather in the way they seemed to be aghast as well as dumbfounded at the conceivability such a print could even occur within the all-encompassing ritualized mantra “the drop in crude oil is a massive tax cut to the consumer allowing them to “spend more, and spend more often.”

They all espoused how they added this, that, and the other thing. Divided for this, subtracted for that, carried the 1, adjusted for “the weather” then “seasonally adjusted” and what did they come up with for an answer as per known economic doctrine?

It was obvious this report (from their view) seems to not capture what they “know” must be taking place. And wagered this anomaly or noise laced figure will smooth itself out in the next report. For it must be assumed as fact: The consumer must have more money in their wallets if the same purchase of gasoline in now basically cut in half. And that half equals real money.

Sure sounds reasonable and bulletproof as far as economics would have one think. For 2+2 must =4. Unless of course you need it to equal 10; then you either “seasonally adjust” or state non-GAAP metrics. But I digress.

The true issue is the numbers did show exactly what the math does show. It’s in the putting of two and two together where the reasonable assumptions of objective analysis can show where that money has materialized as well as where it’s been spent.

All of that so-called new-found “savings at the pump” money that’s supposed to be burning a hole in consumers pockets to by more goodies has indeed resulted in more spending. Just not where the economists believe it should.

As added proof to this hypothesis that It is indeed being spent into the economy, the personal savings rate showed once again: It ain’t going into their bank accounts. As a matter of fact the data revealed not only was personal savings down. It was to the lowest it’s been in months. “So where’s all the money?” ask the economists perplexed and bemused. For surely if their math is correct it must be somewhere? Right?

Yes, it is right. And it’s also right there – under their noses. But either they’re blind to the observation as to make a calculus. Or, just like the gospels of yesteryear that were denied canonization, they must be neither recognized – nor spoken as to have ever existed in today’s version of economic theology. For admission of such an observation would be blasphemy, possibly punishable with banishment, as well as excommunication from the televised “financial” media.

So again, where ‘s the proof for my claim? Simple: Healthcare spending. i.e., required new out-of-pocket expenses relating to that tax (which should not be spoken) “ObamaCare.”

Household spending is down in direct proportions (if one really wants to look at correlations) to the increased out-of-pocket outlays now mandated for households as well as individuals, and businesses in accordance to the now never-ending rollout of new payments and penalties required to stay in compliance with the effects mandated by the new healthcare laws. And these new mandates for one to spend their “gas savings” on – are just getting started.

Remember it is this same choir of economists relentlessly chanting the homily of “Everything Is Awesome” when GDP prints miracle numbers such as 5% with such zealousness – it would make a backwoods styled congregation leader envious. For it would seem if the numbers appear in the “canonized” report: It’s to be viewed as gospel and free from question. For one must have “faith” the numbers are real. Period.

For those that may question the reason I state: they can add, but can’t come to a conclusion based in reality. May I remind you once again where that “everything is awesome” meme stems from? i,e., A print of 5% GDP. To wit:

 

It would appear that “gas savings” that put money back into consumers pockets came about just in time to make it into the collection plate. So for my money, when it comes to this new theology of economics. I’d rather be with the heretics. Maybe we don’t understand how they can believe the numbers they recite. But we do no one thing above all else.

We won’t partake in the Kool-Aid.