"empty home on Bloomington Ave S, Minneapolis" by Andrew Ciscel via CC
OK, so I'm not an economist. But as a venture investor in early-stage medical and technology companies I read the usual financial articles that come across my screen and I see the same statistics everybody is seeing. I listen to Obama and I watch the TV shows where pundits argue with Congressmen about the wisdom of this or that particular tax or stimulus measure to restart our sick economy. I have nothing to say about this, no statistics of my own and no fancy theory, so instead of taking sides in this particular debate I keep looking for the things that are missing.
What is missing is this: Over two million American families have now lost their homes; foreclosure figures are at an all-time high. Several million new families will be thrown into the street over the next year, no matter what happens to taxes or the stimulus. This is a given. Yet, among Washington and Wall Street experts this disaster is only reflected in the form of statistical figures they mix up and datamine alongside many other figures, where the numbers lose their special, tragic character.
It's not a very newsworthy disaster, either, so after a while it even fades from TV news: no dramatic shots of oil gushing up from a broken well or birds coated with black tar. No sense of urgency here, just a big spreading tragedy. The experts only know that the banks are off the hook: they have been given tons of new money to help with mortgages. The fact that this money sits unused and that many banks have not even appointed managers to deal with desperate homeowners does not come to their attention. My Bank of America branch won't even talk to you about mortgages - they send you to a faceless office downtown where nobody knows you.
In such complex situations, it is healthy for somebody to just state the obvious before trying to develop cute, complicated theories. You don't look smart by stating the obvious: Duh! Everybody knows that. You won't get invited on the CNBC morning show. You knew what I'm going to say all along but perhaps you hadn't thought it through.
So here is an obvious statement: if you have just lost your house you are not likely to go buy a new TV set for a while. If you just moved your family into a cheap motel, you probably don't think about ordering new drapes for the living room; and if you also lost your job (as thousands of people continue to do every day) and now live in your car in some urban park, you won't be shopping for refrigerators, sofas and camcorders for a long, long time to come.
Since nobody can find you because you don't have an address any more, the statisticians won't be asking for your opinion about the economy, which may explain the puzzling discrepancies in the mysterious tables called "consumer sentiment," a figure that is now at a five-month low. This "obvious" fact may also account for the lack of any serious recovery; or the probability that the economy will not be very robust for a while, no matter how "stimulating" the climate gets in Washington around election time; it may explain the chill over the Chinese industry, which makes all the refrigerators, the sofas, the TVs, the drapes and the camcorders you used to buy when you had a house to put them in; and the uncertainty in Europe, which makes the machines China needs to make TVs, camcorders, drapes and sofas. So that uncertainty travels around the planet in opposite direction to the Earth's rotation and comes back to hit us from the east, because we used to supply lots of goods and services to Europe to make the machines, etc.
No wonder Mr. Bernanke finds that things are "unusually uncertain." At least he still has his sofa.