Eric Sprott, a veteran fund manager and researcher based in Toronto, believes the buyers are in la-la land when it comes to interpreting economic data emanating from the world’s largest economy. A few of his salient points include:
- A prolonged U.S. retail sales slump, highlighted by a same-store sales plunge of 32% last month at Abercrombie & Fitch (ANF, news, msgs), shows that consumers are in no mood to buy goods even if factories were ready to make them. A plunge of 5.1% reported by U.S. shopping malls in June was worse than the dire 4.5% forecast.
- Unemployment is not just the worst since 1983 — 29% of the unemployed have been looking for work more than six months; the number of people taking unemployment benefits has reached a record 6.88 million; and six people are looking for work for every job opening, a fourfold increase from just a year ago.
- With consumers on the sidelines, U.S. industry is on the brink. Factories used only 68.3% of available capacity in May 2009. The lowest prior level since the Depression was 70.9% in December 1982.
- Despite the recent uptick in construction, new-home sales are down 73% from their 2005 high, and the cumulative loading of rail cars is down 19.2% from 2008′s depressed levels.
- Price/earnings multiples on U.S. stocks, reflecting investor sentiment, fell only to a multidecadeaverage at 16 rather than to the single-digit lows seen in prior deep recessions.
The Economic Recovery Puzzle’s Missing Piece – Jon Markman, MSN Money
Income inequality can rise and fall for all sorts of reasons
Income inequality can rise and fall for all sorts of reasons. Twenty-somethings just starting out and retired seventy-somethings both earn a lot less on average than peak-earning fifty-somethings. As the age profile of the population shifts, income inequality figures shift, too. So what? Consider another example. A generous immigration policy can widen the income gap in this country while at the same time reducing world poverty. That’s good, if you ask me.
Income inequality can also rise as a side-effect of injustice in our socio-economic system. But injustice should be rooted out because it is wrong, not because it widens the income gap as a side effect. If, just to take a wildly hypothetical example, the government has unjustly dumped loads of taxpayer money on Goldman Sachs, such a narrow allocation of public funds for private use should concern us for its own sake – not because Goldman’s bountiful bonuses are likely to exacerbate income inequality.
A good hard jog and an oncoming heart attack may produce the same racing heartbeat. But the distinction matters. A mathematical abstraction like national income inequality is a similarly ambiguous symptom. We can slash the level of income inequality in an instant by slapping even higher taxes on big earners. Or we can slash the level of income inequality by falling into recession. But neither remedy addresses the real problem, which is persisting poverty, not income inequality.
The corruption of a political system in which crises are used to pay off the governing party’s allies is also a real problem. The current silence about inequality – from news editors, pundits and politicians alike – would be golden if only it were based on a grasp of the limited utility of income statistics in guiding us toward more effective and humane public policy. But that is not the case. Instead, it appears that the commentators who fretted over income inequality so publicly for so long have simply stopped worrying about it. Inequality, it seems, only matters when a Republican is in the White House.
Does Income Inequality Really Still Matter? – Will Wilkinson, The Week