The Man Who Cried, Wolf

The NY Times has two stories today (call them Mutt and Jeff ), which I find synchronistic. The piece on leading indicators is so funny. The one on the impoverished blogger, is ever so close to my heart.

The synchronisity arises from me. I have been saying and writing and so recently blogging (in my penury) that the cause of the Great Recession (and predicted long before it occurred and this endeavor began) is other than the conventional pundits (well, most of them most of the time) conventional wisdom.

If one wants to know the direction of an economy, the sole metric one needs is median income. If it's rising, then the economy is doing well. If not, well, not. How then to explain the stability which led to the Great Recession? Median income was not rising during Reagan, BushI or BushII. The answer is median income, in particular the ratio of house price to median income. Since this ratio was rising, which it can't do in a rational economy, something nefarious had to be going on; and it was. Which I've detailed all along. It's the distribution, stupid! The clobbered middle class was robbing some Peters to pay some Pauls, those who bought early (or before) the mania supported their Keeping Up With the Joneses lifestyle by burning all that windfall equity passed on by those who bought late. If that sounds kind of like Ponzi and Bernie, well, yes it does.

The problem with being among the Accepted Crew of Pundits is that the Accepted Crew of Publishing Gatekeepers (from Fixed News to the NY Times) have only a limited tolerance for notions outside the mainstream. Thus Mr. Hugh, and I (he says blushingly), labor discreetly just for the jollies of it. Now, I know for a fact that some members of the Accepted Crew of Pundits were also leery of the Euro's ability to withstand turbulence (remember Professor Galbraith: "genius is a rising market") early on. So long as the livin' is easy, the Euro worked. But, as I have said here, a multi-country currency without a multi-country fiscal policy (one that can be enforced over any objections of sovereign states) gets dicey once recession hits.

One of the more amusing, and incorrect, aspects of the piece was comparing the thrifty countries with the spendthrift countries. The writer, and the Accepted Crew of Pundits, have always ignored the synchronisity, symbiosis even, of both. Like love and marriage, the thrifty and the spendthrift go together like a horse and carriage. It's in the distribution, Stupid! If there were level distribution, thrift and profligacy would carry out their battle within each entity (household, company, town, state, country). But there isn't level distribution, so money and production pile up on one side of the scale. In order to level the scale (if it doesn't get leveled, then a deflationary debacle results), the spendthrift on the other side must rise into action. And so it is.