Dear John: Explain the following conundrum: Unemployment remains at about 8 percent, with an underemployment rate that is significantly higher.
Despite this, CNBC touts the return of the housing market.
I have spoken with consulting engineers, title companies, realtors and real-estate attorneys, and they are not seeing much of a pickup.
The government owes more than it can ever repay. We are in the classic definition of bankruptcy (liabilities exceeding assets), yet the stock market is on an upward tear that makes the irrational exuberance of the 1990s seem like sleepwalking.
At least that irrational exuberance had the tech explosion going for it.
The Federal Reserve has printed more money in the last three years than in the [previous] history of mankind, yet inflation is far lower than where it should be. We are about to have a mass retirement of baby boomers, yet we don’t hear of the unsustainability of Social Security and Medicare.
Are we just a bunch of drunk, medicated gamblers hellbent on self-destruction? Or is the economy about to roar? A.P.
Dear A.P. What you are experiencing, I think, is people’s desire to be optimistic — whether or not that optimism is warranted.
Let’s talk about CNBC and all the other financial channels first. These stations need to fill hours and hours of on-air time. And the only way to do that is to invite guests from the financial community.
The vast majority of those guests are Wall Street salespeople in one form or another. So if you listen to these channels, you are going to get an overwhelmingly positive view of things, whether or not that view can be justified. There is just enough negativism to cover the stations’ behinds in case there is financial calamity. CNBC learned its lesson the last time when it was criticized for luring people into financial deathtraps.
The other reason for the seemingly misplaced optimism is this: History tells us that bad economic times don’t last forever. So, the experts figure, if they keep predicting an upswing in the economy, they will eventually be right. With the Fed, as you mentioned, pumping as much money as it is, can the upturn be far off?
But it’s been five years, and we are still looking for that end-of-the-tunnel light.
I think the economy is growing very moderately. And it’s worrisome that this is the best it can do, given the amount of stimulus provided by the Fed and the huge amount of money being spent by Washington. (That’s also known as the deficit.)
I think inflation isn’t as contained as the official numbers would make you believe. And price increases are only this moderate because there is not much demand for goods and services in this economy. In other words, the bad economy is keeping prices down.
I believe the housing market has gotten a little bit of a boost from people who think an investment in real estate is as good as anything else right now. But if the economy ever does break out, I think all the people who’ve wanted to sell their houses over the past five years will quickly glut the market with properties. And banks that have been holding onto foreclosed properties will also be sticking For Sale signs on a lot of lawns.
This is all a very dangerous situation. I hope I’m wrong, but this is one of those “better to be safe than sorry” sorts of economies.
Send your questions to Dear John, The NY Post, 1211 Ave. of the Americas, NY, NY, 10036, or john.crudele@nypost.com.