Willful Ignorance

By Bob Wood, Muslim Media News Service (MMNS)

As I write this article on Friday, September 7, the stock market is reeling from the announcement of disappointing new job creation numbers for August. As you undoubtedly know by now, that number showed the first loss in monthly jobs for the past four years. What is surprising is, not that jobs were lost but, the apparent astonishment of those in the financial media who regularly offer positive opinions about the U.S. economy.

Doesn’t it seem that every time we hear some piece of bad economic news, the Bulls react with surprise to the reports indicating that conditions are not close to perfect? Yet, the Perma-bulls push back by citing a long list of economic data points that clearly bolster their case for a strong economy. Have you seen a pattern developing?

Why bullish promoters are so taken aback at what is occurring in our economy defies common sense. Anyone with the objectivity to simply look around at what has been happening should have seen significant problems in our economic picture.

How is it that the sub-prime mortgage meltdown comes as such a surprise to people touted as experts on the economy? Or that job growth would be affected, considering the miserable state of the housing market, which is one of the largest job creators in the country?

Am I the only one wondering why so many stock market promoters continue to recommend buying domestic large-cap stocks to the exclusion of much better performing emerging markets with their stronger economic fundamentals?

Let’s face facts: if I know that such factors spell trouble for the stock market, how can the media promoters not know? The way I see it, they should know more about the economy and how it works than I do. So where is the disconnect between what they know and what they are recommending?

Do you remember the old adage that helps explain what’s going on? “Do not expect a man to believe something when his paycheck depends on his not believing it.”

Let’s face it, people who work on Wall Street managing mutual funds have a job to do. Their job is selling stocks or shares in their funds. If they truly believe that the country is on the cusp of serious change of direction in the markets and admit it, that might be bad for business!

Of course, it may be hard for investors to believe that people working in the financial industry would appear on television and simply lie to the audience. After all, why would they lie? Who stands to gain from it?

But it’s not just stock market promoters endorsing issues they surely wouldn’t bet on as true. Our President recently called our economy ‘’the envy of the developed world.’’ To speak the truth, he might need to say that his government is essentially bankrupt and in need of infusions of over $2 billion/daily, just to keep the doors open.

Just yesterday, in an appearance on CNBC, one of Bush’s economic advisors smiled into the camera and pronounced that ‘’a strong dollar is in our best interests,’’ so that is the policy of the Bush administration. Let me say this: that is one big lie! Do you remember when John Snow, former Treasury secretary, proudly told us the same thing, as Tresaury offices were making plans to discontinue weekly releases of the broadest measure of the money supply, M3, in an apparent effort to hide how quickly the money supply would be increasing?

And we’re seeing more blatant manipulation of economic statistics, such as the latest job creation number. While the official number shows a loss of 4,000 jobs, the actual number would have been much higher without use of the statistical gimmick created by the Bureau of Labor Statistics, the “birth/death model.’’ This number simply assumes that new jobs have been created somewhere else in the economy, based on how many small businesses have folded!

In a truly strong economy, this “statistic” might be a valid assumption. But in a weak economy, it is a real stretch. Without this “pumping up” of jobs numbers, several months in the past year would have shown negative jobs numbers. But did you see the reaction of the CNBC morning team, expressing shock at the negative number? How could they possibly think that our troubles in housing markets — and now in auto sales, too – would not, at some point, affect jobs?

Now, stock promoters are calling for interest rate cuts from the Federal Reserve. While many knowledgeable people are predicting that doing so would be problematic for the value of the dollar, those calling for rate cuts see the falling dollar as the least of our problems. But if the dollar tanks, will they also express surprise at that development — when it is already so obvious to many?

Now that the U.S. has sold off our manufacturing base and all the good jobs that go with it, now that we have sold our national security for loans from global competitors to keep consumers shopping at the mall, where is our economy headed long term? To many of us, the future does not look good.

This country is deeply in debt; our currency is losing value steadily; and the cost of food, health care and other basic necessities is soaring. Yet we are reminded daily that these are all positive signs of a healthy economy. But how can they be?

We have also heard that tax cuts for the rich would stimulate the economy in ways that we could all share. That hasn’t happened, according to nearly two thirds of those polled recently by The Wall Street Journal; most think we are, or will soon be, in recession. Yet we hear repeatedly, almost daily, that those tax cuts are a good thing.

Based on what? That’s what I’d like to know! Absolutely no credible evidence shows that the tax cuts have done anything but enrich those who were already doing better than ever. Now you wouldn’t think we are hearing lies over and over again because the richest among us are doing so well under current economic policies, do you? Those wouldn’t be the same policies that appear to be running our economy off a steep cliff, would they?

And you don’t suppose those lies leading us into a disastrous war in Iraq were told just because the war has been so profitable for so many defense oriented companies, do you? Nah! That certainly seems like a stretch, though those same defense companies surely are not calling for a pullout of our forces in Iraq, are they?

Is it just my thinking that this much lying has a reason behind it? If it’s in the interest of helping the rich get richer, that may be all the reason needed. In another news item appearing in the latest Financial Times newspaper, I read that the fine folks at Goldman Sachs have made a fast $300 million from their investments in an in-house hedge fund that had run into trouble making big bets on sub-prime mortgages. The trouble is that this investment was meant to rescue the fund that has hit outside investors with a 25% loss.

Some things never change, do they? The business of America is — business, and that means more profits for the wealthiest among us. But when those profits come at such a steep price for the rest of us, someone had better start telling the truth — very soon!

Have a great week…
Bob

Bob Wood ChFC, CLU Yusuf Kadiwala. Registered Investment Advisors, KMA, Inc., invest@muslimobserver.com.