Media are wishing us toward recession

May 4 , 2008

 

I did a Google search of news stories for the first quarter of 2008 saying we were in a recession.  There were 51,800 such news stories.  “Financial turmoil suggests deeper recession” was one headline from USA Today.  “US recession appears unavoidable” screamed the International Herald Tribune.  Forbes was the gloomiest with one dire story after another.  One analyst said, “A second straight month of job losses all but ended the debate over whether the US economy has slipped into a recession.”

 

A recession, by the way, is two straight quarters of contraction in the gross domestic product (GDP), the sum total of our economic output.  Just a few days ago the Commerce Department released the economic data on the GDP.  The economy actually expanded at a 0.6 percent annual rate in the first quarter.  That would be the very same time period when over 51,000 news stories were telling us we were in a recession.  We weren’t.

 

Now, you’ll get no argument from me that the economy has slowed down.  Gas prices, particularly, have had a devastating effect on consumer confidence.  When consumer confidence erodes to the point that people actually curb their buying substantially then we’re in trouble.  But most of this recession talk is just that. The news media insist on talking us into a recession.

 

I saw a story from AP lamenting the fact that all these people were putting their personal items up for sale on sites like eBay.  They cited sob story after sob story about how these people were selling DVDs just to pay the water bill.  Yes, eBay continues to boom, up 34.6 percent last quarter.  That means a lot of people are selling items on eBay but it also means a lot of people are buying items on eBay, too.  That’s an angle the negative naysayers in the mainstream media ignore.  If record numbers of people are buying things how bad could the economy be?

 

The housing market is one of two primary fear areas in this economy, along with fuel prices.  We’re bombarded with story after story telling us how foreclosures are going through the roof.  Do you realize that foreclosures, although higher than usual, account for less than 2 percent of mortgages?  Let me put it to you another way.  More than 98 percent of us are in no danger of losing our homes but you never hear it phrased that way.  Also, the bubble bursting in the housing market means prices are beginning to return to some level of sanity.  This is good news for people who protect their credit, pay their bills and don’t over-extend themselves.  These are exactly the customers banks are looking for these days and credit-worthy customers can find some sweet deals in the real estate market.

 

Even though the data show that we’re not in a recession, a business columnist for the Baltimore Sun just couldn’t let go of the negativity.  “It still feels like a recession” was the title of his blog the day after the economic numbers came out.  He jumped from recession fear-mongering to blowing the inflation horn.  Yes, gas prices are up and it hurts.  Yes, some food items are up.  Corn has gone from $2 a bushel two years ago to $6 a bushel.  That’s primarily because the brain trusts in Congress are mandating ethanol in our gasoline.  About 30 percent of the corn we grow now goes to ethanol.  That’s helping to drive up both the price of gas and the price of the corn we eat and contributing to food riots abroad.  That’s what happens when the government monkeys with the free market.  Gas and food are essentials.  Yes, and so is housing and it’s now coming down.  It’s funny but when home prices in my neighborhood were doubling in a year I don’t recall hearing anyone worrying about inflation. 

 

We’re in a much needed market correction, especially in the housing market.  We are not in a recession.  But we will be if we continue to listen to the endless drumbeat of negativity coming from the mainstream media.