You will have noticed an ever increasing number of articles and commentaries lately with headlines like ‘No Double Dip’, ‘No New Recession’, etc.  For example, see ‘IMF sees no recession but risks rising: Lipsky’ – reading time 2 minutes.  I see this ‘stuff’’ as nothing more or less than ‘economist speak’, and say ‘tell it to Main Street America’ and see what reaction you get.

As I have discussed in other commentaries, economists typically reference ‘recession’ in what I refer to as ‘theoretic economist convention’ terms.  The most popular ‘economist definition’ of ‘recession’ is “two consecutive calendar quarters where GDP drops from quarter to quarter”.  Another, far less frequently referenced ‘economist definition’ of recession is “a 1.5% rise in unemployment within 12 months”.  Satisfaction of either definition is subject to (1) the vagaries of, (2) the accuracy of, and (3) the influences brought to bear on a Federal Government reporting system.

The World Bank offers a table reflecting what it says is the GDP for each of the calendar years 2006 – 2010 for just over 200 countries.  The following table sets out the data shown in the World Bank table for five countries.  All numbers are, according to the preamble to that table, expressed in ‘current’ (whatever that means) U.S.$ trillions.  That I have rounded all numbers to one decimal place will influence my percentage calculations to some degree.

The percentages I have calculated based on the World Bank table are wildly different than GDP % growth/decline figures reported annually for each of the five countries shown in the table.  That may be the result of changes in U.S.$ exchange rates over the five year period, or other (for me) inexplicable reasons.  The point I am making here is nothing more or less than to suggest you consider the old saying that there are ‘lies, damned lies, and statistics’, and also consider the second old saying that ‘figures lie, and liars figure’.

I suggest you think about the articles decrying there can be anything other than GDP growth, and no likelihood of double-dip recession in the United States where there currently is reported ‘theoretical recovery ongoing in accord with economist definition convention’.

Then I suggest you think about the story of the explorer in deepest Africa who encounters for the first time a band of hither-to unknown pygmies.  By happenstance, the explorer speaks their language and he sits down with the Chief Pygmy and ask ‘how are things going, how in particular has the agricultural and animal harvest been this year, and how is the weather treating you?”  The Chief Pygmy, thinking that there might be ‘something in it’ both for him personally and for his Pygmy Band, tells the explorer – with a lot of statistical quotes and references – how great everything is.  The next day the explorer is off in the forest and encounters a pygmy hunting party.  The Chief is nowhere to be seen.  The explorer asks the pygmy hunters the same questions about the economic well-being of their Pygmy Band.  He is overwhelmed by everyone talking at once, with the message coming loud and clear that they had torrential rains at the beginning of the year, have experienced a total drought for the past four months, all the animals have moved on, and they haven’t had a ‘square meal’  in six weeks.  One of the pygmies says they are as pleased to see him as they would be if they saw a herd of antelope.  Too late, the explorer learns ‘who to believe’ as it dawns on him the pygmies are cannibals, and have started a fire under the pot.  Because of the drought the pygmies lacking water.  What really shakes the explorer up is that he sees the pygmies are all ‘peeing in the pot’ in order to ‘boil him up’.

So who are you going to believe the next time your read something about ‘no recession’ in the U.S.?  The U.S. administration and U.S. theoretical economists, or the Americans on Main Street who are unemployed, are seeing their houses drop in price, and are seeing the food in their stores increasing on a ‘price per ounce of food basis?

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It was reported Friday that the U.S. ‘Michigan Consumer Confidence Index’ fell in August to 55.7, down from 63.7 in July – the lowest level since November, 2008.

My take:  Bear Sterns happened in March, 2008, Lehman Bros. happened in September, 2008.  Things were very bleak in November, 2008, notwithstanding the ‘changing of the guard’ marked by the U.S. Presidential election on November 4 of that year.  The DJIA had dropped precipitously from about 11,500 in September, 2008 to about 8,880 by November, 2008, and continued to drop through early March, 2009 to a low of about 7,000, before reverting beginning on March 9, 2009.  So what is going to happen to the equity markets from here – perhaps nothing as the ‘trading algorithms’ continue to ‘chug away’.  But I suggest we all watch the U.S. consumer confidence index closely from here as the holiday season approaches apace.

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On Friday I wrote a commentary titled ‘Bernanke From Jackson Hole’ where I essentially said that Mr. Bernanke didn’t say anything I thought was new, articulated a number of platitudes that sounded naïve to me, but I didn’t think should be taken to be naïve because of who he is and what he does every day.  Concurrent with the time I was writing my commentary, the Wall Street Journal published a blog article titled ‘Key Passages From Bernanke’s Jackson Hole Remarks’ – reading time 4 minutes.  You might want to consider reading it to compare its summary of Mr. Bernanke’s speech with mine.  The WSJ article does what its title says, it summarizes what its author took to be Mr. Bernanke’s ‘key points’.  It doesn’t do much else, and provides neither provides analysis or conclusions.  This doesn’t surprise me.  However, it does draw me once more to say that I believe that if Mr. Bernanke had any constructive and meaningful answers or suggestions to America’s current economic woes he now would be making them ‘in spades’.  So my conclusion is he doesn’t.  To suggest as he did on Friday that:

• “without significant policy changes, the finances of the federal government will inevitably spiral out of control, risking severe economic and financial damage”;

• “fiscal policymakers can also promote stronger economic performance through the design of tax policies and spending programs”; and,

• “perhaps most challenging, the country would be well served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses”

is tantamount to throwing snowballs into a roaring fire, when all you have available to you to fight the fire is a big pile of snow.  You know full-well that to make and throw them to put the fire out is the ‘right thing to do’.  You also know that your expenditure of energy won’t do an iota of good – and that the fire will rage on.

If I am right, America (and by association a number of other country economies) are in for a long and hard struggle.

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This morning at 10:00 a.m. ET Federal Reserve Chairman made his ‘much anticipated speech’ from Jackson Hole, Wyoming.  You can read his speech (titled ‘The Near- and Longer-Term Prospects for the U.S. Economy’ – reading time 10 minutes) and think for yourself about what he said.  In my view, if you participate in the financial markets that will be 10 minutes very well spent.  I suggest reading and thinking about today’s speech is a far better thing to do in these ‘rude economic and financial market times’ than reading my comments, or comments of other writers and ‘experts’ – not all of which may be written by persons who are unbiased and write from non-vested interest positions – that summarize and draw conclusions and inferences from it.

That said, having read Mr. Bernanke’s speech carefully, my comments are:

• six printed pages in length, most of what he says to me is simply a litany of factual statements on the current state of the U.S. economy and how it got to where it is today;

• Mr. Bernanke again said that the Federal Reserve currently thinks U.S. prospective economic conditions are likely to warrant ‘exceptionally low federal funds rates through at least mid-2013.  Again, as I read his words, he doesn’t guarantee such low federal funds rates through that period – although many of the articles and commentaries I (and presumably you) have read would have one believe Mr. Bernanke did give such guarantees earlier this month.   Those writers may well see his comments today as a reinforcement of this.  I wrote about this same thing in my August 10 e-mail under the heading ‘Federal Reserve Promise’ – reading time 1 minute;

• Mr. Bernanke made only three comments toward the end of his speech that I think are worth discussing – see following.

Let me begin by saying that I am sure Mr. Bernanke has a high intellect, that I am certain he has a knowledgeable and experienced grasp of Washington and its politics, and that he is far from as naïve as the following three ‘motherhood’ statements he made in his speech would– but for my qualifiers as to his intellect and ‘Washington smarts’ – imply for me.  He made these three ‘Bernanke statements’ after saying “most of the economic policies that support robust economic growth in the long run are outside the province of the central bank”.  Those three statements are:

• “without significant policy changes, the finances of the federal government will inevitably spiral out of control, risking severe economic and financial damage”;

• “fiscal policymakers can also promote stronger economic performance through the design of tax policies and spending programs”; and,

• “perhaps most challenging, the country would be well served by a better process for making fiscal decisions. The negotiations that took place over the summer disrupted financial markets and probably the economy as well, and similar events in the future could, over time, seriously jeopardize the willingness of investors around the world to hold U.S. financial assets or to make direct investments in job-creating U.S. businesses”.

In his speech he stated his belief that (my words):  ‘America is America’ and in the end everything will recover nicely and life in America will go on and progress as it always has to the ongoing benefit of the American people.

I strongly suggest you read Mr. Bernanke’s speech for yourself, and reach you own conclusions.

At 11:15 a.m. ET today the price of physical gold had recovered to U.S.$1,780, and the Dow and S&P 500 were down 23 and 5 points respectively.  I say ‘go figure’, it seems to me that so far even the trading algorithms haven’t figured it out – but they are programmed to read markets, not speeches (smile).

Visit Stock Research Portal for free stock market data, analysis, and research on over 1,600 Mining, Oil and Gas Companies listed on the Toronto and Venture Exchanges. See our Legal Disclaimer.

Possibly Related Posts:

• A New Greece?
• Bernanke – February 2, 2012 – U.S. Presidential Election!
• U.S. January Jobs Report!
• More On Greece!
• Christine Lagarde – Listen Between the Lines!