David Rosenberg Bashes Daniel Gross
Daniel Gross, who while at Newsweek saw the end of the recession even as the depression was merely stretching its wings, and generally drank Kool Aid by the supertanker, only to see his media venue blow up (some recovery) and by forced to move to that other bastion of creative thought Yahoo!, gets pummeled in today's letter by David Rosenberg for his most recent lunatic ramblings which not at all surprisingly made it into Paul Krugman's New York Times. Frankly, it was about time someone explained to Mr. Gross that reality is actually quite visible, if only one puts down the mild hallucinogens for at least a minute.
YOU CAN'T MAKE THIS STUFF UP!
Yesterday’s WSJ ran with this: Middle Class Slams Brakes on Spending (page A4). It’s all about how consumer attitudes toward discretionary spending have undergone a secular shift. Not too hard to understand considering that the average household is still in the hole to the tune of over $100,000, in terms of net worth, when compared to three-years ago. There is also this other little problem of 1 in every 7 Americans either unemployed or underemployed. Uncle Sam’s generosity is not accounting for a record 20% of personal income for no reason.
Then we came across this surreal column in the op-ed article of yesterday’s NYT by Daniel Gross. His message is that “the new frugality is a myth — and that's good for the economy.” He adds, “for this recovery to mature, broaden and persist, the greatest economic force known to mankind — the American consumer — has to get back in the game.”
Wow. Talk about playing by the old rules. There was no mention in the article the fact that with a 70% share of GDP, the U.S. consumer never exactly went into hibernation, even if spending decisions have changed.
Then he goes on to extol the virtues of debt (what would Kant say?) and longs for the days when we collectively lived beyond our means: “The renewed willingness and confidence to spend money we don’t have is vital to the continuing recovery.”
Huh? And I thought employment and income were the vital components to sustainable growth.
Then Mr. Gross goes on to say — brace yourself: “Money may make the world go 'round, but credit makes the gears ofcommerce run smoothly.”
Yes, sure it does. Up until you reach a point where 30% of the population have a sub-620 FICO score.
But listen to this ... the coup-de-grace: “As the economy slowly recovers, there are signs that Americans are rediscovering their free-spending ways. Total consumer credit, which includes non-revolving debt like car loans, have stabilized, and it rose in both June and July. It’s back to where it was in the second quarter of 2009.”
We just went to the Fed’s database and saw that in July, outstanding consumer credit shrank $3.6 billion and has contracted now in each of the last six months and in 18 of the past 19, which makes it mathematically impossible to have gone back to 2009 Q2 levels. And, the August data for bank-wide consumer loans showed a $6.0 billion slide.
As a wise man once told us, you are entitled to your own opinions, but not your own facts.
Come to think of it, the opinions were about as spurious as the data (still trying to figure out what series he was looking at).