Three Points That Refute All Talk of Recovery

Phoenix Capital Research's picture

For well over five years now we’ve been told that the US was in recovery and that as most the biggest risk was a potential double dip or worse a slow down to the recovery.


 The reality however was that the US never experienced a real recovery (unless you work at one of the “chosen” firms on Wall Street).


Housing has re-entered a bubble driven by liquidity, not first time homebuyers entering the market.


The key relationship for housing is home prices relative to income, NOT nominal prices. Stocks are valued relative to earnings. Homes have to be priced relative to incomes.


Today, the median US income is $51K. The median home price is $328K. So homes are priced at 6.4X incomes.


To put this into perspective, in 2007, the housing bubble was only marginally higher than this with homes priced at 6.8X incomes. So housing, which is alleged to be in a recovery, is not much more affordable today than it was in 2007… at a time when home prices were more overpriced than at any point in the last 100 YEARs.


Speaking of incomes, they remain WELL below their 2007 peaks… which were in fact below the 2000 peaks. In fact, the median income in the US today is effectively the same as back in 1987.



Again, NO recovery to be seen here.

Indeed, the number of people of working age who actually HAVE jobs is back to levels no seen since the 70s. Gotta love that recovery… when the percentage of people working is the same as it was back when the US was in a recession four decades ago!

At the end of the day, the entire economic landscape is very simple to understand. The economy grows when people make more money and spend that money on things including homes.

Lower incomes= lower spending= lower economic activity. Sure, you can reflate a credit bubble in which spending rises briefly due to people having easy access to credit…

But at the end of the day, all this does is set the stage for another economic collapse when people once again default on their credit card payments/ mortgage payments.

That day of reckoning is coming… It’s just a matter of time.

For a FREE Special Report outlining how to set up your portfolio from this, swing by:

Best Regards

Phoenix Capital Research 





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scraping_by's picture

This has commonly been called a Potemkin recovery: the illusion of economic activity created directly, by juicing what's measured, by redefining the measurements, by out and out lying.

It's also a Positive Thinking recovery: the Great American Boosterism shouting out and shouting down. Fake It till you Make It. Pretend long enough and hard enough, and it will magically come true.

Or not. As a policy, it allows ignoring real problems since they're going to disappear in a bright haze of goody. Improvement's just a matter of demanding. You can't let yourself be dragged down by negativity.

Tony Robbins/Joel Orsteen/Norman Vincent Peale, it's all so simple. Want and you'll get. Make your own reality. Want and the world will move for you.


IREN Colorado's picture

Speaking of incomes, they remain WELL below their 2007 peaks… which were in fact below the 2000 peaks. In fact, the median income in the US today is effectively the same as back in 1987.

Except a dollar of income in 1987 is worth a hell of allot more than a post QE dollar of 2014.

novictim's picture

"The key relationship for housing is home prices relative to income, NOT nominal prices."

"...median income in the US today is effectively the same as back in 1987."

That all understates the problem!  Capitalism has got us to where we are now...and more of the same won't fix it.

Capitalism has one destination and that is grinding poverty for all but the well-connected few...and it always gets there if given the time and no interventions.  

Remember 2008?  Hello?  1929?  

Socialism ALWAYS rides to the rescue of capitalism.  

Only crooks, criminals, and mental defectives at ZH can't see this pattern.

Too bad that Obama seemingly remains a believer in the self correcting theories of the capitalist system.  Low-tax-shills are the clear peddlers of this crap.

Obama still keeps the 2008 trickledown stimulus/QE/ZIRP and free trade policies going forward despite its clear failure to produce results (obvious outcome if you understand Crisis Theory of Capitalism) .  And he continues to resist calls to institute Trickle Up economic policies where the Government steps in and creates jobs, builds roads, lays cable, and performs a command role in the economy until recovery is actually created.


Hey, what about having a national bank that could take over handling the mortgage business that the private banks deliberately screwed the tax payers with?  


Ideology that the "free market" fairy and "private is best" philosophy actually work are our biggest hurdles to moving toward prosperity.

Smiley's picture

Have no fear the great "THEY" will fix everything; just vote for the best Puns,Platitudes, anecdotes, and cliche's coming up in the next election: Surly you wouldn't think of electing people based on being...QUALIFIED?

If stupid people didn't trust liars and thieves we would never have a working government.

Stuck on Zero's picture

Since when does a "modern economy" need people with incomes?  We have the Fed, we have government, we have Wall Street, and we have the banks.  That's enough to drive the GDP to infinity.


ebworthen's picture


d edwards's picture

Related ZH article "Why is there no inflation?"


Because we are in a deflationary depression (like the '30's) that is being hidden by a flood of QE $$.

LMAOLORI's picture



"Because we are in a deflationary depression (like the '30's) that is being hidden by a flood of QE $$."


We do however have inflation in the things you really need to live like food, and gas and you can't eat a smart phone.

Today the severity is also masked by social programs like food stamps, section 8, etc.  If not for those we would see even longer lines at the food shelves and homeless shelters. 




Hurt by Slower Sales of Smartphones, Best Buy Has Bleak Holiday Results



"A slowing smartphone market and aggressive price-cutting by competitors have struck at the heart of Best Buy, the large electronics retailer."


Jim Rickards: We Have Both Inflation And Deflation Right Now


We have two things going on at once right now. You have deflation which is perfectly natural and what you would expect in a depression. A depression means among other things that people are deleveraging; when you deleverage you sell assets; selling assets pushes prices down; that makes things worse and prices go down more. Against that, we have inflation from the Fed money printing. These two forces are pushing against each other: deflation and inflation at the same time. It has been possible to estimate precisely, but in rough numbers we might have 4% deflation and 5% inflation at the same time which net out to about 1% inflation in the CPI. That is not a stable series; that is actually two forces pushing against each other.

scraping_by's picture

At the risk of being a Big Bad Socialist and giving all the Clueless Stooges of the right a chance to go all howly, let's point out again that QE is paid to the Elite/Capitalist/Connected class while wages, which are the majority of income, are mostly paid to the Middle/Working/Poor classes.

Inflation is all that's trickling down from people being handed free money. Deflation is bubbling up from the vast majority.

The Heart's picture

Fourth to ponder.

This would be the base reading.

Time will be the next speaker.

Dem chickens still be a hatchin.




The Old Man's picture

I'd think the "when" would have to be referenced to another period of time. I'd look at 1933 as a starting point. It took 16 to 17 years for the country to get back into some kind of serious employement and manufacturing solvency. And after a World War no less. Although I heard 1950 was a bummer for the economy. With todays technology, I'd maybe knock 2 or 3 years off that and say we'll be on some kind of better track by 2025 or 26. I don't really think we've seen the bottom just yet, though. So those dates would have to be adjusted. We're in a long slide down I'm afraid. And the crawl back up is going to be a lot tougher than it was from 33' onward.

buyingsterling's picture

Galloping tyranny means that today we have a totally different ballgame. The only periods we can really compare to are the pure fiat years from '71 on, and for the first 30 or so of those, we had a level of economic and personal freedom that we'd rightly envy today.

Yes_Questions's picture



Yours truly had a conversation today with someone who was suspiscious of a job candidate we interviewed whose work history showed a "decline" dispite college degrees and years of applicable work experience.  Apparently the job opening we're trying to fill is below the candidate's resume. Its not, in terms of task, but pay has not been discussed yet.  


Anyway, I told him this is an economic depression with a "you get that, right?" jesture. 


Maybe I'll show him the graphs above.  May be really telling about my "boss" the reply I get.





Postal's picture

No, he doesn't get that. Nor do most other people who haven't been caught in the wave of the downturn.

Now that I have a job, there's two types of employers for whom I will never work again: Those without a non-discrimination policy toward the unemployed, and anyone who asks me to explain gaps in my employment history. These are the ones who don't have a clue.

wareco's picture

Myself, I'm suspicious of people who can't spell suspicious and despite. 

kurt's picture

So he's your replacement. bu bye.

spinone's picture

Of course, economies move in cycles.  Its always a matter of time.  WHEN is the question.

disabledvet's picture

this is not a cycle but a total re-ordering of the economic landscape. the North American energy boom is fueling a mining boom in Space. that would be "already refined product" I might add. there's at least a billion tons of gold in the Ocean alone.

StychoKiller's picture

Does that metal plate in yer head set off the metal detectors, oh disabled one?