Guest Post: The Grand Game Of Perception Management

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

The Grand Game of Perception Management

The economy will expand if you believe it is expanding--because you'll be "animal spirited" into buying a lot of stuff on credit that you can't afford.

It all boils down to perception--that's the insight at the heart of the Grand Game of Perception Management. Economists speak of magical "animal spirits" that fuel economic expansion, but this is simply a colorful term for perception management: when people perceive others reaping outsized gains in profits or pleasure from taking risky bets and freely spending borrowed money, then they will feel an overpowering urge to follow the herd and leverage their capital (if any) and disposable income (if any) into risky bets and zealous over-consumption, i.e. "animal spirits."

Conversely, when said risky bets blow up and participants have lost their ever-loving derrieres by following the herd, then "animal spirits" quickly dissipate as the herd thunders off a cliff to its financial demise.

The task of the financial/political/media Status Quo is to convince Americans to overlook the abundant evidence of economic deterioration and focus on heavily juiced "evidence" of robust "growth."

The game plan is this: if the Status Quo can convince you that the economy has righted itself and from here on in everything will get better and better, every day and in every way, then we will abandon financial rationality and start buying homes we can't afford on credit, cars we can't afford on credit and boatloads of stuff from China that we don't need on credit (of course looking cool is a "need," i.e. having an iPad to carry around).

In other words, believing it is so will make it so. That is the essence of the campaign to stimulate "animal spirits" confidence: though the economy is actually tanking, if they can only convince us the Dow is moving to 15,000 and then on to 20,000, jobs are being created left and right and things are looking up everywhere, then the resulting piranha-like shopping-feeding-frenzy will create the expansion that is currently chimerical.

This "feel-good" promotion of "growth" is also designed to persuade the millions of holdouts earning nothing on their IRA funds to drop all that cash back into the stock market, which is "breaking out to new highs." (Isn't that what they said in January 2000?)

And just in case this propaganda campaign fails to do the trick, the Federal Reserve has destroyed the return on savings and cash, all in the hope that the decimated, income-starved herd will turn from rationally avoiding risk to irrationally embracing it out of sheer desperation.

"Perception management" can be usefully shortened to a one-syllable word: "con." The confidence-man's most basic tool is to create the surface sheen of success with minimal investment of time and capital. Thus the con-man buys a couple of designer suits, rents a cubbyhole office with a prestigious address, leases a 500-series Mercedes vehicle, counterfeits some diplomas or other signifiers of Elite status and achievement, and then goes to work conning his credulous marks.

This exactly describes the strategy being pursued by Ben Bernanke, Tim Geithner, the financial media, and America's scabrous political class. Consider one of the Status Quo's most valuable cons, the unemployment rate as calculated by the Bureau of Labor Statistics (BLS).

If we look at this chart from the St. Louis Federal Reserve, we see that employment--the actual number of people with jobs, as opposed to those who are without jobs--we see that the number of people with jobs has declined recently and is now at the same level of 3rd quarter 2009, a few months after it was officially declared that the recession had ended.

The official unemployment rate was 10% in October 2009, when about 140 million people were found to have some sort of job, and now that the same number of people have been found to have some sort of job (140 million), the unemployment rate is now only 8.3%, even though the nation has added roughly 6 million residents to the workforce.

Huh? How can 140 million jobs generate an unemployment rate of 10% in 2009 and 8.3% in 2012 while the workforce and population have grown by 6 million? If anything, the unemployment rate should be higher, since the number of people with jobs has held steady while the number of people without jobs has expanded.


Mish Shedlock has done many an autopsy on the unemployment rate, including this one from Feb. 3: Nonfarm Payroll +243,000; Unemployment Rate 8.3%; Those Not in Labor Force Rose an Amazing 1,177,000.

The labor force and the unemployed have magically declined by millions since the recession was declared over in mid-2009.

The Status Quo con-men are careful not to mention that $6 trillion in Federal borrowing has been squandered since 2009 just to return employment to 2004 levels. And that sum rises by $1.3-1.5 trillion every year as unprecedented quantities of money are borrowed to prop up the Status Quo.

A few years ago, deficits of $300 billion were considered unsustainable; now deficits of $1.3 trillion are accepted with little more than routine political jockeying. The con-men also never mention that this "official" deficit leaves out all supplemental appropriations which run into the hundreds of billions of dollars a year for expenditures such as war and bailing out Fannie Mae and Freddie Mac--and now, FHA will be added to the taxpayer bailouts: Housing Agency's Reserves at Risk FHA losses require taxpayer bailout.

Then there's the con-men's masterwork of perception management, the U.S. stock market. As noted earlier this week, much of the stock rally since March 2009 has been attributed to rising corporate profits. Yet a significant share of those profits were smoke-and-mirror illusions created by the Federal Reserve actively depreciating the nation's currency. Now that the dollar is strengthening, that charade is wearing thin.

Another chunk of those fabulous profits resulted from household incomes declining--that is, people earning less from their labor and savings as corporations kept any net increases for management and shareholders. Since 2007, the year before the most recent recession, real median household income has declined 6.4%. The median household income in 2010 was $49,445, down from $49,777 in 2009 and $52,673 in 2007. In other words, all this "growth" in GDP and profits since mid-2009 has not resulted in any visible improvement in household income, healthcare coverage, or any other metric that has a basis in real life. (Please review ths Census Bureau link above for more.)

So believe the smooth talk about Dow 15,000, strong job growth and rising GDP at your own peril. Ignore declining income, empty storefronts, lower energy consumption and all the other real-world evidence of a contracting, enfeebled, precarious economy if it boosts your all-important "consumer confidence," but make sure you don't confuse the con with confidence: the Mercedes is leased, the office a front, the resume a fraud, and the smooth sales pitch a clever fabrication.

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CPL's picture

Manufacturing consent is the idea you are looking for.

Clueless Economist's picture

I am a world renown Economist and I am also very Clueless, but I am quite confident things are getting much better.

P. Krugman

Nobel Prize Winner

NY Times Blogger

Ivy Leaguer

Genius

Professer

All-Around Douchebag

American34's picture

You mean you work for the currently corrupt system that dominates the world as a whole! Wow, what credentials. Please explain how things are getting much better. I am pretty sure common sense says whether it is a family or governmental budget you cannot borrow your way out of debt and social discord. Explain how Top Down Economics is going to solve a problem it has failed to solve since Reagan. Please fill us in on how an extraordinary wealth gap between the very few at the top and the educationless bottom third is going to be solved by throwing money at them through a "Welfare State." Please correct our wrong point of view for expecting all those who currently occupy positions of power and wealth to act responsibly when they have no incentive to do so. Please, please fill us in on these important issues.

dlmaniac's picture

"Perception management" can be usefully shortened to a one-syllable word: "con."

 

Long live the art of Joseph Goebbels.

withnmeans's picture

Good piece, however "I know the general public would read this and be shocked", but to me and a select few of us with the gift of common sense (this is old news). The whole problem of our writings here on ZH, no offense to anyone here, is there needs to be more means of getting the word out to the mass's. We can write all we want and read related comments, don't get me wrong (some are down right hilarious, some are  informative, and some for a better term hmmm "miss there mark completely"). A few thousands of us read these on hourly, daily, weekly, and so on basis, not to mention Tyler is on his game "great reseach man".

To get to the point, this needs to hit the Main street !   CHEERS

American34's picture

The problem is how along with why. I do not believe "the masses" want to hear it or give a rats butt about it. Hence the thousands rather than millions that read and post here. Very few are willing to be realists. Most of "the masses" are where they WANT to be, living on debt and government handouts and with their head in the sand. Although some in roads have been made. Santelli did mention ZH live on CNBC last week. That is a start. I agree whole heartedly with you, I just don't feel that "the masses" care enough to change their ways.

withnmeans's picture

You may have a good point on the masses not really giving the proverbal RATS ASS about their ever increasing debt. It is sad that we live in a time of "wants" not "needs", you know the "I" era (pun not intended, as I don't find it funny). As for Mr. Santelli, he gets it, and I applaud him for trying to talk to the inherent deaf ears of society.

Just a curious question, where do you think this is heading?  As the greater part of our world spends beyond the realm of belief, I believe we are destine for a repeat of the 1930's.

American34's picture

Hard to say. Things seem to change by the day, or even hour at times. If the Dollar holds out as the worlds Reserve Currency we as in the "USA" will outlast "The World" by 6 months or so if things go to crap in the Sandbox and WWIII gets started thanks to us and Europe pigeon holing the Iranians. But in all honesty, I think we simply happen to be living in one of those periods of history where great changes take place. Thanks to ridiculous accounting techniques and imaginary "profits" and immense debt loads our standard of living has increased as fast as energy, from all sources, can be provided. Eventually we, as in "The Entire World," will be forced back into living within our means both monetarily and concerning energy needs. How this happens is anyone's guess but if history is a guide, and it usually is at least in a broad sense, we will come out better on the other side but only after a violent struggle and in a different social system. Kingdoms didn't last forever, neither did Monarchies and neither will "Democratic Soverign Nation States." Although I love America, the America in my head is no longer reality and of course all good things must come to an end. Except for Christ of course, that promise is still there. My best guess is a year or so more of this living Bond Sale to Bond Sale or paycheck to paycheck if your a family or person rather than Nation State. We will make it to the next election, or at least fairly close I think. 

mtomato2's picture

Great post, on all points.

Spanish Lizard's picture

I agree.  I have friends/co-workers who just don't want to hear it.  They joke and call me doom and gloom.  They prefer to not face or prepare for the possibility of the world repeating a 1930's collapse.  

OldPhart's picture

I do my part.  I paste links, a synopsis and a picture of boobies on my facebook page.

LowProfile's picture

"Good piece, however "I know the general public would read this and be shocked", but to me and a select few of us with the gift of common sense (this is old news). The whole problem of our writings here on ZH, no offense to anyone here, is there needs to be more means of getting the word out to the mass's. We can write all we want and read related comments, don't get me wrong (some are down right hilarious, some are  informative, and some for a better term hmmm "miss there mark completely"). A few thousands of us read these on hourly, daily, weekly, and so on basis, not to mention Tyler is on his game "great reseach man".

To get to the point, this needs to hit the Main street !   CHEERS"

 

...Why bother?

The longer the rest of the world keeps the gears turning by running on their hamster wheels, the longer the rest of us have to prepare.  It's not like millions of us haven't been screaming at them for years!

I say:  Tun in, turn on, shrug out.

Badabing's picture

Just like my avetar

HD's picture

They can spin it all they like. People without money can't spend it.

mayhem_korner's picture

People without money can't spend it.

 

Where's credit fit in?  If people without money couldn't spend, we'd be where we're going to end up.

Dagny Taggart's picture

People without money can't spend it.

I don't think Timmy Geithner got that memo.

HarryM's picture

This article is right on - THE SPIN WORKS!!!  AND THE DOW WILL PROBABLY HIT 15000 !!

So how do we make money in the market?

 

Gold has been moving up and down along with the market.

 

rayduh4life's picture

Really?  Wanna buy a house?

HarryM's picture

I bought 2 investment properties 40 cents on the dollar - rented them out with a positive cash flow - right out of the gate.

LowProfile's picture

Hope that works out for you and that your tenants can afford to keep paying rent.

But I have a feeling you and a lot of other people who did that are in for a very necessary awakening in about 1-2 years.

alien-IQ's picture

"It is the absolute right of the State to supervise the formation of public opinion."
Josph Goebbels, Nazi propaganda minister

FlyoverCountrySchmuck's picture

REMEMBER FOLKS...

This is the same media that convinced the Sheeple in 2006 that 4.8% unemployment and a 14,000 DOW was "The Worst Economy Since The Great Depression!". Remember that?

We are dealing with some real S.O.B.'s here, who care for NOTHING, other than POWER, (“He who controls the language controls the masses”. – Saul Alinsky in Rules for Radicals), The TRUTH no longer matters, just the narrative.

I’ll bet you thought “1984’ was just a book.
Socialist Democrats see it as an INSTRUCTION MANUAL.

knightowl77's picture

Amen amen amen....

Yea, we won't hear the "truth" again until the other side is in the WH...then we will hear nonstop how bad things are...

blunderdog's picture

Socialist Democrats see it as an INSTRUCTION MANUAL.

Fascist Republicans, too.  That's why we end up with the same policies no matter who's in power in Congress and the White House.

knightowl77's picture

ALL Big guvmint types need to GO & GO NOW

youngman's picture

Goebbels knows this very well....propaganda works...look at the political ads...

ebworthen's picture

Have you seen the MSNBC ads with Al Sharpton, Rachel Maddow, Chris Matthews, etc.?

Blatant propaganda from supposed "jounalists".

mktsrmanipulated's picture

whats the fucking bs rumor now

Comay Mierda's picture

greece deal being worked out. everything is ok now. seriously though its just the fucking skynet hft bots tracing out a fibonacci, commence downturn

Mr Lennon Hendrix's picture

US data good, Greece is fine, Europe is fine, terrists bad.  Rally on.

Mr Lennon Hendrix's picture

US data good, terrists bad.  Rally on.

HarryM's picture

It's an election year, the numbers are being fudged etc. etc. etc. - go with the flow or get fucked

Mr Lennon Hendrix's picture

If the doors of perception were cleansed, everything would appear as it is - infinite.

-William Blake

dumpster's picture

MOPE    sinclair   circa 2009.. old news  now just beginning to be reailized by the dense .

taniquetil's picture

"We cannot and will not sustain deficits like this without end. Contrary to the prevailing wisdom in Washington we cannot simply spend as we please. [...] That's why today I'm pledging to cut the deficit we inherited by half by the end of my first term in office"

 

-Barack Obama, Feb. 2009

Mr Lennon Hendrix's picture

[Gasp!]

He lied?

Sarc/

But really, it is pretty funny to watch him say in one interview that the reason he needed to balloon the budget (what budget?  You ask....) was because they "didn't know how bad it would get" (meaning it is still bad) and then in speeches he touts recovery.  Maybe not funny actually.  Maybe sickening.  But hey, if you can't laugh about something, you know?  Ha ha!  Ha....aaah....fuck.

American34's picture

Oil is over $100 a barrel now for 2 days. What happened to the Saudi Prince "primising" to keep it under $100!! Lets get some news on pumping it out already. I am pretty sure this economy won't improve much until oil is considerably lower for a considerable amount of time.

Mr Lennon Hendrix's picture

When the House of Saud came out and promised to keep the price below $100 when their production peaked two years ago I thought the game is over.  It is like when CEO after CEO came out in '07-'08 saying everything is fine!  Bear's fine!  Lehman's fine!  Real estate is fine!  It's fine, everybody!  Fine!  Fine!  Fine!

What's french for "end"?

pods's picture

Prince Ben can print faster than Saudi can pump.

pods

TomGa's picture

Yes, this is the "Growth & Recovery to pacify the masses" narrative spun by Washington. A lie repeated often enough....

But it could not occur except for the colusion of the main stream corporate propagandists, er, media. It does, however, demonstrate the rising power of the alternative media; for instance Geithner's "green shoots" was so lampooned outside of the MSM that it eventually lost any semblance of credibility and was quietly discarded.

Theta_Burn's picture

At the risk of being labeled a "bull"

 Or coat-tailing certain non reality observing posters here.

Nice short squeeze forming up (DMND)

 

~runz~

Shizzmoney's picture

So believe the smooth talk about Dow 15,000, strong job growth and rising GDP at your own peril. Ignore declining income, empty storefronts, lower energy consumption and all the other real-world evidence of a contracting, enfeebled, precarious economy if it boosts your all-important "consumer confidence," but make sure you don't confuse the con with confidence: the Mercedes is leased, the office a front, the resume a fraud, and the smooth sales pitch a clever fabrication.

This.  So this.

Really is funny to watch MSNBC, ox Business, or any other MSM outlets that keeps telling me, "The economy is improving".  ORly?  Despite my health insurance going up, public transport going up, food going up, Oil at its highest (and would be higher if the winter wasn't so warm), renting up....but homes sales/property values down, tax breaks for corporations, but tax hikes for working people (either via inflation or legislation).

Again, we live in two Americas.  Maybe even 3. 

earleflorida's picture

"all roads lead to Rome" --- fast forward 2012 - "all financial market tranches be it paper, or gold, eventually are herded along the 'Neo-US Romanesque Trail',... slowly, methodically, and  selectively corralled into the banker's abattoir holding-pen's -  facilitating 'Prime-Time  Execution'!

bon`Appetit 

lotusblue's picture

Thanks for posting article.

The truth is-growth as it has been is Not sustainable.

The whole system is based on endless growth.

A colission is in the offing.

Tense INDIAN's picture

have you guys heard  of JOHN RENDON

tabasco71's picture

Writing in the New YorkerSeymour Hersh said the Rendon Group was "paid close to a hundred million dollars by the CIA" for its work with the INC.

 

I think David Baldacci also wrote a fiction based on perception management agencies... entertainingly informative in its own way.

ziggy59's picture

Perception Deception..almost like Conjunction Function..but more devious

sabra1's picture

to anyone with student debts out there! pay as much off as possible using credit cards, (from the big 5) then claim bankruptcy! see, no more debts!!!

therearetoomanyidiots's picture

me likes.   As a matter of fact, why not just buy everything you want on credit. 

when the whole thing blows up...you still have everything you need.  

Well, there are those pesky Fema camps (or was that debtor's prison).