There is, as so often the case, a great deal of misinformation about economic (and political) events. With modern communication, anything can be communicated very rapidly regardless of its veracity. However, inasmuch as politicians nowadays rely so heavily on that data, serious consequences are entailed for us all.

It has been said over and over again by our leaders that our economic problems are ending with an economic recovery underway. To use a word coined by a U.S. congressman in 1820, the foregoing is “bunk” and “whistling in the dark.”

Consider the following. What passed for good news in the recent past was the slowing jobless rate. The jobless rate of about 10 per cent may not seem like the 1930s depression numbers. Still, in 1930, the unemployment rate nearly doubled to 15.9 per cent from 8.7 per cent a few months previously. However, if you factor in the differences in how the rate is calculated, the current unemployment rate would be about 16.3 per cent, or slightly worse than in 1930. The government statistics at the present time exclude vast numbers of workers who have given up looking for work, are on leave, on strike, working part-time, or are enrolled in job-training programs. Hence, obviously we are in a range similar to that of the 1930s.

Although the Institute of Supply Management’s index of U.S. manufacturing has rebounded from its lows earlier in the year; it remains among the worst in three decades. Too, the Baltic Dry Index of Freight Rates is seen as a measure of global trade activity, and is a staggering 96 per cent off the May, 2008 high.

The “recovery” looks shaky. Credit is hard to come by as banks remain tight-fisted about lending. The comparative signs for housing have been distorted by the $8,000 government grant for house buyers, an incentive that ends this year. The glut of supply soon will reassert itself; there will be more foreclosures resulting from the inevitable increase in interest rates from adjustable rate mortgages. The $4,500 “cash for clunkers” auto program boosted car sales but that program is ending, and many buyers purchased cars this year instead of in later years.

 It is difficult to see where any forward punch will come to drive the economy, once the impact of the nearly $800-billion infrastructure spending is concluded. Also, monetary stimulus cannot continue as the concomitant increase in money supply is certain to lead to rising fears of inflation. As economist Dr. Edward Yardeni said, “When the punch of these measures wears off, economic growth will fizzle.” It is noteworthy manufacturers cut back on production levels to far below the depressed sales rate, so inventory re-stocking is taking place, providing a temporary lift to manufacturing output, and consequently the demand for commodities.

The financial markets are at a point that could be justified by a quick and strong economic recovery; that is based on a complete misreading of the situation. The parallels to the 1930s are ominous. Too many are seeing imaginary signs of life in the present scene. We are receiving more information than ever, but it is basically misinformation that predominates.

Bruce Whitestone