The term used by the major media and the U.S. government regarding the economy is “recovery.”
Here is our one major question: Recovery to what, and when?
Consider the latest Case-Shiller Price Index for home prices:
U.S. Home prices have dipped to pre-bubble levels, and appear to be on track for pre-Dot Com era levels.
Are we headed back for 1996? Hasn’t the United States become a different nation since then?
Is the “recovery” a trip back to 2007, 2002, or 1992?
Do those all count as recovery?
Many of my colleagues have been recently wondering how the media regarding the American economy could be so sunny in the face of increasing unemployment. 
Indeed, how could any recovery happen having doubled the unemployment rate? The U-3 unemployment rate hovers around 9.7%, while underemployment is at a record 16.8%. How can an economy supposedly based on consumer spending come back with twice as many people unable to spend?
Americans have a strong bias toward good news. We are historically, as a people, motivated and entrepreneurial, so rather than dwell on things like history or future trends, we would prefer to get right back to work. This is an admirable trait in general. So long as you are focused on the right things, unthinking hard work is preferable to endless bureaucratic meetings in which you decide a suitable course of action, only after multiple hearings from all parties, et cetera.
There are moments where a sunny disposition is the wrong thing. To be sure, there’s no point in whipping people into a depression-related psychosis, causing a run on the banks and prodding people to fling themselves off bridges because the end is nigh. And economics is at the end of the day a social science; sometimes when people simply think positively, things turn around.
Ron Paul says we can’t just create capital nor simply reinflate the bubble.
Is it the end of the Federal Reserve system?
A couple months old, but as we anxiously wait the ultra-scientific “stress tests” on banks, we need to consider whether banking as a system is at the end of an era.
Yesterday, the Washington Post Express featured a story with an original angle. According to the paper (not an editorial, reported as news) Americans anxious over economic turbulence are starting to save their money for a time without healthcare, food, and other luxuries. The bad news is, this may defeat the purpose of the stimulus bill, to get people to SPEND SPEND SPEND, thus Americans will be ironically wrecking the economy through their careless “saving.”
Let me get this straight: our growth-at-all-costs economy has hit a ditch after Americans began purchasing homes they couldn’t afford and running up massive debt. But the worst thing would be to slow down and reconsider our habits, and live within our means?
I can’t find the link to this story. That’s probably for the best.
President Elect Obama, along with America’s Mayors and governors say that massive infrastructure projects are the key to pulling us out of recession.
Incidentally, this was the subject of one of our first STEEP Reports around one year ago.
The whole set of ten STEEP Reports to be available soon…watch this space.