Some basic mathematics for newspapers

Ah, the Sydney Morning Herald. I don’t suppose this story originated there – and their whaling story is carrying a Greenpeace advertisement, so I won’t assume much about editorial control going in.

Consider the story about the apparently so-called Santa Claus rally on Wall Street (honestly, does commodification pass as the sufficient condition for verisimilitude, these days? When did it breeze right by being a necessary one?). Leaving aside tripe such as

“Wall Street is awash with holiday cheer in this last full session of trading before the Christmas break,” said Joseph Hargett at Schaeffer’s Investment Research.

He said RIM was the latest tech group to deliver solid earnings, which eased concerns about a slump in profits.

Meanwhile news that a Singapore fund was eyeing a $US5 billion ($A5.84 billion) investment in Merrill Lynch “took the edge off credit crunch concerns for the financial sector”, according to Hargett.

None of which makes up for all the bad reports coming out – or does a USD5bn cash card for Merrill Lynch outweigh the short life and death of the SIV superfund?

What really did me in, though, was this one:

On the economic front, a report showed US consumers shook off a slump in housing and tight credit and boosted spending by a stronger-than-anticipated 1.1 per cent in November.

I had seen this – a (former) student, in fact, had emailed it to me on the day, asking whether it was not good news (I said no: consumer staples were driving it via appreciating prices). Here, though, is the full context that the SMH let run:

On the economic front, a report showed US consumers shook off a slump in housing and tight credit and boosted spending by a stronger-than-anticipated 1.1 per cent in November.

The Commerce Department report also showed that personal incomes rose 0.4 per cent, a notch weaker than forecast.

“Consumers have not stopped spending and as long as income keeps growing, the economy can stay out of recession,” said Joel Naroff, chief economist at Naroff Economic Advisors.

We’ve seen discussed, here and everywhere, the – accepted, surely – fact that the level of private dissavings is basically enormous. Then, if consumption expenditure can increase a further 1.1%, while incomes increase only 0.4% (and real incomes no doubt less), how does that let us stay out of a recession? At best it pushes one off down the road to grow bigger and meaner, to jump us later in 2008.

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1 comment so far

  1. […] much for that killer 1.1% increase in consumer spending. The blog The Big Picture has an excellent re-cap of it “all”, […]


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