First, Paul Krugman [yes, that Paul Krugman] points out, for purely partisan reasons of course, that the looming crisis in social security payments that has pundits so exercised is not imminent and the situation is actually improving. He writes:
The latest report of the Social Security Trustees is out. I think the key message is what has happened to the estimate of actuarial balance — the difference between projected outlays and projected revenues over the next 75 years. This is the thing that’s supposed to get steadily worse as time goes by, as the 75-year window contains ever fewer years in which the baby boomers are in the work force, paying payroll taxes, and ever more years when the boomers are out of the work force and collecting benefits.
In fact, however, the actuarial balance has been improving rather than worsening. It’s now better than it’s been since 1993. What this tells us is that projections made in the mid-to-late 1990s were, in the light of subsequent revisions, way too pessimistic.
Moral: Social Security’s financial problem is relatively minor. It doesn’t deserve the emphasis it receives from most pundits.
Read it here.
Then there's this from Reuters:
LONDON - Maybe, just maybe, the financial world is not about to implode. Such is the level of disaster mongering surrounding the latest phase of the eight-month-old credit crisis that you could be forgiven for thinking we will all soon be hoarding food and reverting to a barter economy. At the very least, some market pricing and financial commentary has invoked a systemic collapse akin to 1929's stock market crash and the Great Depression that followed.
....But with investors already positioning for a "worst case" scenario, there is a chance of a large pendulum swing.
Last week, a survey by Merrill Lynch showed a majority of 193 fund managers were overweight cash in March, signaling extreme caution.
No coincidence then that three-month US Treasury bill yields are their lowest since the 1950s, at less than 1 percent. Or that safe-haven gold had topped $1,000 an ounce before a violent reversal late last week that may itself signal a turn.
"People are one-way; they've got the cash; they believe equities are cheap," said Merrill consultant David Bowers. "They just need a catalyst to know when it is safe to go back into the markets."
There follows a discussion of the nature and likelihood of such a catalyst. Read it here.
Interesting.
AND THIS JUST IN:
Amid all the talk of recession and depression the economy continues to grow -- slowly, to be sure, but the final fourth quarter figures on GDP showed that the economy grew at 0.6%. This was in line with expectations and that in itself suggests that the economy has stabilized and, given the huge cash reserves hoarded in banks and investment institutions, is poised for a rebound. Note, a recession is defined by two consecutive quarters of declining GDP. So far we have not had any, repeat any, quarters of decline. Just saying we are in a recession [and in this political season many partisans have been willing to say just that] doesn't make it so.
UPDATE:
Reuters reports:
WASHINGTON (Reuters) - U.S. personal income rose more than expected in February as the economy teetered on the brink of a recession, while both personal spending and a key price measure increased only slightly, a government report showed on Friday.
What is more:
The personal consumption expenditure price index, a key measure of inflation, rose 0.1 percent in February after a downwardly revised increase of 0.3 percent in January. Excluding volatile food and energy costs, the personal consumption expenditure index also rose just 0.1 percent, in line with analyst expectations.Read it here.On a year-over-year basis, this core index rose 2 percent, matching the prior months' gain, which was downwardly revised from 2.2 percent.
"The decline in the year-over-year core PCE is important in that it supports the notion the Fed is making the right decision in cutting rates aggressively and not threaten long-term price stability. It argues that the Fed can lower rates in the months ahead," said Zach Pandl, an economist with Lehman Brothers in New York.
Gee! The economy is growing, there has been no recession, investors are sitting on piles of cash just waiting for a signal to get back in, social security seems sound, inflation is under control, and personal income is rising. Yet the Lou Dobbs crowd is screaming that we are on the eve of destruction.
