Economy | timiacono.com - Part 5

Shocker! New Tech Bubble Spurs Confidence

A recent Gallup poll indicates that, in a part of the country where stock values and home values are at nosebleed levels with a dovish Federal Reserve just last week providing a green-light for more of the same, the populace is pretty confident about the economy.

About the only thing that might be considered surprising about the data below is just how big the confidence gap is between the Bay Area and the rest of the country.

At the other end of the spectrum are areas in states such as Alabama, Mississippi, Tennessee, Arkansas, and Oklahoma where folks are downright gloomy. In these areas, 60 percent or more of the respondents said that the economy is getting worse, not better, and less than 20 percent said that current conditions were good or excellent.

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Deflation: The Central Bank’s Bogeyman

Ahead of the Federal Reserve’s big day today, via this item at the WSJ Real Time Economics blog, it is learned that the Bank for International Settlements has questioned the conventional wisdom amongst the dismal set that deflation is such a bad thing. From their recently published quarterly review comes the graphic below demonstrating such.

The report concludes that, save for the Great Depression, there is little or no correlation between falling consumer prices and economic growth, however, falling asset prices are entirely different and, sadly, in our asset bubble dependent global economic growth model, this kind of trumps everything else.

With each passing year, the prospect of Federal Reserve rate hikes seem more and more like Charlie Brown trying to kick that football held in place by Lucy Van Pelt in one of the better known scenes from A Charlie Brown Thanksgiving.

That point should be pretty clear in the chart below that appears in this Bloomberg story.

“Ha! You’ll pull it away and I’ll land flat on my back and kill myself.”

Another Way to Look at the Job Market

Among the Federal Reserve’s dozen or so ways to look at the labor market as they debate monetary policy next week will no doubt be this new alternative found at the Wall Street Journal Economics blog in which the difference between the U3 jobless rate and the U6 gauge of under-employment is charted (recall that U6 includes U3 plus discouraged workers and those stuck in part-time jobs who would like full-time work).

Interestingly, back in January 1994 (the first month that U6 is available), the two components were slightly different. The U3 rate back then – about three years after the 1991 recession – was nearly 12 percent and the U3 rate was 6.6 percent versus, today, when U6 is 11.0 percent and U3 is 5.5 percent.

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