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Ben Stein How Not to Ruin Your Life
Recessions Are in the Eye of the Beholder
by Ben Stein
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Posted on Thursday, May 8, 2008, 12:00AM
How many times have you been witness to an event and then read about it in the newspaper later? How many times would you say the newspaper reported the event as you witnessed it?
If you're like me, truthful, accurate reportage is a rarity in your experience when compared with, well, with your experience.
Reports of Recession Greatly Exaggerated
This is as true of giant national events as it is of neighborhood ones. I've been involved in many of these big events, from Watergate to the Drexel/Michael Milken junk bond scandal. The media simply never gets it right. They give an impression, highly colored by the inexperience, bias, and laziness of the reporter. Most of all, in national events, the reporting is based upon the reporter's urgent need to magnify his or her own importance. This is only human, but it's good to recognize it.
I've been thinking about this a lot because in the last few weeks, we've seen a barrage of data buried in the back pages of major newspapers telling us that the "recession" everyone said was a certainty, the "recession" that the reporters assured us would be about as bad as the Great Depression, is simply not happening.
The bond markets have rallied staggeringly. The stock markets had one of their best months ever in April. The rate of defaults on corporate bonds remains extremely low. And index securities that track mortgage defaults are saying that the fear of a colossal national mortgage default epidemic was ill-founded.
Ignoring the Data
Just as I am writing this, new employment data has come out showing only very small job losses in April -- 20,000 jobs out of a labor force of very roughly 160 million, meaning that 1 in 8,000 jobs has been lost. The actual rate of unemployment is falling to a very modest level -- 5 percent.
Yet the national media is still selling us fear of a recession. One of the major national newspapers has a reporter who's desperately trying to peddle a story of national economic collapse even as the economy stays afloat.
And the beautiful part is that it's now crystal clear that we're not in a recession (we could be later -- anything can happen). There was just a report that showed first-quarter 2008 GDP growth was positive, meaning that as a matter of arithmetic we can't be in a recession, any more than a man who's gained weight can also be losing weight.
The Economy's Still Afloat
No, that's not the beautiful part: The beautiful part is that because we're not meeting the definition of a recession -- two consecutive quarters of negative economic growth -- the pundits are trying to rewrite the definition, to make it just about anything they feel like making it. (Or, as I like to say, the new rules allow liberals to call a conservative administration's tenure a recession any time they have the urge.)
Ladies and gentlemen, the dogs may bark but the caravan moves on. Adroit moves by the Federal Reserve have saved the economy from a bad recession. The housing crisis was never anywhere near as bad as the media naysayers were trying to claim. The mortgage foreclosure problem was never the disaster hedge fund traders and their allies in the media were trying to say.
This big old leaky barge of an economy is still floating lazily down the river. It's not as strong as it was two years ago, but it's still above the water line. The big problem for most employers now (as they tell me) is getting decent labor. Any halfway skilled, halfway decent college grad can have her choice of jobs. Anyone with a real work ethic and an education can make a fine living.
Get Real Now
I've come to feel that you, my readers, are my family. So I hope you haven't been terrified by the media and didn't sell your stocks. I hope you've been buying while the market was down. It may have some further air pockets, but the direction sure looks like it'll be up for a while now. P/E's aren't at all high, and foreign stocks are amazingly cheap.
And I'll add another suggestion. My evidence is anecdotal at this point, but I'm hearing of an uptick in home sales in my beloved Southern California and my native Washington, D.C. I think the tide is hitting full ebb, and while it may ebb for a while, it'll turn before long.
The nation is still rich. Mortgage rates are low. Employment is high. Contrary to media reports, loans are easily available to qualified buyers. Houses are still tax-subsidized. Young families need homes. We old people need retirement homes. People are moving for many reasons, and they need homes, too. Clearly it's a good time to dip your toe in and see how you like the residential real estate water.
Bunk, More or Less
As for the financial journalists, take a cue from Henry Ford, who famously said, "History is more or less bunk."
I wouldn't say business journalism is all bunk. But I would say it's about glorifying the reporters and selling newspapers. And while fear sells papers, it doesn't
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