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Double-Dipping: The Next Step in “Economic Recovery”

Chuck Butler (June 19, 2009)

Friday, June 19, 2009

By Chuck Butler It’s Friday, so it’s a short one today. But I have to let you in on what’s happening out there in the markets today.

For starters, the euro got a boost this morning when the European Union leaders released a draft statement. The statement basically said the leaders are seeing the first signs of a “sustainable economic recovery.” Apparently there will be little to no need for further stimulus of the economy.

Now, normally this would have sent the euro on a trip to the moon, soaring even higher. But, these days, everyone has to take a statement like that, and temper it a bit with a dose of reality.

These guys don’t really know if the economy is going to have a “sustainable economic recovery.” Every country is in uncharted waters with their economy right now, and it remains a possibility that the economy could rebound a bit, and then take a double dip back into the negative news territory.

That’s what I see happening in the U.S. later this year – double dipping. In other words, I see the economy going back for seconds on this recession. It’s a possibility with an economy so deep in a recession / depression, that with all this stimulus, it does show signs of recovery, only to fall back. It’s because the country was never on terra firma when this recession began in the first place.

Real vs. Make-Believe Numbers – Another Media Folly!

Speaking of the U.S. economy, yesterday we saw the Weekly Initial Jobless Claims remain above 600,000 for the week, but the continuing claims dropped drastically. And this is where I draw the line between make-believe and reality folks.

First of all, no one in the media had covered the Continuing Claims data while it was going up, up and away in its beautiful balloon. But, show a drop, and these knuckleheads were all over it like a cheap suit! Okay, so the number dropped – big deal! I don’t see that as a “sign that the job meltdown is over,” like many in the media said.

When my colleague Chris Gaffney told me that the number had dropped, I told him:, “That means one of two things… Either people are going back to work or that unemployed people saw their unemployment benefits expire.”

If it is number two and people’s benefits are expiring, then it shouldn’t be a surprise that Continuing Claims are lower, because the BLS drops those people from the list of unemployed! Seriously, what mental genius came up with that one?

I would put my money on what’s behind door number two! Wouldn’t you at this point?

When the Bureau of Labor Statistics (BLS) can report a strong jobs number without all the adjustments, then I’ll jump on the job creation bandwagon…

Who Else Here Believes the Fed Is NOT In Control?

Let’s see what the Fed has up its sleeve these days… The Fed is looking for ways to communicate to the markets that they will NOT be raising interest rates until, at the earliest, 2nd half 2010! Now they also want everyone to know that they will be quick to remove the stimulus from the markets. One doesn’t add up to the other one here, folks.

It looks like the cagey Fed is just not being truthful to us…

You see, they don’t want the markets jumping ahead, and moving yields higher on bonds, which would basically shut down the nascent mortgage business recovery. But, they are very quick to say that they will remove the stimulus.

I wonder how many people out there really, truly believe the Fed will 1. know how to remove their stimulus without damaging the economy, and 2. will do it at the right time?

You won’t see me signing up on the roster of those that believe in those two things! Just look at their track record! If you want some insight to the bumbling, tumbling, fumbling that has gone on at the Fed over the years, you should check out a book by William Fleckenstein, Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve. You can get it on Amazon.

It will open your eyes wide open to all the things I talk about regarding Big Al’s incompetence and the Fed’s bungling.

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