Where It All Went Wrong——The ‘Recovery’ Is Hollow, The Fed’s Growth Narrative Is False

Wednesday, April 27, 2016
By Paul Martin

by Jeffrey P. Snider
April 27, 2016

With the housing recovery, it is perhaps because it has been much more visible and earnest that the disparity is more easily appreciated and understood. Prices have surged in some places as much as the housing mania portion of the great bubble of the 2000’s, yet that has taken place despite levels of overall activity at only fractions of that prior period. Thus, it is what looks like recovery with all the characteristics in price and momentum yet suspiciously devoid of true depth that would really define the very idea of “recovery” itself.

That real estate void is a microcosm of the “recovery” in the full economy. In many ways, it has looked like recovery but it has also suffered from this shocking lack of broad participation. If we really want to understand what has happened in especially the past two years (where “overheating” that was supposed to occur has given way to contraction and even recessionary imbalance) it has to start with appreciation for the narrowness with which the recovery narrative was defined. It really started in the summer of 2014 in what was really confirmation bias bordering on a state of full circular logic:

Wall Street is smiling. Although the economy is getting better, the Federal Reserve is probably not going to raise interest rates until the summer of 2015 at the earliest.

The Fed said Wednesday that it continues to believe rates should remain low for a “considerable time” after its bond buying program is complete — which should happen following its next meeting.

Investors were pleased. They sent the Dow to a record level in the afternoon — crossing 17,200 for the first time ever. The index closed at a new high of 17,157.

The Rest…HERE

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