November 3, 2003 – What a
quarter. Amazing. Astounding. Let me give you an exact parallel
to what happened with our economy last quarter.
Say we have been pretty cash strapped in
my household, my boss hasn’t been giving me raises, my wife had lost
her job, and so our household net income had been low and not on the
climb. I keep telling my family I am turning things around, but
nothing ever improves.
So, one quarter, I line up all of my
credit cards, find those slips of paper I had filed away that had
the PINs I need to get cash advances on them, and head down to the
local ATM and take out massive amounts of cash that I don’t have,
which I will have to repay at some point down the road – with
I return home, and when my wife opens
the door, my hands are full with massive wads of dollar bills. She
asks what happened, and I say, “Look, it was a great quarter here at
the Stanson household. Look at the growth!”
Would my wife celebrate along with me?
Well, actually, probably not. You see,
my wife, being an intelligent woman, would likely beat me for
destroying our financial future with such an asinine action, and
beat me again for coming home and lying to her, trying to pretend
our financial situation had turned around when, in fact, it had not.
Now, my wife doesn’t actually beat me
when I am stupid (which is hopefully not too often,) but I’m sure
you can see the point.
The record 7.2 percent ‘growth’ was the
result of three things: massive defense spending, one time tax
refunds, and refinancing due to low interest rates.
In case you haven’t noticed, two of
these things – the massive defense spending and tax refunds -
involve putting money into the economy that we don’t have, which we
will have to pay back, plus interest, down the road. And the third
thing does not actually involve any growth but simply people taking
advantage of a temporary opportunity to refinance – the boom of
which has now passed.
Signs of an actual economic turnaround
would be tangible and catch nobody by surprise. And they would not
come from out of nowhere, from minimal growth one quarter to ‘record
growth’ the next.
Things that would be actual signs of
economic recovery would be new job creation, new areas of business
development or development of new products, preferably exportable
ones. For example, if we had developed a useable hydrogen fuel cell
that we were ready to put into production, that would lead to job
growth and a chance for the economy to grow.
But none of that existed in this
‘incredible’ third quarter of 2003.
What we saw this quarter was the
outflowing of cash from our nation’s coffers. You see, when
President Bush decided to create the biggest deficits in our
nation’s history, the money was going to go somewhere.
So, there it went. No, not to sound
investment. No, not to anything that will lead to long term growth.
Quite simply, the rush of growth we saw
in the third quarter of 2003 was exactly like the rush of water you
see when you flush a toilet. Wow, all sorts of water comes rushing
into the tank, but in reality it is only a sign that the water tank
has been emptied and soon all the water – both that which had been
in the tank and what little water sat in the bowl - will be gone in
a blurring whoosh.
But I guess the sight of all that water
rushing around dizzied some people into thinking there was a water
glut. Even more, some went on to conclude that this was the first
sign that a massive flood is on the way.
Well, I hope they didn’t call their
plumbers, as it would be unfortunate to waste all that money on an
emergency call when really there is no massive flood of water – or
in this case - cash to come.
No, it was just an illusion, and what
will be left once that one exciting report is past is just an empty
tank – the empty national coffers.
However, don’t send that plumber away
too soon. There is a massive stoppage that needs to be fixed on the
part of certain people, and his plunger (likely even his rooter) can
be very useful in cutting through the massive wad of – well, you can
imagine what clogs linger in toilet bowls – that some people are
trying to perpetrate on us by acting oblivious to the fact that this
third quarter report was just the flashpoint of really, really bad
economic news. They had a very nice strategy, that if you stuff the
bowl with a massive amount of BS, the water will seem to be so
plentiful that the bowl runneth over.
But in the old adage of “glass half full
vs. glass half empty,” we are sorry to have to be the ones to point
out that, in this case, the bowl is entirely full of it.