By the end of last year we were certain that if America wasn’t already in recession it was getting pretty close. Nothing has happened since to change our minds. Instead, the news out of the US is just getting worse.
House prices are still falling fast – the S&P Shiller Index shows that prices were 9.5% lower in December 2007 than in December 2006 and futures prices on the Chicago Mercantile Exchange (CME) suggest they’ll be down another 10% before this year is out. This isn’t exactly helping the many people out there who can’t meet their mortgage payments: the number of foreclosure filings across the country rose by 8% in January and is now 57% higher than it was a year ago.
It isn’t helping consumer confidence either: February numbers show that consumers feel worse today than they have at any point since the early 1990s (with the exception of a brief period around the start of the Iraq war). The financial sector isn’t getting itself out of trouble in a hurry either. The write-offs continue and, in a nasty little sign of the times, The Wall Street Journal reports the Federal Deposit Insurance Corporation is looking to bring 25 retirees from its division of resolution and receiverships back to work in an attempt to prepare for a rise in the number of failing financial institutions.
Then there is inflation: the US producer price index (PPI) was up 7.4% year on year in January – that’s its biggest leap since 1981. And the dollar. Very often a sharp rise in inflation numbers gives a currency a bit of a boost as investors look forward to a rise in interest rates. Not so in the US, where the dollar is is still tanking due to the fact that the Fed has very little left in the way of inflation-fighting credibility. Instead of muttering about keeping prices down, Ben Bernanke has made it clear that his priority is to “support growth” by cutting rates “as needed”. The government is joining Bernanke in his efforts to go for growth at the cost of the currency: sending cheques for hundreds of dollars out to pretty much every couple in the land in an effort to encourage spending is hardly the kind of thing that stamps on inflation.
There is no good news here, something that must be confusing for Americans as they try and figure out who they might vote for when the election finally comes. John McCain’s main policy appears to be to keep taxes low, while Barack Obama and Hillary Clinton want to do the same – just not for the rich – and appear obsessed with healthcare.
None of it is the stuff of real change or of economic recovery, although there is, of course, always Mike Huckabee, presidential candidate and graduate of Ouachita Baptist University to fall back on. He promises a little more than just tax cuts. “Folks,” Jonathan Allum of KBC quotes him as saying in The Economist a few weeks ago, “I didn’t major in math. I majored in miracles.” The American economy could sure do with one of those.