The Nossiter Net
The net that shall enmesh them all
Edited, Written, and Published by J.C. Nossiter
The Morning Mendacity
Thursday, September 9th,  2004
The Nossiter Net is cast  to snare some of  the riper rascalities of the day.  Comments?
The wizened figure of Fed Chairman Alan Greenspan hardly conjures up short skirts and pom poms, but he’s turned himself into a cheerleader.  In testimony to the House Budget Committee yesterday, Mr. Greenspan went out on a limb and said “The most recent data suggest that, on the whole, the expansion has regained some traction.”  That may not sound wildly enthusiastic, but for a man given to veiling his remarks in a cloud of obfuscatory qualifications, that’s a ringing endorsement of the economy. It’s too bad the numbers don’t support his enthusiasm.

The last revised figures from the BLS ( show the economy growing at an annual rate of 2.8% in the second quarter.  That’s economic growth so sluggish as to hardly qualify as an expansion.  By comparison, growth (as measured by inflation adjusted GDP) averaged 4.2% during President Clinton’s last four years in office, 50% higher than our current anemic rate.  It gets worse if you look beyond our shores.  The Chinese are enjoying a 9.6% growth rate (, the Russians 7.4%, and our neighbors to the south 3.9%.  The Euro area is performing even more dismally than we are at 2%, but according to the Bush administration those countries are irrelevant anyway.

The economy produced 144,000 new jobs in August, not enough to keep up with demand by new workers;  that the unemployment rate dropped by a tenth of a percent was due to those workers who left the job market entirely.  They stopped looking for work because there was none to be had.

“Early readings of retail sales have been mixed” says the Fed Chairman.  Translation:  business is bad at Wal-Mart because the middle-class buyers who shop there don’t have the income to buy much of anything, whereas earnings at high-end retailer Neiman Marcus tripled compared to last year.  The Bush tax cuts are benefiting at least some of us.  Forget the kids’ sneakers;  in the market for a new mink coat?

Although not known for his humor, Mr. Greenspan must have been joking when he told the Budget Committee that manufacturing output was higher, due to “inventory investment.”  Translation:  manufacturers can’t sell their goods because demand is weak, so the goods are piling up in warehouses.  It costs money to store those goods, hence “inventory investment.”  That’s not going to give the expansion much traction in the long run.  Just ask Intel, the technology bellwether.  Its earnings forecasts have been cut because of weak demand for the chip maker’s products, which are found in everything from PC’s to automobiles.

Despite these sickly economic numbers, Chairman Greenspan is setting the stage for another interest rate hike.  Mr. Greenspan admits that corporate profit margins are down, imports have fallen, and that “inflation expectations have eased.”  Translation:  the economy was slow, is slowing further, and there is no inflation to speak of, nor will there be any time soon.  But the game must go on.  The Bush administration insists we’re in a recovery, and therefore the Fed must raise rates to prevent the economy from over-heating.  And of course, that could happen;  so might the sky fall, or hell freeze over.

Chairman Greenspan may be the administration’s cheerleader, but the bond market acts like the economy’s scorekeeper.  The yield on the ten year Treasury dropped after Mr. Greenspan’s testimony, which is the financial markets way of saying there’s no inflation in sight, and precious little economic growth to look forward to.  The Chairman can waggle his pom poms as he will, but that won’t change the final result:  U.S. economy, 0.  U.S. workers, taxpayers, citizens, 0.  For voters keeping score, that’s not a tie, but a no-win situation.

©J.C. Nossiter 2004
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