massornament

Over the past week or so I have had a few conversations with friends and colleagues where the conversation turned to why–in the midst of a global recession and EU fiscal problems–that some companies are pulling in record profits and/or revenues.  To me the answer is obvious but then, I guess, I have to remember that as someone with virtually no social life and who enjoys spending almost every spare moment reading and what not, I have the luxury of time to spend on such matters.  For others (who have a social life or other family responsibilities) the seemingly conflicting signals coming out of the mainstream media about the economy would be exceedingly confusing.

When it comes to the media, we should always remember that most of these conflicting signals originate in a media echo chamber, itself filled by a mixture of mainstream and social media, which more often than not tends to latch onto good news without digging any deeper.  This is why whether stocks or gold or currencies are up or down is such a major focus… it can be delivered quickly and spun in almost any way (good or bad).  In an era where news is crafted into fifteen second sound bites and 140-character-or-less chunks it is easy to become convinced that being well-connected is therefore the same as being well-informed.  And when those doing most of shouting in the echo chamber are nothing more than readers of government and/or corporate press-releases or are (paid to be) obsessed with the latest celebrity Facebook posts and Twitter ‘Twends’… it should not be surprising that people get confused or are sometimes completely misinformed.

A week or so ago, while listening to CBC Radio (coming out of Calgary so this shouldn’t be surprising), they held up another statistic stating that some high-end retail sector in the city is doing great and that this must be some sign that the recovery is here/gaining-momentum.  This is typical of Calgary radio… economic analysis with heavy rose-coloured spin is a regular occurrence.  Which brings me to the title of this post or at least the ‘the recession is sooo… 2009′ part.  That was another statement made by someone on CBC radio in early 2010.  Another rose-coloured, and completely misleading, statement made by a business reporter on our beloved public broadcaster.  On the private broadcasters (I cannot even watch Global National anymore) it is just as bad.  After Christmas, the stories centered around boutique brands and other high-end retail enjoying healthy sales over the holidays:

Porche & Lamborghini: http://www.bloomberg.com/news/2012-01-10/porsche-rolls-royce-chasing-record-sales.html

Samsung: http://www.arabianbusiness.com/samsung-posts-record-q4-profit-amid-high-end-sales-boom-438831.html

And, of course, more recently, Apple: http://www.theglobeandmail.com/globe-investor/apple-profit-doubles-thanks-largely-to-37-million-iphone-sales-in-three-months/article2313464/

And this is not a recent trend either as is evidenced by these articles from approximately a year ago:

IBM: http://www.theregister.co.uk/2011/01/18/ibm_q4_2010_numbers/

High-end Retail: http://blogs.wsj.com/marketbeat/2011/03/03/retail-sales-high-end-most-trendy-teens-doing-best/

So, what is up?  Should we be like the average CBC Calgary reporter and announce that this all is just more evidence that the recession (and economic worries) are “sooo… 2009″? that European contagion is a myth? that Canada is not in a housing bubble? That everything is just the fault of lazy Greeks and PIIGS?

As I said, I do not find this surprising at all and if you have been reading entries on this blog then you will know why.  To me, this makes perfect sense.  Since the global meltdown in 2007 and 2008, governments and central banks have been pouring trillions into various financial sectors and bailing out corporations in sectors like banking and auto manufacturing.  And this continues.  It continues because the crisis never went away; rather than being a solution, the actions of governments and central banks the world over were just an attempt to kick the can down the road… and funnel more money into the financial/banking sector (which donates lots to (re)election campaigns after all).  The (intended) side-effect was that all that money-printing went directly to the upper echelons of the economy.  With a few exceptions, such as Lehman Brothers Holdings Inc., the upper echelon was preserved.  The best example is the housing market in the U.S.  As thousands of individual homeowners lost their homes, the lenders and mortgage brokers were thrown government-guaranteed lifelines.  This is the real ‘wealth redistribution’ and not the kind that those on the extreme right banter about.

And this is reflected in the retail numbers.  While the U.S. faces record numbers of people living under the poverty level or using food stamps (http://www.businessweek.com/news/2011-11-02/u-s-food-stamp-use-reaches-record-45-8-million-usda-says.html), high-end retail surges.  The upper middle class and the elites in Western nations are doing fine (and are driving record sales in upscale, high-end, and boutique sectors).  Their wealth has been preserved while the poor and the lower end of the working population are suffering and inflation is exported to less-developed parts of the world.

The dangerous thing is that for in the media echo chamber (which, let’s face it, is populated mostly by the middle and upper-middle classes) they look in the mirror and things seem fine.  The mainstream media doesn’t tell anyone that the stock markets are kept afloat by a few profitable companies like Apple (http://www.zerohedge.com/news/ieconomy-demonstrating-how-apple-distorts-market), Microsoft and IBM (mostly tech and energy companies) and the illusory effects of ramped up high-frequency trading (http://www.zerohedge.com/news/presenting-rise-hft-machine-visual-confirmation-how-skynet-broke-stock-market-us-downgrade-day). And the illusion is rebroadcast and retweeted endlessly so that it appears, on the surface of televisions and smartphones everywhere, that the recession is sooo… very 2009.