How does one characterize properly American capitalism’s current state? Its financial crisis is roughly a year old. During that time, the media have been on recession watch, predicting recession (as have I), in some cases even depression weekly, daily. Where is that recession? Looks now like we may not see one before Election Day (growth in the April-June quarter will effectively rule out the classic definition of recession—two quarters of negative growth—anytime before January 2009).The media’s motives are transparent: they want Obama to win. As one conservative writer put it, the media believe bad economic news helps Obama because “the Democrats have all the right answers domestically and have lost presidential elections only because of national security and cultural concerns.”
So media focus on bad economic news. There’s one hiccup: suddenly high gas prices are helping Republicans because the GOP is willing to drill offshore, Democrats aren’t, and the people side with Republicans. Of course Democrats are onto this difficulty in July, and will surely finesse it by November. Sharp fuel price drops offer one solution, but then of course the economy doesn’t look so bad.
Another problem is falling housing prices. Until our homes stop losing value, people will feel bad and buy less. According to the Case-Shiller home price index, home prices in 20 major cities are down a staggering 15.8% over the past year—a Depression era rate of collapse. The latest (May) data shows continued big hits for Miami, Las Vegas, and Phoenix.
Yet the Case-Shiller survey also notes the rate of decline has slowed in each of the last three months, and that home prices actually rose in Atlanta, Boston, Denver and Dallas. The report adds that falling prices are “a necessary ingredient if the housing market's to work out its excesses and begin growing again.” No pain, no gain.
