American Leaders Say Economy Is Better, Macroeconomics 101 Says Otherwise.

That’s secessionist Governor Rick Perry of Texas talking to a bunch of business leaders in Houston claiming that the state is basically recession-proof, which is strange considering that in August the unemployment rate in Texas hit a 22-year peak. High comedy. Expect these remarks to be replayed in television ads by Perry’s opponents in the 2010 Texas gubernatorial race.

Perry joins a growing chorus of officials across the country and in Washington D.C., as well the oligarchs on Wall Street, who have been assuring us that things are looking up for our economy. Even the stoic Fed firebomber Ben Bernanke declared last week that the recession is “very likely over.” Well that’s a relief, because I had been hoping that someone important would come along and tell me that my reality-based assessment of the U.S. economy is off the mark. And here he is, telling me that everything is going to be ok.

Why is that? Because the Dow finished at an 11-month high on Friday? Big whoop. Unemployment is still hovering around 17% (not the cooked “official” 9.7% figure we keep hearing), and likely to get worse. The trade gap is narrowing, thanks to gun-shy American consumers and because of the falling U.S. dollar, which helps exporters. The problem with the atrocious dollar index figures, however, is that these numbers may not be temporary, but instead a harbinger of much worse things to come. Why? Please watch this instructional video featuring Bernanke, former Treasury Secretary Hank Paulson and his successor Tim Geinthner for the answer:

Well, after the Chinese saw this, they started buying up gold in order to hedge against the falling dollar—the world currency at the moment. They’ve even started to issue yuan bonds outside of China because they full well expect their currency to play a larger role in the global economy, especially with inflation in the U.S. likely to worsen.

Between inflation, low interests rates, and a consumer base still smarting from overspending, Americans are expectedly unsure about what to do with their money at this point. The options are not very appealing. In one of the better scenarios, do they stick it in a CD with a 17-month interest yield of a whopping 2% on a minimum $1,000 deposit, even though by the time they can get their money out it might have less real value than it did when it went it because of inflation? Or, do they take advantage of the flowing credit that’s been reestablished and buy a bunch of shit with their stagnant wages (assuming they’re actually employed) even though they’ll need to save up for their annual health insurance premium hike of 8% (assuming they actually have health insurance)?

Wall Street and its political wing, the U.S. Government, prefer that people do the latter, and prop up retail and stocks even though the last thing Americans need is another flatscreen television or a thousand shares in General Motors. Common sense says that Americans need to stop spending and start saving, but the Federal Reserve is doing its best to encourage people to part with their dollars, which, when you think about it might be a good thing. That way, when the dollar isn’t worth the paper it’s printed on, Americans can sell their flatscreen TVs and other possessions on Ebay in exchange for euros, pounds, and yuans. Maybe there is a method to the Federal Reserve’s madness after all.

- Max