Today’s larger than expected surge in consumer confidence, the biggest monthly
gain in 12 years, shows that the propaganda effort to convince the public that
structural economic problems would be solved by a quick victory in Iraq was
successful. As a result, over indebted, non productive Americans are now confident
enough to purchase more imported products by borrowing more money from naive
foreign creditors who have dramatically over estimated America’s ability to
repay its debts.
Consumer confidence is perhaps the most over hyped of the economic releases.
Alternate names for this index might be “consumer irresponsibility,” “consumer
gullibility,” “consumer duplicity,” “consumer arrogance,” “consumer
compliancy,” or “consumer profligacy.” Its only real value is
its potential use as a contrarian indicator.
Given the severity of America’s structural economic problems, and the precarious
state of its job market, American’s would be wise to tighten their belts. However,
Wall Street heralds consumer spending as if it were a virtue to be praised.
Ironically, the coming recession will be that much more severe because over
confident Americans will enter it considerably more indebted than would other
wise have been the case had they been a little less confident.
Ironically, on the very day consumer confidence had its biggest surge in 12
years, the U.S. dollar index, the ultimate measure of global confidence, fell
to a new multi year low. It seems that the success of the “Iraq victory
recovery propaganda campaign” did not transcend American boarders.
The fact that this “good” economic news, together with a rallying
stock market, failed to lift the dollar, is an ominous sign, and portends disaster
for the American “borrow and consume” economy, which is so heavily
dependant on foreign capital. For the world’s largest debtor nation, creditor
confidence is far more important than consumer confidence.