This recession’s biggest losers: The experts


The other day, in my “Things I no longer believe in” post, I included my current (and I expect permanent) disbelief of all explanations of the economy that are reduced to a narrative.

This morning, the Wall Street Journal’s Dennis K. Berman uses a few hundred words that help reinforce that “disbelief.” Unfortunately, he buries the most important message of the column in the last sentence:. “The important thing to know, it seems, is how little we know.” I say “unfortunately,” because the way in which the column is written (and its headline), will lead most readers to accept what seems to be the column’s premise: those who are predicting a recovery are wrong. The column cherry-picks a series of anecdotes to suggest that experts who believe the economy will begin recovering this year (almost all do) are wrong: “When you’re in the expert business, after a while you realize there are no experts,” the writer quotes Richard Sylla, New York University’s Henry Kaufman Professor of The History of Financial Institutions and Markets.

In other words, the columnist performs a unique accomplishment: He wrote a column that disproves the premise of the column.

I think a better headline for the column would be: The experts agree on one thing — everything in this column is crap.

I believe most people are afraid to believe anything about the future of the economy these days: they intuitively know the economy is neither hopeless or hopeful; it is sluggish and confused. But Americans — and the reporter/pundits who write for them — don’t like gray: we want black or white.

As I’ve written before, I agree with Paul Saffo, who quipped at the beginning of this year that “Pessimism is the new black. It’s a lot easier to face doom than it is to face uncertainty. This is a particularly American disease. We are really good with clear opportunities and we’re really good with clear threats. We do really badly with the gray zone in the middle.”

How gray is it?

Well, on Monday, the Dow-Jones Industrial Average fell nearly 300 points to its lowest level in 12 years.

But on the same day, with perhaps less coverage, these news items appeared:

1. In January, the personal savings rate in the U.S. rose to a 14-year high. The personal savings rate rose to 5%, the highest since March 1995. A year ago, the personal savings rate was 0.1%. At an annual rate, personal savings rose to a record $545.5 billion. Lesson: While “some experts” will tell you Americans have a genetic pre-disposition against saving, the reality is this: you scare the bee-jeezes out of people and they’ll soon start socking money away at rates that will make the Japanese look like profligates.

2. Disposable real incomes rose in Jauary at the fastest pace since last May as annual pay raises and cost-of-living increases took effect while taxes plunged 9.3%.

3. Real disposable incomes (adjusted for inflation and after taxes) increased 1.5%, despite the third straight decline in income from wages and salaries.

4. While much of the economy is teetering between bust and bailout, the movie industry has been startled by a box-office surge that has little precedent in the modern era. And it is not just because ticket prices are higher. Attendance has also jumped, by nearly 16 percent. If that pace continues through the year, it would amount to the biggest box-office surge in at least two decades. (via:

5. Despite the increase in personal savings, consumer spending rose more than expected in January, after declining for six consecutive months.

In other words, if you want a narrative constructed from glimmers of hope, or one based on portents of doom, take your pick.

As for me, I choose to believe that none of the above matters. Through good economies and bad, I choose to focus on those things I can control.

And so far, my 2009 narrative remains one of anticipation for positive results from focusing on those things I can control.

However, I’m not that hopeful for the future of experts.