The Unexpected Weakness of the Recovery

Our title today comes from a phrase ripped out of context from a recent Wall Street Journal article. The article itself is not important, but the assumption of the phrase was just too rich for us to pass by uncommented upon.

As discussed copiously elsewhere, a propaganda campaign of gargantuan proportions has been unleashed upon the world's populace. The term perception management sums it up nicely. The basic idea is that if people are confident, they will consume. If people will consume, there will be 'work' to do. It is an effort to restore society and the economy to the defined norm of 'the way things were until about two years ago.' Whatever an individual sees or experiences to the contrary (especially unemployment and homelessness), is to be disregarded in favour of the consumerist paradigm.

Almost everything you read or hear will be attempting to reinforce the notion that the recent (and thankfully over) financial and economic crisis was just a bump in the road to ever greater prosperity.

Whether there is a vast conspiracy orchestrated by the Ministry of Truth, or whether it is merely the unconscious coordination of wishful thinking is immaterial. This informational miasma is deadly and if one wants to make it through the Depression without being too battered, one had best learn to recognise the disinformation, not get sucked in, and think straight instead.

The unhappy reality is the Depression is still on and it is going to get worse - a lot worse. Incomes are still falling. It doesn't matter that stocks are recovering or house prices in Australia are hitting new highs. In terms of purchasing power, aggregate incomes are going to be falling for a long time and everyone had better get used to that fact. Tragically, the more the truth is evaded (whether deliberately or otherwise), the worse off everyone will be.

Housing Price Report for June

As promised, we are returning with our North American Housing Price Index. We do not claim that this is completely representative of North America as a whole, only that it is honest and not massaged to put a spin on things.

Our first result was a bit of a shocker, even to us: A drop of 9.65% in one month! So, whatever you might be hearing about 'green shoots' - it's not happening in residential real estate.

We noticed the pull downwards was from a lot of distressed properties (i.e. foreclosures) being brought to market. Since there seems to be no end in sight for the foreclosure flood, this trend will likely continue.

Tune in next month for our update.

An Index is Born

Today we have created a housing price index for ourselves that covers diverse cities in Canada and the USA. We do not claim it will be completely representative, just that it will be completely honest and not subject to manipulation by government authorities or commercial interests.

In one month's time, and monthly thereafter, we will update our index and let you know if housing prices are rising or falling as we measure them. We are naming the index The Frugal Scotsman's North American Housing Price Index.

We suggest you set up some indexes of your own for the costs of things that are important to you. Don't rely on official measures of inflation or deflation to tell you where prices are going. There is too much 'riding' on official numbers to trust them.