When the majority of Americans examine the world around them, they see a stock market at record highs and modest apparent improvement in the economy, but, as John Hussman notes, they also have the sense that something remains terribly wrong, and they can’t quite put their finger on it.
Exceprted from John Hussman’s Weekly Market Comment,
According to a recent survey by the Federal Reserve, 40% of American families report that they are ‘just getting by,’ and 60% of families do not have sufficient savings to cover even 3 months of expenses. Even Fed Chair Janet Yellen seemed puzzled last week by the contrast between a gradually improving unemployment rate and persistently sluggish real wage growth.
We would suggest that much of this perplexity reflects the application of incorrect models of the world.
Before the 15th century, people gazed at the sky, and believed that other planets would move around the Earth, stop, move backwards for a bit, and then move forward again. Their model of the world – that the Earth was the center of the universe – was the source of this confusion.
Similarly, one of the reasons that the economy seems so confusing at present is that our policy makers are dogmatically following models that have very mixed evidence in reality.
This post was published at Zero Hedge on 08/25/2014