Why you shouldnt believe the Green Shoots Groupies

As we previously discussed in “Green Shoots? – Don’t believe the hype!”, U.S. Federal Reserve Chairman Ben Bernanke  coined the term “Green Shoots” back in March.  So far apart from a few wobbles everywhere you look in the mainstream media seems to support his statement worldwide.  And he backed it up again recently ‎in August saying that the U.S. Economy is on the Cusp of Recovery.

Here in New Zealand the property market appears suddenly ‎buoyant.  Sales are up month on month and year on year.  We have ‎heard a number of reports of houses selling in Auckland at auction ‎for 15% or more over the council valuations which were only ‎completed in late 2008.  Anecdotally there are also a high number ‎of Chinese bidding and buying currently.  We reckon this may be ‎due to Chinese investors flush with cash – the after effects of their government ‎instructing banks to lend to anyone with a pulse.  See this Wall Street Journal report.‎

While governments continue to proclaim all is well and the populace ‎continues to swallow it, this current uptick in most assets could well ‎last much longer than we expect.   However unlike Bernanke, we ‎still feel the global economy is instead on the cusp of the next ‎significant down phase of the financial crisis in what will be a ‎depression lasting many years yet.‎

Remember most government and mainstream financial economists ‎and commentators views are in close alignment with Bernanke’s.  ‎Pick up any newspaper or listen to any TV news bulletin and ‎recovery is the catch cry.  But this video should make you think ‎twice about believing anything that escapes from Bernanke’s lips ‎and by extension most other governments and their agents.

‎‎

These are just some of the “visionary” (please note the thick coating of ‎sarcasm) comments from Bernanke over the last 4 years: ‎

  • July 2005: Commented on the lack of a house bubble (yeah right)‎
  • And how there won’t be a nationwide drop in house prices in the US ‎‎(there was), ‎
  • November 2006: How consumer spending will continue to grow (it ‎didn’t)‎
  • February 2007: The sub prime housing problem won’t spread into the ‎broader mortgage market (it has and will get worse over the next ‎‎18 months with more mortgage rate resets to hit the middle class in ‎the US)‎
  • July 2007: Home sales should improve due to growth in ‎income and employment (They were almost 60% lower in March ‎‎2009) ‎

Why should we now suddenly believe someone who has been so ‎incredibly wrong over the past 4 years?  How anyone can even take ‎the slightest notice of this we find staggering.  ‎

If you spend what looks like amounting to $24 trillion on bailouts the odds are that this will cause some froth to appear, ‎but in the long run the same imbalances still exist and when the ‎froth settles the empty glass will be revealed.‎

We would urge caution before making any investment decisions based upon the propaganda of any government currently.

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