Ali’s blog

Mostly quant stuff with occasional digressions

Confidence not that high

Posted by alifinmath on March 26, 2008

In the Guardian today:

US has not felt this bad since Watergate

The Case-Shiller index of house prices in 20 US metropolitan areas found that the bursting of the real estate bubble had led to the biggest decline in the index’s 20-year history. Las Vegas and Miami were the worst hit cities, reporting 19.3% drops, significantly more than the 10.7% average decrease felt across the country. Fourteen other cities, including Phoenix, San Diego and Detroit, also suffered record lows.

Bernard Baumohl, executive director of the Economic Outlook Group in New Jersey, said consumers’ pessimism “reflects the great anxiety that households have because there are just so many uncertainties that everyone faces”.

Lynn Franco, director of the Conference Board’s research centre, said: “Consumers’ outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon.”

James Knightley, economist with ING, said the decrease in US consumer confidence about the year ahead was consistent with consumer spending contracting at an annual rate of 1% – “true recession territory”.

He added: “If the relationship holds as it has over the past decades then further policy action seems inevitable, be it rate cuts or tax cuts or quantitative easing. Moreover, with house prices plunging, stock prices falling and now employment declining, a rebound of any significance looks a long way off.”

So what should one’s individual reaction be? I find the outlook of the Stoics useful: that nothing good is ever going to come out of life in this world and the best one can do is maintain a stiff upper lip and suffer impassively and in silence. Or the Buddha: life is suffering, and the wheel of suffering continues as long as desires keep it in motion. Or even the outlook and the behavior of the English — when asked how they’re doing, the reply is usually a surly “can’t complain,” or “fair to middling.” But this may have something to do with the English climate — as Byron once wrote: “Our cloudy clime and our chilly women.” But I digress. The one thing I find unpalatable is the facade of American optimism and ebullience: the compulsion, for example, to reply “great” when asked how one’s doing. How mendacious, how insincere. How taxing it must be to maintain a confident facade day after day, when behind it huddle and crouch all the usual anxieties, stresses, and failures.


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