Comfortably Numb: Markets Ignore the Perfect Storm

The eyes, ears, and mouths of record are mesmerized by the European debt drama. This is the escapist method of coping at its most devious. It's like being distracted from the stack of unpaid bills on your desk by watching your neighbor's car being repossessed.

Day by day in the US, the vital signs show the economy getting weaker and, if it were possible, weaker still. Consumer confidence, lower. Home prices, lower. Home sales, lower. Initial jobless claims averaging over 400,000 continuously for over 3 years. The unemployment rate remains high even by its own dubious calculus. The once mighty America once again beset by Malaise 2.0, imposed upon it by a regime that makes honest people wonder how so many bad ideas, so many laws antagonistic to business, and so many actions that look fraudulent can emanate from one house on Pennsylvania Avenue.

The finance head at Lloyd's of London -- the world's most experienced students of risk -- recently pulled the firm's deposits from certain European banks. His rationale: "if the government is at risk, you know it will take the nation's banks down with it." Here in the US, the federal government's habit of behaving like a compulsive credit junkie has been exposed by the downgrade of its credit rating. Yet it remains on a credit binge of fantastic proportions. We know that the end of this cannot be a happy one. Is the government at risk? The nation's not-so-bailed-out banks?

You'll have to tune in later. Stocks are "rallying on news of European debt resolution hopes."

[This post is editorial, as opposed to event-related. In fact three indicators -- home prices, consumer confidence, and capital goods orders have all increased this morning. We welcome these signs of life but won't refuse to point out that economic activity in some form or another must go on, no matter how perfect a record of abysmal economic policies a regime accumulates. The economy hasn't shown such signs for months; and having been in such decline for such a long period, we argue it is due for some minimal signs of activity, even as a comatose patient registers a heartbeat once in while. We certainly will not countenance any claim by the administration that anything it is doing is helping the economy in any way, because nearly everything it is doing is suffocating it. We wistfully hope that our own "capitulation to malaise" is a sign that's a bottom, at least for a while.]