Nobody I know who is smart and rich (albeit much less rich than they used to be) thinks the economy is patched up and ready to roll—except, apparently, Warren Buffet (who I don’t actually know), who announced yesterday that “the financial panic
is behind us.”
But then he is also a man who believes
the future is railroads.
The view of my personal focus group of the smart and the rich is a basic one: Their own businesses continue to really suck; some 17% of the country is unemployed or under-employed in an economy built on consumer spending; every bank in the country is still hiding underwater assets which won’t rise until consumer spending does, and consumers can’t spend if they’re unemployed.
And then the Dow: It’s going strong precisely because so many companies have fired so many people that their results are looking surprisingly better than expected, so, likely, they keep firing people.
Of course my personal focus group of the smart and rich didn’t much see the collapse coming either, so no reason to necessarily think they’ll be the first to glimpse the dawn.
The positive view is that as the Dow restores underlying asset value to American corporations, their ability to borrow and expand increases, which puts people back to work, which means they can once again become patriotic consumers and spend gallantly on everything, including real estate.
So, after all that has gone down, so many bubbles burst and illusions shattered, we are still in an economic cycle not so much motivated by production as by perception. If enough people think this, it propels that, which somehow creates a sense of confidence we can take to the bank.
In other words, is Buffett—as American as apple pie, as dear and good as mom herself, as oracular as God—also quite cynical?
After all, he must know that if perception is value, when he speaks he can spin dross into gold. So has he been sitting out there in Omaha thinking there is a point—which he would have measured with some study and calculation—when he can exert a maximum amount of leverage on the economy by saying everything is getting good?
He makes a huge investment in the railroad business, which necessarily depends upon a thriving economy to supply it with goods to haul, so he has to talk it up.
If he is talking it up, that means that every financial writer and reporter in America has to think twice before disagreeing with Warren Buffett, which means that at some point—some point soon—even my personal focus group of the main street smart and rich starts being bullish again.
So this is good? Right? I mean if that’s what it takes, why not?
Will being manipulated and spun and force-fed a new story really bother anyone if the economy grows and people go back to work? Not so much.
More of Newser founder Michael Wolff's articles and commentary can be found at VanityFair.com, where he writes a regular column. He can be emailed at michael@newser.com. You can also follow him on Twitter: www.twitter.com/NewserColumns.
