Retail Sales, Recession, and a Real Surprise

Via Denninger, we see that retail sales are down again, and the market is reacting, selling off quite a bit of Friday's gain.  The dollar eases its grip on the euro's throat but not much.  People are unsure of the Fed response, which we would normally think would be more QE. 

The ship has struck an iceberg and water is rushing into the hold.  Bernanke says, "I have a great idea.  Let's cut another hole in the other side to let the water out!" 

Conventional wisdom believes that Obama cannot be re-elected if the economy does not improve, and I think that is true.  A real recovery, had it started a few months ago, would probably have guaranteed another four years of golf and tyranny.  Since that is not happening, one would tend to think Romney is headed for the White House.   

However, keep in mind that if your constituency is basically the Free Stuff Army, and you have no scruples about lying, have no concern about anything except maintaining power and transforming the United States into a post-First World nation while building a Chicago-style, Democrat dictatorship, the right kind of economic collapse might serve just as well as a recovery to get your voters out to the polls.  A mere holding pattern in the current stagnation is not going to do the trick.  I do not see any way for a recovery to occur in time to save the regime.  But a catastrophic collapse could possibly be a catalyst for Obama to look heroic, sort of like Chavez in Venezuela.  If we were to fall off the cliff into a deflationary depression in a very sudden way with, say, the Dow 3000 and the S&P at 650 or something, with unemployment skyrocketing, Obama could pull out his soaring rhetoric denouncing capitalism and greed and all that stuff.  Romney could be painted, not as the answer, but the heart of the problem.

The Obama campaign is already doing this to some extent with their attacks on Bain.  And we have a good portion, if not a majority of the population that has been conditioned to think of government as having a solution to any problem. 

My wife picked up a disaster movie called Category Seven, about super-storms or something.  She had several to choose from -- this one and 2012, maybe another one.  I voted for Category Seven because I saw Randy Quaid was in it.  I figured they would all be lame but Quaid has the potential to interject a little humor.  I can't tell you for sure as I gave up on the whole thing somewhere a little less than halfway in.  The idea is that a new head of FEMA has the resources to fund research by a brilliant but outside-the-system scientist to explain why these new super-storms are developing.  One takes down the Eiffel Tower.  Another destroys the pyramids of Egypt.  That's right.  A tornado is so strong that it pulled down the pyramids but basically left the sand. 

We have to cut the filmmakers some slack because, as ridiculous as the conceit is, it is no more ridiculous than faster-than-light travel or shiny vampires or King Kong.  No, the part that got me was that government funding was needed to solve the problem and that if we just channeled our resources to the "right" researcher, we could suddenly find a solution to the weather.  This reflects, I think, an unfortunate attitude in the real world.  There are way too many people who believe that we would not have hot weather in the summer or tornadoes in Tornado Alley were it not for the internal combustion engine and that capitalism and greed in the energy industry are thwarting the efforts of selfless reformers within the government who wish to correct the system before it is too late.

In the same way, there are too many people who think that if we would just turn our economy over to some wise professors, some kindhearted politicians, and a few underpaid government employees who really care, we could have a centrally-planned economy with full employment and free healthcare, and all of us could live in Kincade-esque bungalows powered by dolphin farts.   You know, like in China.  

Beware the October Surprise in September.