Phillip Tilley

The confidence men

February 17, 2011 |  0 comments
Image Credit: sxc.hu During the Depression of the 1930’s America saw a rise in “Confidence Men”. These men talked the talk and because they sounded like they knew what they were talking about they gained people’s confidence enough to get them to hand over their money for an “investment” that would double their money. The only safe way to double your money is to fold it in half. Of course once the Confidence Men had your money they vanished and you realized you were had. Confidence Men was shortened to “Con Men” and being had is synonymous with being “Coned”.

One of the ways the Government gages the health of the economy is with the Consumer Confidence Index, of the CCI. The CCI is produced monthly by a non-profit group called The Conference Board. Since 1967 they have conducted a monthly survey of 5000 average U.S. consumer households.

The survey has only five questions. They consist of ,current business conditions, business conditions for the next six months, current employment conditions, employment conditions for the next six months and finally the total family income for the next six months. Positive responses are divided by negative responses to get an “index value” which is compared against the respective monthly value for 1985. That year was chosen as a benchmark because President Reagan had just been re-elected and business was good.

You can see how unscientific this is because none of us can say if we will have a job in six months or what business conditions will be in six months or how much income the family will have in six months. In business you use a guarantee to build consumer confidence, but the CCI has no guarantee because it is not an exact science, it is based on perceptions.

In January the CCI shot up to 60.6 from 53.3 in December. Survey participants expressed greater confidence that the economy will continue to expand and generate more jobs in the months ahead. I agree except I think the jobs will be in China. Consumer spending used to account for 66% of the U.S. economy. In the last two years Government spending to prop up the depressed economy has made consumers less significant as the split between consumer and Government spending now is 50% each.

Even with the index rise to 60.6 it is an anemic outlook. A healthy index reading would be 90 and for strong growth a reading of 100 is needed. So we went from an F to a D- and economists are jumping for joy, whoever Joy is. Some economists said consumers started using credit cards again in January and they think that is a positive sign that consumers are confident. It could just be that consumers have run out of ready cash and in that case it is a bad sign.

The psychology behind the CCI is that if the Government tells people it is good, it makes them more confident and they will spend more which will in turn raise the CCI. When the CCI is high people buy things they do not need because they are confident, or maybe they buy things they do not need because they are high. My good buddy Rocco says people like that have more money than brains. The only trick here is that to spend currency you have to have currency to spend. For all the currency the Government is printing for Quantitative Easing II, I have seen no evidence that it exists.

Paper currency is good for closing the gap between what the economy should produce and its real production. There can never be enough of anything to satisfy everyone. Money equals nothing, and no matter how much nothing you have it is never enough. Paper currency will give everyone what they want, more currency. But when money is free to everyone it is not worth anything.

It is interesting that the CCI was created in 1967, three years after we stopped using real money. Only since we went to Federal Reserve Note fiat currency based on the confidence of the Government to back it did we need a confidence index to gage our faith in our economy. Maybe the Consumer Confidence Index should be shortened to “Consumer Con.” Wake up people, the money matrix has you.[!gad]During the Depression of the 1930’s America saw a rise in “Confidence Men”. These men talked the talk and because they sounded like they knew what they were talking about they gained people’s confidence enough to get them to hand over their money for an “investment” that would double their money. The only safe way to double your money is to fold it in half. Of course once the Confidence Men had your money they vanished and you realized you were had. Confidence Men was shortened to “Con Men” and being had is synonymous with being “Coned”.

One of the ways the Government gages the health of the economy is with the Consumer Confidence Index, of the CCI. The CCI is produced monthly by a non-profit group called The Conference Board. Since 1967 they have conducted a monthly survey of 5000 average U.S. consumer households.

The survey has only five questions. They consist of ,current business conditions, business conditions for the next six months, current employment conditions, employment conditions for the next six months and finally the total family income for the next six months. Positive responses are divided by negative responses to get an “index value” which is compared against the respective monthly value for 1985. That year was chosen as a benchmark because President Reagan had just been re-elected and business was good.

You can see how unscientific this is because none of us can say if we will have a job in six months or what business conditions will be in six months or how much income the family will have in six months. In business you use a guarantee to build consumer confidence, but the CCI has no guarantee because it is not an exact science, it is based on perceptions.

In January the CCI shot up to 60.6 from 53.3 in December. Survey participants expressed greater confidence that the economy will continue to expand and generate more jobs in the months ahead. I agree except I think the jobs will be in China. Consumer spending used to account for 66% of the U.S. economy. In the last two years Government spending to prop up the depressed economy has made consumers less significant as the split between consumer and Government spending now is 50% each.

Even with the index rise to 60.6 it is an anemic outlook. A healthy index reading would be 90 and for strong growth a reading of 100 is needed. So we went from an F to a D- and economists are jumping for joy, whoever Joy is. Some economists said consumers started using credit cards again in January and they think that is a positive sign that consumers are confident. It could just be that consumers have run out of ready cash and in that case it is a bad sign.

The psychology behind the CCI is that if the Government tells people it is good, it makes them more confident and they will spend more which will in turn raise the CCI. When the CCI is high people buy things they do not need because they are confident, or maybe they buy things they do not need because they are high. My good buddy Rocco says people like that have more money than brains. The only trick here is that to spend currency you have to have currency to spend. For all the currency the Government is printing for Quantitative Easing II, I have seen no evidence that it exists.

Paper currency is good for closing the gap between what the economy should produce and its real production. There can never be enough of anything to satisfy everyone. Money equals nothing, and no matter how much nothing you have it is never enough. Paper currency will give everyone what they want, more currency. But when money is free to everyone it is not worth anything.

It is interesting that the CCI was created in 1967, three years after we stopped using real money. Only since we went to Federal Reserve Note fiat currency based on the confidence of the Government to back it did we need a confidence index to gage our faith in our economy. Maybe the Consumer Confidence Index should be shortened to “Consumer Con.” Wake up people, the money matrix has you. Comments (0)

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