Confidence among U.S. consumers unexpectedly fell in January to a record low as job prospects remained dim. The Conference Board’s index of consumer confidence fell to 37.7, from a revised 38.6 in December, the New York-based private research group said today. Records began in 1967.
A low confidence number doesn't mean the economy is bad. It means the economy's members think it's bad. In other words, right now the system and its elite participants are having a hard time successfully marketing the system's virtues to its mass participants. That could be because there are no virtues to market. But that doesn't sound right to me. What about marketing future growth? Marketing the idea that once the recession is over the future will again be bright? I mean, when has this not been true of America? 1946-1970 -- the era immediately following the Great Depression -- is often referred to as the Golden Age of Capitalism. Instead, the historically low confidence number tells me that the economy's members question -- or even doubt -- a similar breakthrough following the current downturn. This, to me, is significant. For it would truly be a sea-change in the history of mankind if the American economy didn't turn back up at some point in the near- or medium-term future. Is this sea-change what we are currently living through? If so, the confidence numbers are spot on. If not, then we need to get a collective grip, survive the downturn, and build new institutions that will re-grow the wealth we have lost and will lose over the next few years.
In any event, the social-psychology of the system's membership is what 'consumer confidence' measures. It does not measure the economy's fundamentals themselves. Now, the fundamentals matter, because it is those fundamentals -- job prospects, credit prospects, inflation expectations, investment futures -- that the members are interpreting when they describe themselves as confident or not.