As NewsBusters has been reporting this week (see this and this), as the stock market hit new all-time highs, the media have been dour Nervous Nellies carping and whining about gas prices, the low value of the dollar, the housing slump, and the rising trade deficit.
Yet, there are a variety of issues that press outlets have conveniently ignored during this record bull run that not only explain rising stock prices, but also give a more accurate view of what is going on in the global economy.
For instance, Bloomberg was one of the only major media outlets Tuesday which reported record purchases of U.S. securities by foreigners in May (emphasis added):
International buying of U.S. financial assets unexpectedly climbed to a record in May as investors snapped up American stocks and corporate bonds.
Total holdings of equities, notes and bonds climbed a net $126.1 billion, from $80.3 billion the previous month, the Treasury said today in Washington. Economists predicted foreign investment would slow to a net $73 billion, based on the median estimate in a Bloomberg News survey.
``The breadth and depth of U.S. markets help it attract capital,'' particularly from emerging markets and oil exporters flush with cash from trade surpluses, said Joe Quinlan, chief market strategist at Bank of America Corp.'s investment strategy group in New York. Foreign investors ``still have confidence'' in the U.S. economy, he said.
Yep. Foreign investors have more confidence in the U.S. economy than American media. Imagine that.
Didn't hear about this report? Well, how could you? Virtually no one outside of the financial press thought it was newsworthy; reporting such bullishness by foreigners would undermine the media meme about how America is hated all across the globe as a result of the war in Iraq.
So would another inconvenient truth media are hiding from the citizenry: the low dollar has created a boom in foreign travel to this country setting tourism records in cities around the nation.
As reported by the New York Post:
A depressed dollar is turning Fifth Avenue into a virtual flea market for global travelers as strong currencies like the British pound and the euro create a glut of great deals on fashions, electronics and hot status brands.
New York City is celebrating a record year from foreign tourists hitting town for weak dollar bargains - reaping savings of about one-third of what they'd spend back home.
And it's not only New York City that stands to benefit. European tour operators are said to be packaging shopping tours for U.S. cities - including weekend sprees in such hard-core retail destinations as the Mall of America in Minnesota, the world's largest shopping center - where three nonstop flights arrive daily from Europe.
It is expected that more foreigners will visit America in 2007 than in any year in history. Adding this to record foreign investment in our securities, it certainly appears that this America-hating the media focus so much attention on is largely present only in newsrooms.
Unfortunately, as press outlets mischaracterize the evils of a falling dollar, they conveniently ignore the positives. For instance, in a global economy, a weak dollar is beneficial, as it makes your product cheaper around the world.
This is why China keeps its yuan pegged to our dollar in a fashion that makes the yuan inexpensive compared to all other countries. This makes its products cheap compared to those made elsewhere.
Europeans might be egotistically pleased with the strength of the euro, and American media members green with envy. However, European companies are very unhappy with this exchange rate, and wish the European Central Bank would lower interest rates in order to weaken the euro and make European products more affordable abroad.
Unfortunately, the ECB president, Jean-Claude Trichet, has woefully mismanaged EU monetary policy to such an extent that most European nations aren't experiencing close to the economic expansion America is. Sadly, our European-loving media aren't interested in sharing such facts with the citizenry.
Nor are they willing to give the Bush administration or our Federal Reserve any credit for America's low dollar policy. After all, it's not an accident the dollar is so cheap compared to most other currencies. It is, in fact, an intended consequence of both fiscal and monetary policies to help America's companies sell their goods and services in a highly competitive overseas market.
If the media were at all honest, they would look at exploding stock prices, rising corporate earnings, expanding employment and wages, and surprisingly strong tax receipts as evidence that U.S. economic policy is working. Alas, such appears impossible when a Republican is in the White House.
Nor are they willing to honestly represent the true meaning of trade deficits as they present this largely misunderstood economic statistic in a fashion exclusively designed to generate unwarranted pessimism.
For instance, America is the largest economy in the world, and our entire system is based around consumption. Loads of it. Including piles and piles of debt.
As such, we are the world's consumer, a fact that media should revel in rather than rue. After all, since the press live exclusively off of advertising dollars, if consumers stopped consuming, media outlets not supported by government funds would all go the way of the dodo.
Not recognizing their similar dependence on consumers to that of foreign nations, press outlets speciously point at the trade deficit as some sign of American economic weakness. In fact, nothing can be further from the truth.
As the following chart from the Census Bureau illustrates, America has had an uninterrupted trade deficit now since 1976. Coming so soon after the first energy crisis in late 1973, it is likely that much of the change from trade surplus to deficit at that time stemmed from rising oil prices. And, given what's happened to oil and gas prices the past five years, it is conceivable that a good percentage of the trade deficit expansion of late is indeed oil-related, a concept that seems lost on bearish media members.
Regardless, one of the huge fingers being pointed concerning this imbalance deals with China's growing surplus that media members portray as some lurking bogeyman in the closet about to pounce at any moment. This, of course, is similar to how such surpluses in Japan and Germany in the '80s were guaranteed to eventually destroy America.
Twenty years later, Japan and Germany can only dream about having an economy as strong as ours.
Conveniently ignoring their mistaken prognostications regarding the evils of trade deficits in the past, the new ogre for media members is China.
Sadly, they ignore that it will be many years before Chinese citizens become aggressive consumers. As a result, China has to have a trade surplus with its partners. Can't be any other way, and will likely be such for at least another decade, maybe more. Any honest assessment of this situation couldn't possibly suggest otherwise.
As we have now been running uninterrupted trade deficits for more than 30 years without the world coming to an end, ringing alarm bells now is absurd. This is especially true as this deficit has normally come back to America in the form of foreign investment, which is certainly the case today.
Finally, with regard to trade deficits, it should jump at the reader that for the most part, the only time this deficit has declined in the past 30 years was during periods of recession. What does that tell you?
In the end, there's a lot of reasons foreign investors are so bullish on America. If only the media would get it, and, maybe more important, report it.