Cognitive Dissonance

 

 

 

 

 

Cognitive Dissonance- psychological conflict resulting from incongruous beliefs and attitudes held simultaneously

Back in the day, when I (along with many of us) took basic psychology, we learned about an odd term called cognitive dissonance. I have been thinking about that term as of late - not with people, but with our economy. Recently I posted an article on being disconnected - the disconnect between Main Street and Wall Street. In this article however, I want to go a bit deeper.

The Stock Market - In May 2013, the DOW hit 15,000 and since then has set many daily highs. Some analysts are saying the DOW could hit 20,000 or maybe even 22,000 before a major correction.

This is good right? Maybe, if you forget it is a "bubble". Now is where the dissonance comes in:

Medicaid - According to Families USA in February 2013, Medicaid provides health coverage for low-income children and adults, medical and long-term care coverage for people with disabilities, and assistance with health and long-term care expenses for low-income seniors. More than 58 million people rely on Medicaid services today, and millions more will qualify for Medicaid when the provisions of the Affordable Care Act take effect in 2014.

Ouch! 58 million people is a whole bunch of people! Since this partially funded by the states, this is what the governors have been complaining about with a very loud voice.

Disability - According to the Daily Caller in April 2013, the number of Americans enrolled in the Social Security Disability program hit an all-time high of 8.9 million in March 2013, up about 7.4 million when Obama took office in January 2009. Some of the rise in disability payments can be explained by America’s growing population and the dismal employment environment generally.

It seems from the untrained eye that the 7.4 million increase in the past four years is higher than what the demographics say it should be. Is it that this is an easy way out of working for some?

Food Stamps - According to a CNS News report in April 2013, the most recent Supplemental Assistance Nutrition Program (SNAP) numbers on the number of households receiving food stamps show 23,087,886 households participated in January 2013.  The most recent information from the United States Census Bureau puts the number of households in the United States at 115,310,000. If you divide 115,310,000 by 23,087,866, that equals one out of every five households now receiving food stamps.

One out of five? Come on! Either we are getting to be a very poor nation or the SNAP program has become somewhat of a fraud.

The National Debt - $16.850T is the National Debt in June 2013. Even with cuts and sequester, it is still projected to be over $22.3T in June of 2017.

Holy fright and good night! That is a whole bunch of money to pay back to someone! However, we keep being told "no worries, mate".

GDP - The GDP in the last two quarters was 0.4% and 2.4%, respectfully. The growth rate in India for the same two periods was 4.5% and 4.6%, respectfully. Most economists agree the ideal GDP growth rate is more than 2%, but less than 4% to have steady, healthy growth. In the past 4 years (16 quarters), the quarterly growth rate in GDP has only been between 3 and 4 percent only 3 times - one of those barely over 3% (3.1) and the other barely over 4% (4.1).

Well, there you have it from my perspective. The stock market is going crazy due to many factors. We must remember one of the reasons is the Fed pumping zillions of dollars into the economy. When you can buy a car for zero interest and can refinance your home for 2.75%, you know we are living in a financial fantasy land. However, the real numbers for the rest of the economy tell a much different story - the story of economic cognitive dissonance.