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In what amounts to a healthy rejoinder to my post from Sunday, Yves Smith challenges the notion that a con job is enough to stimulate economic recovery:

The one bit of policy, if you care to call it that, that has worked well is the Administration’s concerted campaign to talk up the stock market. Its success in using the bogus stress tests to goose bank stocks was remarkably effective, particularly since anyone who knew anything about banking and was not in on the con was highly critical of the tests. But the media played them to the max... And the Administration kept pointing to the improved tone of the markets as proof that the economy was on the mend. And some readers have noticed a cheerleading stance in news outlets that were once more evenhanded, particularly Bloomberg.

Can a con job lead to recovery? The continuing lousy news on the employment front suggests not, but as long as the stock market remains relatively buoyant, few want to challenge this thesis. I had drinks with a hedge fund manager who was recently pilloried at a buy side/sell side get together when he dared suggest that the fourth quarter might not look as robust as everyone assumed. He said the argument against him boiled down to, “We are all feeling better and spending more, so everyone else surely is too.” The fact that they are all in the top 1% of the population and beneficiaries of TARP and other government bennies means it is a huge leap to generalize from them to the other 99%, but they didn’t see it that way.