Stephen Foley: Why are consumers gloomy? Because the Republicans tell them they are

They know defeating Obama hinges on a weak economy

US Outlook The American consumer is "a riddle wrapped inside an enigma", one economist wrote, when we learnt that consumer confidence has dipped again. She certainly is a riddle. The outlook is actually brightening, and quickly. The unemployment rate, now down to 8.3 per cent, is at a three-year low. Income growth has been rising, inflation falling and mortgage rates could not be any lower. GDP growth in the final three months of 2011 was no blow-out, but at 2.8 per cent it was no bust either. And though the US housing market is still moribund (of which, more below), this is hardly new news since the New Year.

The decline in the Conference Board's confidence index was small – it slipped from 64.8 in December to 61.1 this month – but there really shouldn't have been a decline at all. Why so gloomy?

The question is even more perplexing when we look back across the Atlantic to the UK, where economic growth has evaporated, yet where consumer confidence actually ticked higher in January.

Consumer confidence, it seems, is a poor indicator of what is going on in reality for household finances. The rise this month in the numbers of Americans saying jobs are "hard to get" cannot be squared with the improvement in non-farm payrolls in January, which was reported yesterday.

More likely, the consumer confidence figures reflect back the headlines of the month. And if there is one thing guaranteed to turn Americans to the gloomy side it is the procession of Republican presidential candidates, in TV debate after debate (after debate after debate), declaring that the US economy is in the tank and only they have the skills to pull it out.

All the candidates sense and all the political scientists know that the Republicans' hopes for defeating President Barack Obama in November hinge on the US economy still being weak, or more accurately on the public still feeling like it is weak. The gentlemen on the Republican stage know what they must do.

Talking down an economy can actually push down an economy; it's one of the reasons financial journalists should be very careful not to bandy the word "recession" around when we are not technically in one. Candidates for office have no such qualms. So let's all be thankful for the next few weeks, when there is a gap in the calendar of Republican primaries and no debates scheduled. Perhaps we can all get our shredded nerves back.

Let's co-operate to help struggling homeowners

Will state prosecutors and America's largest banks sign up to a $25bn (£16bn) legal deal designed to bring some relief to the ailing housing market here? They should.

For the Obama administration, which is corraling the 50 states' attorneys-general into signing on, the deal is a chance to offer some financial relief to homeowners. For the banks, it is a chance to draw a line under the so-called "robosigning scandal".

This is the scandal over fraud and incompetence in US banks' foreclosure processes, although, actually, processes is not the right word. Chaos would be a better term.

In the rush to hand out mortgages during the credit boom, and in the rush to repossess homes after it went bust, paperwork went missing, administrators forged documents and many foreclosures were signed off by machine instead of by a human, as is legally necessary. Anyone being foreclosed upon in America now goes straight to a lawyer to try to dig up evidence of wrongdoing by their bank. This is slowing down the foreclosure process and piling up the costs for banks. State attorneys-general have launched criminal investigations.

So you can see why it would be in the interests of banks to get a pass out of this morass by sealing a one-off deal, even though the number of real injustices in the foreclosure system hardly adds up to $25bn, or even to the $5bn that will be set aside for victims. The other $20bn will be shared among about 1 million responsible borrowers to reduce their negative equity, an average $20,000 cheque to pay off some of the principal of the loan.

The banks are already resigned to taking their lumps. The biggest mortgage banks – Ally Financial, Bank of America, JPMorgan Chase, Citigroup and Wells Fargo – are all in, and smaller players such as Britain's HSBC look likely to join. They are being punished really for their role in recklessly pumping up the housing market in the first place. Robosigning is not the reason for the epidemic of foreclosures that has made Americans so angry, and the robosigning settlement won't be enough to douse that fury. If the deal does get done, it will be decried as the banks getting off lightly.

Indeed, some of the states would prefer to pursue their own settlements, and believe they could win substantially more from the banks.

This weekend is the deadline for the 50 states to sign up to the latest iteration of the deal but California, at the epicentre of the housing market collapse, doesn't seem to be on board. That makes the prospects uncertain.

That would be a shame. Despite rock-bottom interest rates here, borrowers suffering negative equity cannot readily refinance to take advantage. Principal reduction is one of the keys to unlock the problem.

Let's not pretend $20bn is a big sum. After four years of falling house prices, 12 million Americans are underwater on their mortgage, with total negative equity of $700bn. But with Congress gridlocked, raiding the banks is the best option we've got to bring relief.

Facebook waves a flag for the hacking community

I hereby pledge never again to use the word hacker in an article without prefacing it either with "white-hat" or "black-hat".

The history of hackers, technological tinkerers who are the radio hams of the modern era, goes back to the model railway enthusiasts of MIT, and it is infuriating that "hacker" in the popular imagination is always a hooded beast intent on theft or chaos. In the hacker community, these are called black hats; the rest are white hats, out to innovate and improve gadgets and software.

Mark Zuckerberg, in the letter he wrote in Facebook's prospectus this week, makes an impassioned defence of "the hacker way", which he says infuses his company. "Every few months we have a hackathon, where everyone builds prototypes for new ideas they have," he said.

"Many of our most successful products came out of hackathons, including Timeline, chat, video, our mobile development framework and some of our most important infrastructure like the HipHop compiler." His letter really wasn't aimed at potential shareholders; he was appealing to a next generation of developers, saying: "Come work for us. Going public doesn't mean we're going all corporate."

But this is a letter that will be widely read, and maybe, just maybe, we can fix people's understanding of the hacker community. I promise to do my bit.

Start your day with The Independent, sign up for daily news emails
News
people
News
A survey carried out by Sainsbury's Finance found 20% of new university students have never washed their own clothes, while 14% cannot even boil an egg
science...and the results are not as pointless as that sounds
News
politicsIs David Cameron trying to prove he's down with the kids?
News
Dominique Alderweireld, also known as Dodo de Saumure, is the owner of a string of brothels in Belgium
newsPhilip Sweeney gets the inside track on France's trial of the year
PROMOTED VIDEO
News
Cumberbatch was speaking on US television when he made the comment (Getty)
people
Life and Style
tech
Arts and Entertainment
Tom DeLonge, Travis Barker and Mark Hoppus of Blink-182 pictured in 2011.
musicBassist Mark Hoppus and drummer Travis Barker say Tom Delonge is 'disrespectful and ungrateful'
Sport
football
Arts and Entertainment
Olivia Colman and David Tennant star in 'Broadchurch'
tvBroadchurch series 2, episode 4, review - contains spoilers
Sport
cyclingDisgraced cycling star says people will soon forgive his actions
News
Britain's Prince Philip attends a Garden Party at Buckingham Palace in London
people
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Ed Sheeran will play three sell-out gigs at Wembley Stadium in July
music
News
i100
News
Lena Dunham posing for an official portrait at Sundance 2015
people
Arts and Entertainment
Under the skin: Sarah Kane in May 1998
theatreThe story behind a new season of Sarah Kane plays
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea