Consumer Confidence Suffers Surprise Drop. Consumers, nervous about rising unemployment, lost confidence in their economic prospects in July, resulting in a sharp, unexpected drop in sentiment. By The Associated Press. [New York Times: Business]

Well, duh.

Why this was “unexpected” is beyond me. Here, we've had the economy running on purely consumer spending and house buying for the past, well, year, and business spending is still flat. Despite the bullshit unemployment figures that we're hearing, a lot of people remain out of work, and many have lost unemployment benefits (removing them from the unemployment rolls, conveniently). An unmeasured number of people are underemployed, earning a fraction of what they once did, with no prospects for short-term improvement. Stand by for a big seasonal layoff at the end of the summer, and watch as deflation and Wal-Martization of the market drives more small businesses to the edge of bankruptcy.

Post-war euphoria is being replaced by post-post-war realization that we'll be slogging around in Iraq for the long term, and those checks that many people just got in the mail from George (see “You may already be a winner”) are going straight into people's rainy day funds–or are being used to offload existing credit card debt.

It's late afternoon in America, to paraphrase Ronald Reagan. We don't have expectations–we have “lesspectations”. The economy, despite all the cheerleading from the Fed and the stock market, is turning around with all the nimbleness of a supertanker, instead of the cigarette boat we all were hoping for.

You can't water ski behind a supertanker too well.

Thanks to the huge debt being run up by the war in Iraq, the government is flooding the bond market with Treasury junk–driving down bond prices and driving mortgage companies out of their minds.

And consumer confidence is down? Pshaw.