Real estate markets have definitely been improving. Discouraged money looks away from high priced gateway wealth-island citadels where the best investments have become just too dear and begins to boost prospects for secondary markets and more commodity properties, foraging for better—albeit riskier– deals.  Occupancies look better, rents inch up, and thankfully most commercial development stays mothballed, while multifamily builders have room to run given renter demand. And now even housing looks like it’s finally on the mend.

But an examination of the economic smoke signals does not offer a confidence boost. The unemployment numbers do no better than edge down at a painfully slow rate, statistically helped by discouraged job seekers leaving the market. The Fed now extends its timeline for keeping interest rates at rock-bottom rates until 2015. As we have noted before, Bernanke and friends implement this printing money policy, because their examination of data suggests the economy remains in a weakened if not dire state.  Pushing the low rate regimen out for another two whole years suggests they see no sign of rapid jobs and wage gains, or maybe just the opposite.

And why is that? Well we can start in Europe where for all the tap dancing by the various government players and bankers, the debt hole is as big as ever and growing. Germany essentially demands austerity, which only creates more hardship and larger government shortfalls for its dependent Eurozone neighbors. Nobody wants to take a hit. Independently, the UK austerity plan has put the country back in recession. The region’s bankers are essentially bankrupt held up by governments drowning in their own red ink with rising unemployment and reduced tax revenues.  It’s not exactly an expanding market where the U.S. or China can sell more goods.

And speaking of China, the story about the 21st century global juggernaut ready to roll over the rest of the world wears a bit thin, considering the rest of the world cannot buy as much of the stuff China has been producing. Also, their highly touted infrastructure, built with lots of borrowed money, isn’t all it was cracked up to be—roads collapse, trains derail, new buildings leak, airport terminal roofs blow off.  Now Brazil and some other once vibrant Latin American commodity-resource based economies lose steam, because China is not buying as much from them.

As the world slows down, the U.S. remains the high cost global employer and most multinational companies find it much more profitable to do more of their business with lower paid non-U.S. based employees. But now these companies find their overseas markets constricted, which means lowered corporate profits and likely reduced hiring quotas whether in the U.S. or elsewhere.

If you read the tea leaves, the Fed gurus appear to calculate that there will be no quick fix to Europe and probably figure we’ll see more crisis moments involving Greece, Spain, Italy, or even France. Back here in the U.S., the fiscal cliff approaches and any reduction in government spending means only one thing—more unemployment. Fewer government workers, fewer defense contracts, fewer grants to not-for profits all translate into less hiring and more people with less money to pump back into the economy.  But then borrowing more to keep up appearances and create much larger debt service burdens is totally counterproductive too.

So the Fed knows what they won’t tell us in so many words—our standard of living is in decline. They figure it is better to let us slowly sink than deal realistically with where we are headed. That’s what politicians and their big business bankrollers dictate—any crisis in confidence would just make things worse, including reversing any recent advances for real estate players.   So the happy, let’s pretend narrative goes we can still have Medicare, Social Security, and/or as much defense spending as ever, while the bill on our debt skyrockets and we pay lower taxes.

Just we can’t.