Wednesday, January 30, 2013

Negative GDP wasn't "Unexpected"

While the stock pumpers on CNBC were "surprised" and "stunned" by today's announcement that GDP for the fourth quarter of 2012 printed a negative 0.1%, readers of this blog were perhaps not surprised at all.

CNBC today reported:

The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus.
The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles.

But leading up to today, I had pointed out that the economic signs were not as strong as the headlines routinely implied. On December 7th in a posted titled, "More BS at BLS but Revisions to Reality",  I pointed out that both jobs numbers and unemployment numbers were being manipulated. In November in a post titled, "Data Points", I reported that the use of food stamps had hit an all time high. In two posts in October titled, "It wasn't just my imagination" and "More BLS(BS) and dead fish" I pointed out that there had been an uptick in lay off notices (A leading indicator) and that despite the September BLS numbers that seemed nearly unbelievable given that employment usually drops in September as Summer jobs come to an end, that BLS reported the largest September jobs gain since 1948!

I had implied that much of this was pre-election shenanigans. but of course I have no proof that government agencies were manipulating the stats for political purposes. I do, however, today have evidence that the numbers were grossly optimistic and not reflective of the true economy.

Where does that leave us now?

The stock market as measured by both the Dow and the S&P 500 are back near their highs in both 2007 and 2000 (Yes, we're at the same level as we were 13years ago) and interest rates are at historic lows. Despite spending $6 Trillion in deficit spending and a $2 Trillion expansion of the Fed balance sheet to buy Treasuries and worthless mortgage backed securities (MBS) from ailing banks, we have flat to negative GDP growth. And keep in mind, these numbers are based on the Fed's inflation figures that grossly under report inflation. For a reminder of the real inflation rates see below:

Inflation is currently running around 10% based on the 1980 CPI method. You'll notice the average has been around 9% since the 2008 financial crisis. So REAL GDP growth has been negative for some time.

And finally, even if you believe the current Fed numbers consider this:

The St Louis Fed shows this is the slowest "recovery" ever! This isn't as bad as the Great Depression.....its worse! And that was before today's negative GDP print!

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