Posted on 06/25/2014 1:31:56 PM PDT by Signalman
For months the administration, financial pundits and Wall Street analysts made it a point to inform Americans about the healthy state of our economy. One of the key metrics they’ve used as proof of recovery was the Gross Domestic Product (GDP) which measures the productive output of the U.S. economy as a whole.
Earlier this year the U.S. Bureau of Economic Analysis noted that this measure was showing positive growth. But now, after a second official revision, all of that purported growth used to goad consumers into spending more money on homes, cars and other goods has been revealed to be nothing but conjecture. According to the BEA, not only did economic growth stall during the first quarter of 2014, it completely collapsed, signalling a significant shift in consumption habits amid increasing food and energy prices:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 2.9 percent in the first quarter of 2014 according to the “third” estimate released by the Bureau of Economic Analysis.
The government first made consumers believe that the economy grew. Then they revised this down to slight negative growth. The latest revision of -2.9% growth is significant, because even with official inflation at over 2% America’s economic output has declined. It seems that no matter how much money they pump into the system, it isn’t enough to offset the lack of income or job growth.
This is a monstrous negative revision.
A big part of it was non-residential fixed investment. Rather than invest, companies have issued debt and bought back stock. But this does nothing for the economy — it simply blows a bubble in the market. How long before that comes home to roost? Not long now, I suspect.
If you think companies don’t expect a recession inbound, you’re nuts. Inventory draw-downs subtracted 1.7% from the GDP number. Companies don’t build inventories if they don’t think they can sell them — as such this is a forward indicator.
Oh, and current production profits? They’re down while current taxes were up. Obamacare anyone? Worse is that undistributed profits decreased too and this is the second quarter sequentially in which they did. What does a company pay dividends with? Undistributed profits.
So for two quarter the markets has risen like a rocket while the fuel for that rise has been exhausted for the last six months.
This will turn out well, I’m sure.
Officially, we have not yet entered a recession. That requires two quarters of negative growth. However, the current trend indicates that’s exactly what’s going to happen. In the next 30 days the BEA should be releasing the GDP rate for the second quarter of 2014. According to economist John Williams that will more than likely show a negative print and will lead to an official confirmation that the U.S. has entered another recession.
What’s worse, unlike the previous recession that followed the collapse of 2008, there is no way out of this one.
The reason for this is that the consumer is strapped… doesn’t have the liquidity to fuel the growth in consumption.
Income… the median household income, net of inflation, is as low as it was in 1967. The average guy is not staying ahead of inflation.
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As a result – personal consumption is more than two thirds of the economy – there’s no way you can have positive sustainable growth in the U.S. economy without the consumer being healthy.
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As the renewed downturn gains wider acceptance or wider recognition, that will intensify the selling pressure. When someone starts selling, it’s going to be a race for the door, and I am looking for a dollar selling panic to be the trigger for the onset of hyperinflation.
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I don’t see what will save it at this point.
To cries of fear mongering and ‘doom porn’ contrarian economists and analysts warned that these numbers were being fabricated, despite the fact the the underlying fundamentals showed a clear draw-down in consumer confidence, company inventory, home sales and overall spending.
Now all of those warnings are coming to pass.
We have entered the next leg down and given that the governments of the world have pretty much used up all of the arrows in their quivers, there is nothing to stop what’s coming.
And what’s coming is nothing short of a complete collapse of our way of life. Hard to believe? Yes. Implausible? No.
It is so plausible, in fact, that well known radio commentator Mark Levin recently noted that the U.S. government has been actively preparing for and simulating the collapse of our financial system, as well as the widespread violence that will follow.
I’ll tell you what I think they’re simulating.
The collapse of our financial system, the collapse of our society and the potential for widespread violence, looting, killing in the streets, because that’s what happens when an economy collapses.
I’m not talking about a recession. I’m talking about a collapse, when people are desperate, when they can’t get food or clothing, when they have no way of going from place to place, when they can’t protect themselves.
There aren’t enough police officers on the face of the earth to adequately handle a situation like that.
This is happening right here and now. The streets may not devolve into madness tomorrow or next month, but piece by piece the foundations of America’s economic health and social structure are crumbling. The time to finalize preparations for what’s coming is now.
It’s going to go from bad to worse.
We don’t hear much about the homeless. The two I have seen recently were both White men.
Tried but can’t step up unless I drive to another town for grocery shopping. At the store yesterday they didn’t have the beef fajitas (good sale, boneless and already seasoned) or the whole chickens that were on sale. The bullion advertised wasn’t ever ordered and neither were about 6 other advertised specials that I specifically went for. Had to have the manager substitute another item for a sale item and then only was able to get one instead of stocking up. I had to have someone get the soft drinks (a rarely bought item) from the back. Had to have another employee get bread from the back, too. I bought every single serve beef pot pie they had - 6 (treats for hubby). Another employee admitted they never order what the store supports. Seriously, what store doesn’t have chicken? I know what to expect so never put anything on the groery list that is anything above the basic items but still never come home with more than 1/4-1/3rd of what I went for. But that’s what I’m up against.
Waiting at the checkout, I noticed there was only of those little bottles of energy drink. Just one. The only surprise there was that the shelf wasn’t empty like so many others in the store are. Oh, but they can have over 10 feet of one type of store brand pancake mix.
While at the store, there were two guys with a baby (sigh) who were talking about the illegal kids here and didn’t understand why we brought them over (at least they figured that part of the story out) when they couldn’t vote. I butted in to say it’s because their parents will be here soon to be reunited and they’ll be voting. The guys agreed that we’ll soon have 600 thousand adult illegals soon (that number is too low, dude). I replied if we really wanted the kids deported we’d have dropped them off at their embassies and washed our hands of them.
The icing on the cake was on the drive home and seeing a handmade sign posted on the corner that read, “Deport Obama”.
Is that a haiku? :-)
Gas prices jumped this week.
There was a guy with a workman vest on standing in my driveway today so asked what he was doing. He is with a company that contracts with utilities to go around and log with gps where every pole is located and what lines and connections are on each in case of repairs. He also had to get into the yard to check the meter. Yes, we were previously notified they’d be doing this. That’s all well and good, but one would think the utility company would already know where their poles were and everything about your meter. As for the gps, that’s just an expensive wasteful hoo-ha because when the power/cable/phone goes out, you give them your name/account number/address not your gps location. Makes you wonder.
There’s a moneymaker - manufacturing rope.
I think we'll survive, but we won't be happy....will think lovingly of days gone by, when HOPE ruled the day...that your children were absolutely going to do better than you and your grankids even better....
I guess I just miss the hope....
‘Is that a haiku? :-)’
This sort of thing sometimes happens when I’m drunk-posting.
As I look at it I don’t think it’s so much haiku as a take off on Kipling’s ‘British Soldier’ poem.
But, I could be very wrong.
Dow 30K with a loaf of bread at $15 and a gallon of gas at $25 will not matter too much.
Soon people again won't have money to pay their mortgages even though they have worked decades to pay for it they will lose their homes. Who will end up with all those homes? All those financial institutions that Quantitative easing went to. People will be paying rent to the leaches that Obama gave all our money to.
The liars in the press will not likely survive. People starving and homeless don't have a lot to lose and take revenge.
I highly recommend to all my friends, get out of debt and the first debt to get rid of is your mortgage. There are a variety of ways to get the mortgage paid down quickly. Don't treat your self to any luxury, use all available cash to apply to the principal of you mortgage. When you do this a higher percentage of every payment goes to the principal helping you to get rid of the debt even faster.
Don't wait until the end of the year, everytime you can squeeze the minimum amount your mortgage company will take give it to them. and get your interest payments reduced. Most companies will accept $1000.00. That sounds like a lot but isn't what it used to be and the mortgage companies haven't raised it yet.
Once the home prices fall you won't be able to sell your home for what you owe on it. You may have relatives who will want to come and live with you if you have a secure place to live. That may not be all bad, having someone there all the time would be a good thing. They might even be able to pay some rent. If you have a basement it can be lived in even if it isn't finished.
I hate to see all this coming but don't see anyway around it.
Well if you’re correct, we can both be the next John Paulson and laugh at everybody else!
Banks still have not been foreclosing on underwater homes from the 2006-08 crash. Goes without saying they have not been paying taxes either. Worthless nephew was recently foreclosed on in WA after 4 years without paying.
Banks won't be able to foreclose after the next one either. Tier 1 reserve requirements are 5% and they are pretending their balance sheets have this. The bad loans will blow banks out of the water. This is the major reason Japan has stagnated for the last 20 years. They never cleared out bad loans from the system and ate their citizens savings instead. The good/bad thing is we don't have that luxury/time the Japanese wasted along with the growing percentage of elderly’s savings. Think they will newed their Yen back?
When the crash comes, the masses need to take back all the wealth the bureaucrats stole from the compliant workers. Leave the bureaucrats to scrape the bottom of the barrel.
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While your numbers are correct the deficit will be taken care of with inflation, the plan all along. The central banks hold more of a percentage of American money than at any time in the history of our country. Once we have hyper or even high inflation the percentage of bad debts from underwater homes will be substantially reduced simply because the homes will still be valued in old dollars. When it takes 3 million dollars to buy a house the $200000.00 owed on it will seem like chump change to the bank.
There are protections against that, the bank owns the mortgage not the home and the house will supposedly be sold at auction, so that when a $200000 house sells at a give away price of 2-1/2 million the banks will clean off their books, oh and nobody but the banks will have money to buy.
Just one bright light would be appreciated in the coming melt down is seeing Pelosi in a bread line!
The corrupt MSM goes first.
Yep. I want to see the MSM communist elitists in the bread line too - just when they ran out of bread!
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