The 2.5% GDP Growth Spin Job
By Greg Hunter’s USAWatchdog.com
Last week, the government announced the economy (gross domestic product, GDP) grew at a 2.5% rate. The mainstream media (MSM) hailed this as some significant turnaround. Businessweek.com reported, “Buoyed by a resurgent consumer and strong business investment, the economy expanded at an annual rate of 2.5 percent in the July-September quarter, the government said Thursday. The expansion, the strongest quarterly growth in a year, came as a relief after anemic growth in the first half of the year and weeks of wild stock market shifts.” (Click here for the complete Businessweek.com story.) Where did this so-called growth come from? My bet is most of it came via money printing by the Fed, credit card use and inflation that is mistakenly reported as growth.
Economist John Williams of Shadowstats.com says the 2.5% GDP growth rate story is a sham. In his latest report, he says the economy is not growing but “sinking anew.” Williams criticized the government numbers the day they came out last week by saying, “. . .the widely-followed gross domestic product (GDP) nonetheless remains the most-heavily-biased, the most-heavily-guessed-at, the most-heavily politicized and the most-worthless major indicator of domestic business activity. Today’s numbers out of the Bureau of Economic Analysis are outright nonsense. Consider that latest numbers showed that the level of inflation-adjusted third-quarter 2011 GDP broke above the pre-recession high of fourth-quarter 2007: a full recovery. That is absurd. No other major economic indicator, including payrolls, real (inflation-adjusted) retail sales, industrial production, trade deficit or housing starts is showing that.” (Click here to go to the Shadowstats.com home page.)
There are many other signs the economy is not getting better. The latest data from both Consumer Sentiment and Consumer Confidence surveys have recently plunged right along with home prices. Business week.com reported last week, “The New York-based Conference Board’s household sentiment index slumped to 39.8 in October, the lowest level since March 2009 and less than the most pessimistic forecast in a Bloomberg News survey, the group’s data showed today. Property values in 20 cities were little changed in August from the prior month and down 3.8 percent from 2010, according to S&P/Case-Shiller. “The outlook continues to deteriorate,” said Yelena Shulyatyeva, a U.S. economist at BNP Paribas in New York. “It’s not good for confidence when people see their main asset, their homes, decline in value. Our best-case scenario is we’ll muddle through.” (Click here to read the complete article.)
To top it off, a nationwide survey of bankers last month revealed that most expect home prices will not recover until the year 2020! CNBC covered the story and said, “The survey conducted by the Professional Risk Managers’ International Association for FICO, found that 49 percent of respondents do not expect housing prices to rise back to 2007 levels for another nine years. Only 21 percent of respondents said they would. The findings, which authors called “a decidedly pessimistic outlook,” are a sharp reversal from cautious optimism the survey respondents expressed late last year and in early 2011. In addition, 73 percent of surveyed bankers say they expect mortgage defaults to remain elevated for at least another five years. And 46 percent believe mortgage delinquencies will increase over the next six months.” (Click here for the complete CNBC story.) So, don’t hold your breath for the so-called recovery story becoming reality anytime soon.
Finally, I guest hosted for a local radio show in my area last Friday. I interviewed a Wall Street Journal reporter stationed in Europe about the ongoing sovereign debt crisis. A deal was supposedly reached last week where the banks will take a 50% loss on Greek bonds, and the bailout fund will basically back the rest of the sour debt. When I tried to pin him down on the fact that there was not enough money to bail out all the PIIGS (Portugal, Ireland, Italy, Greece and Spain), he got quiet and fumbled around for an answer. All he could say is that it was a “difficult situation” and went on to say something like the EU leaders are hoping to stabilize the situation and “grow” their way out of the mess. Then I asked him, what if the rest of the PIIGS want the same deal Greece got? (The combined amount owed by all the PIIGS is approaching $4 trillion in sour sovereign debt.) The WSJ reporter admitted there wasn’t enough money to “bailout everyone.” To that I replied, “. . . there are going to be some big bank failures and that story is not getting out to the public.” His silence was deafening.
Every time the economy gets into trouble, we are told “don’t worry we’ll grow our way out.” I think someday we will “grow” our way out of the economic mess we are in but not before a very big fall.
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About the Author
Greg Hunter
Greg is the producer and creator of USAWatchdog.com. The site’s slogan is “analyzing the news to give you a clear picture of what’s really going on.” The site will keep an eye on the government, your financial interests and cut through the media spin. USAWatchdog.com is neither Democrat nor Republican, Liberal or Conservative. Before creating and producing the site, Greg spent nearly 9 years as a network and investigative correspondent. He worked for ABC News and Good Morning America for nearly 6 years. Most recently, Greg worked for CNN for shows such as Paula Zahn Now, American Morning and various CNN business shows.
Greg,
The whole debt situation in europe and in the us is a real sad comic show. We can see now with the crisis intensifying how corrupt our politicians are and how the banks control the economy. We are now in
a typical classical Katastrophe hausse which will end badly with another crash. Sadly with the power over creating money firm in the hands of govt and banksters we will see contuing transferring wealth
from citizens to the small elites. The EU is now called by few awake ppl EU SSR same as we can call the US now the US SSR. What is really sad
that the masmedia is completely controlled by same banksters. I just hope that more and more ppl start waking up and take their finances in their own hands and buy real assets.
flying dutchman
Pieter,
Amen to “real assets”!!!!! Thank you.
Greg
George Orwell wrote, “In a time of universal deceit, telling the truth is a revolutionary act.”
Greg, you truly are a revolutionary. Of course the 2.5% GDP growth rate is a lie, just as the 9.1% unemployment rate and 3.87% US inflation rates are lies. In fact, nothing to issue from Washington today is true. Even our money is a lie!
Dark times lie just ahead. We are going to need continued doses of the truth so please keep up the good work.
Frank
Thank you Frank for adding to the content of this post with your comment and analysis.
Greg
I’m not trained as an economist but last week out here on the Western Front another factory announced that they were shutting down the last of December, a loss of 150 jobs, some of which were nice paying and had people who worked at the plant for over 20 years. That kind of stuff is happening in real time out here, seems if the GDP is expanding it sure isn’t around here, its in contraction in my mind.
As for the rally on Crimestreet of last week Europe problems is associated with the 275 point correction of today, go figure that one. In the meantime all the great american politicians dance to fiat money and the MSM is their band. Greg, the elite simply will not stop printing money until its worthless and they are bailed out into their guarded villas with gold fences.
Thank you Art and Sam. Good stuff from both of you guys!!
Greg
To paraphrase Napoleon: “It is with such lies that people are led.”
There is no leadership in this country, as evidenced by the fact that all of our problems, from illegal immigration, no coherent energy policy, unnecessary wars, vampire financialization of the economy is self-inflicted.
Here are some facts.
“There is no leadership,” said Lisa Cedrone, a 47-year-old school nurse from Mason and an independent who voted for Obama. “I think he thought the job would be easier than it is.”
Cedrone was not one of those who said she would vote for Obama again, but she said that there is no GOP candidate “who intrigues me. There is nobody about whom I say, ‘wow, I want to know more.”’
Melissa Kasch, a 39-year-old homemaker from Trenton and an independent who voted for Obama, probably won’t do so again.
“We thought things were going to be better,” Kasch said. “We thought there would be change, but it was change for the worse.”
http://napoleonlive.info/politics/facts-about-obama-and-you-no-leadership/
“Every time the economy gets into trouble, we are told “don’t worry we’ll grow our way out.”
I don’t think they are saying that anymore. They are now using words like quantitative easing, funding, capital injections, etc, etc..
Hardly anyone is mentioning growth anymore.
Peter Schiff’s theory is that people have realized that they are so far up with debt, that there’s no point in even trying to pay it back. They can’t. So, yes, they have extra cash which they are spending because they are not paying their bills and are going to go out with a bang! They also realize that there’s so much debt out there now, that eventually, there’s going to have to be some kind of bailout, not just for the banks, but for the rest of us.
NM,
The “growth” story is alive and well. Just look at the phony 2.5% “growth” numbers recently announced by the government.. “Quantitative easing, funding, capital injections” are all used in hopes of getting the economy “growing” again. I think we will go the implosion route. Thank you for weighing in. You do make some valid points my friend!!
Greg
Well the Europeans seem to be doing their own bit of spinning. I especially loved the “we are going to leverage up the European Financial Stability Fund”. So they are going to borrow to back the Fund whose purpose is to effectively bail out those countries with borrowings they cannot repay! (Who in their right mind would risk their capital with the ESFB).
So the affected bond holders – predominantly European Banks – agreed to lose 50% of their Greek bond investments. (But we do not call it a loss anymore it’s just a multi billion dollar “haircut”). However, why should the banks, who were actively encouraged by EU Governments to purchase their bonds, be prevailed upon to take such a heavy losses? It’s better than a 100% loss I suppose.
So now the banks need to be re-capitalised – if you can find enough investors with the cash to risk when they are aware of the exposure of these same banks to other dubious EU sovereign bond purchases.
With respect to the utterings from the WSJ reporter, the brief comments on the EU debt crisis “solution” by economist Carl Weinberg (among others) are worth reading as reported on CNBC.
http://www.cnbc.com/id/45099883
The comments to CNBC on European debt by outgoing ECB head Jean-Claude Trichet also make interesting reading. “EU Leaders Didn’t listen on Debt”.
http://www.cnbc.com/id/45093623
I wonder for how much longer the “markets” will be buying the rhetoric coming out of Europe. I guess European government bond auctions should be interesting for a while.
Sean S,
Good stuff man. I’ll probably include some of it in the next post.
Greg
Greg,
Since there is not enough money to save everyone, it will be tough to decide which bank should get a bailout. It will be a disaster if there are more bank failures like “Lehman Brothers”. Greece might be the lucky one to get the first bailout before the money runs out. But the Greek debt problem will remain unsolved
As most government-released data (CPI, GDP, unemployment, inflation, etc.) are misleading and deceiving, they should be called “GDP”, also known as “Government Deceptive Products”.
Ambrose
“Government Deceptive Products” Ambrose you are too funny man!!!!! Love it!!!!!
Greg
I hate when I hear the wealth of a nation represented as a GDP per capita or a GDP growth %. I mean the stats may say person (1) earned 1 dollar this year person (2) earned 1 dollar this year and person (3) earned 100,000 dollars this year and gosh the nation has a GDP of 33,000 dollars per capita. I’m tired of shoveling up mainstream medias horseshit. The growth percentage can just be an indication of that one person’s (in this simplistic example) income going up by approx 9-10%. Or maybe uncle sam printed some money and bailed out that one person’s business and taxed the rest of their 1 dollar. The truth is the masses are pissed off. You can’t keep shoveling people horse shit and expect for them to say Thank You. Especially once they are stone cold sober. V for Vendetta.
The scariest part Greg is not the lies, which from some perspectives might even be understandable. For instance the fact that CPI is held low helps to keep public expenditures for welfare, public salaries, pensions, etc. in check. The scary part is that the mucky mucks who run the joint seem to believe the lies too! If they don’t know what the problem is, how can they fix it? So it cuts both ways. Once pensioners for instance find out they are being screwed, they will demand more and by virtue of voting more than young folks (at least around here), they will get their way for a good long while yet, so the system will find it even harder to do the necessary rebalancing as truth becomes known. Nevertheless, Greg, your efforts at truthtelling are needed, appreciated and will be referenced. Thanks, Bob
Thank you Bob for the comment!
Greg
Greg,
Ever wonder how much of the GDP consists of stock and bond sales? Nothing real is produced, just financial paper shuffling. It’s a wonder why government statistics are so skewed from reality.
Sandy,
Good Question!!
Greg
Sandy,
Congratulations, your somewhat impertinent question leads directly to the very pertinent answer. You have identified the fault with ALL gov statistics, the GDP in the denominator of the fraction.
GDP, as currently configured, can make logical sense only inside a black hole on the other side of the looking glass. You know, at the corner of Wall Street and the District of Corruption.
Indeed, G.D.P. is composed mostly of Gross Damned Papershuffling. It is as big a lie as the fiat currency in which it is denominated.
Greg,
Did I say “market manipulation”? Did I say “A selloff would follow”? Now how about the wiggly legs of the Euro, and how much more paper are we going to provide to the IMF? The cries “Leave the Eurozone” are starting up. Looks like we’ll be looking at another bailout for the local big boys vested heavily overseas. Conservatives should remember, the Repubs were behind the first one, so don’t think it can”t happen. As the Chinese say: “Rotsa Ruck”. Oldguy
OG,
You are the man!!
Greg
By the way, a parting comment:
Common sense tells me that abandoning the Eurozone means the troubled nations can print, print, print to get out of their mess. Tell me I’m wrong!
Oldguy
Now, now Greg. The statistics put out by the government are correct. It is just a simple system whereby one select group decides the sample, the sampling methodology and the analytic process to arrive at a predetermined number.
We, the unwashed, just don’t know how they did it. We wrongly assume that the sampling would be unbiased and reach across all socio-economic groups. We assume the methodology would stand up to scrutiny and worst of all, we want to believe the analysis and conclusions are based upon tangible evidence. (We is Joe Average.)
None of this should be a shocker. The industrial and financial sectors do the same thing. Oh for the good old days of “Trust but verify.” Now it is the X-Files of “Trust no one.”
Still thanks for being among the few willing to voice dissent.
Thank you OTE!!
Greg
This is off subject but I would love your input.
Just noticed something on Hannity Show. Condiliza Rice is on and she was talking about a driver she had named Otis. She added in her description of him that he is an “African American” gentleman. I also saw an article today where she made a point that Herman Cain as well as other politicians should never play the race card and that she does not think it is good when either party does. So my question is, should I be finding her disingenuous in her comments about Otis or Mr.Cain or altogether?
norcar survivor,
I feel that is an honest comment from her.
Greg
Here are some very insightful thoughts on GDP
http://www.zerohedge.com/news/observations-engineer
Please let me know what you think.
michael_engineer,
What can I say. I am impressed. Your analysis is well thought out and detailed. You make an excellent case for holding gold even though this is not exactly the point of your post. Thank you for posting a link here.
Greg
Gold is not a basic necessity, for most. It might rate somewhere between fiat paper and basic necessities, in a pinch.
Have you seen the Twilight Zone episode that deals with the value of gold in a unique way?
http://www.youtube.com/playlist?list=PL8FDE00BF1CC3E4AB
Its a fun watch if you haven’t seen it.