The Stimulus Seems to have failed

Because all I heard were crickets … I'll try again …

http://whatisthatwhistlingsound.blogspot.com/2011/05/real-gdp-drops.html

The Bureau of Economic Analysis (BEA) kept their estimate of the annualized growth rate of the first quarter 2011 U.S. Gross Domestic Product (GDP) essentially unchanged at 1.84%.

… snip …

And once again the BEA used an overall "price deflater" that reflected an annualized inflation rate of 1.9%.

… snip …

The importance of the price deflater used by the BEA cannot be overstated. In calculating the "real" GDP the BEA continued to use an overall 1.9% annualized inflation rate, which is substantially lower than the inflation rates being reported by any of the BEA's sister agencies. The mathematical implications of the deflater are simple: a lower deflater creates a higher "real" GDP reading. If April's CPI-U (as reported by the Bureau of Labor Statistics) of 3.2% year-over-year inflation is used as the deflater, the reported 1.84% annualized growth rate shrinks to a 0.56% annualized rate, and the "real final sales of domestic products" is actually contracting at a 0.63% rate. If instead of the year-over-year CPI-U we were to use the annualized CPI-U from just the first quarter (5.7%), the "real" GDP would be shrinking at a 1.82% annualized rate, and the "real final sales of domestic products" would be contracting at a recession-like 3.01%.
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Also …

http://dshort.com/articles/Real-GDP...rex&utm_source=twitterfeed&utm_medium=twitter

http://www.shadowstats.com/alternate_data/gross-domestic-product-charts

Seriously, why is the government lying to us about Real GDP growth? Wait … silly me … we ALL know why, don't we? :D
 
I don't have a dog in this fight, but I'm curious...

If you know all this, and it's that obvious, wouldn't the marketplace know all this? Wouldn't it be built in to the market?

Are they just lying to the average broke-dick citizen to save an erosion of confidence?
 
nvidiot said:
They gambled with other people's lives, money and economic security, lost, and then expected those people to pick up the tab. Sure from the business perspective they won. From everyone else's perspective, they screwed us and laughed while we picked up the pieces.

I'm no economist, but I don't think you need to be one to understand that there were no options available to those in political power other than to try and keep these monsters mobsters going. The alternative was simply untenable.
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The temptation to correct your statement, was simply irresistible.

:)
 
djpar said:
I don't have a dog in this fight, but I'm curious...

If you know all this, and it's that obvious, wouldn't the marketplace know all this? Wouldn't it be built in to the market?

Are they just lying to the average broke-dick citizen to save an erosion of confidence?
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The history of inflations in various countries does not show immediate perception of or understanding of conditions by the population, and more importantly, major market segments.

For example, during hyperinflations banks keep lending. They calculate a rate of interest and seem to actually thing they have it right. But they never do have it right.

The propaganda is arguably necessary as it keeps the actual facts obscured until some planned solution can be sprung. There are several big crises in the wings right now that can be "sprung" at any convenient time the government wants.
 
mhaze said:
The history of inflations in various countries does not show immediate perception of or understanding of conditions by the population, and more importantly, major market segments.

For example, during hyperinflations banks keep lending. They calculate a rate of interest and seem to actually thing they have it right. But they never do have it right.

The propaganda is arguably necessary as it keeps the actual facts obscured until some planned solution can be sprung. There are several big crises in the wings right now that can be "sprung" at any convenient time the government wants.
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But there is no real indication of hyperinflation -- only the prospects of it.

Why are 5yr Greece bonds at 14% and US notes at 1.60%? Is it that the major market segment is fooled on the US but not on Greece?
 
djpar said:
If you know all this, and it's that obvious
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Well isn't it? It's not a matter of opinion. It's simply a matter of definitions and raw data. And those seem to clearly suggest GDP fell this last quarter, not go up like the government claimed.

djpar said:
wouldn't the marketplace know all this?
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One would hope, but it wouldn't be the first time that the market looked at things through rose colored glasses. And what interest does it serve for the marketplace to broadcast bad news? For stock brokers to broadcast bad news? Also, this might be a reason why the big companies are not investing but remaining flush with cash ... waiting to see what happens. Why expand output when GDP is still actually falling and looks like it will fall further?

djpar said:
average broke-dick citizen
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This forum is just filled with "classy" posters. :D
 
BeAChooser said:
Well isn't it? It's not a matter of opinion. It's simply a matter of definitions and raw data. And those seem to clearly suggest GDP fell this last quarter, not go up like the government claimed.
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I don't know. I don't fixate on this type of data. And I suppose it is a matter of definition, which implies that there are more than just yours.

One would hope, but it wouldn't be the first time that the market looked at things through rose colored glasses.
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The market isn't a single entity. I don't see it as looking through anything. It is merely the reflection of the participants.

There is no doubt that emotions (extreme optimism / pessimism) are at play in markets, but they are not the only driver of price.

And what interest does it serve for the marketplace to broadcast bad news? For stock brokers to broadcast bad news?
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It serves them no interest (unless they are bearish), but I don't care about them. I care about my interests, just like you I imagine.

Also, this might be a reason why the big companies are not investing but remaining flush with cash ... waiting to see what happens. Why expand output when GDP is still actually falling and looks like it will fall further?
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This sounds less like looking through rose colored glasses. Aren't they market participants, also?

This forum is just filled with "classy" posters. :D
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:D If the shoe fits.
 
djpar said:
And I suppose it is a matter of definition, which implies that there are more than just yours.
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Real GDP is defined as nominal GDP adjusted for price changes (i.e., inflation or deflation). They are using the same nominal GDP in both calculations so the only difference is in what is considered inflation. I don't know about you, but I've watched prices increase by far more than what BEA used in their calculation (1.9%). The problem is that BEA is using a bogus inflation rate in the calculation to make GDP growth look better than it really is … a rate that doesn't even agree with what other government agencies say it now is. As noted above, using Bureau of Labor Statistics numbers, the inflation rate is over 3 times higher than what BEA assumed. And that's more in line with what Joe Citizen is seeing in stores and at the pump.
 
BeAChooser said:
Real GDP is defined as nominal GDP adjusted for price changes (i.e., inflation or deflation). They are using the same nominal GDP in both calculations so the only difference is in what is considered inflation. I don't know about you, but I've watched prices increase by far more than what BEA used in their calculation (1.9%). The problem is that BEA is using a bogus inflation rate in the calculation to make GDP growth look better than it really is … a rate that doesn't even agree with what other government agencies say it now is. As noted above, using Bureau of Labor Statistics numbers, the inflation rate is over 3 times higher than what BEA assumed. And that's more in line with what Joe Citizen is seeing in stores and at the pump.
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I don't care to take issue with this, although I'm sure there are others here that would.

I'm just wondering why one would think it is not built into the market if it is so obvious. Perhaps I just don't see the market as such a poor reflection of reality as you. The market is where it is whether your fundamental explanation is correct or someone's else is.

And that's not to say that I think everything is rosy. I made my predictions here.

They are not in line with most of the doomsayers here as I think gold/silver have peaked (1year+ top) and the $ will rally (6-12 months), US bonds could indeed rally into year-end but they are a short somewhere soon, and that stocks are likely to have peaked or will peak soon and enter a 1-2 year or more bear market. But they are not in line with the mainstream either.

The outlook is grim, IMO. And I'm not just talking. In 2006, I exited and stepped down from a technology company I founded in 1997. I sold all my real estate except for one home in GA and moved to Panama with my wife and son. Before the technology company, I was a FinOp Principal of an NASD B/D (institutional bond brokerage) and I also owned a commodities firm, so I manage all my money and I have a lot at stake.

I guess I'm just more concerned about making the right investment / trading decisions than being right in theory.
 
djpar said:
But there is no real indication of hyperinflation -- only the prospects of it.

Why are 5yr Greece bonds at 14% and US notes at 1.60%? Is it that the major market segment is fooled on the US but not on Greece?
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Basically, yes. One year CD in Australia is 6%, so why does money not rush from US to Australia? A LOT of money has moved offshore and will continue to, but not enough to indicate the market immediately moves from bad money to good money.

That there is no real indication of hyperinflation is not the right statement I think. The question is latent or unrealized inflation in the money supply. By definition that is not "indicated" by the statistical measures of inflation and is indicated by the M3 money supply number (which the US Government, of course, stopped publishing some years ago...)

But that latent inflation will of necessity burst out sooner or later, basically in "a recovery" where and when the velocity of money increases to something near it's former rates. So when the media starts trumpeting "It's a recovery" that is exactly when one needs to read "Severe inflation coming".

This doesn't mean hyperinflation, severe or moderate inflation for several years would adjust money supply to value. But if the pattern of spending by the US government keeps up that is a whole different story.

You probably know this link but if not here it is.

www.shadowstats.com
 
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Thanks for the explanation.

Do you think credit contraction could offset this? Doesn't M3 contain this component and isn't it possible that another wave of credit contraction could unfold?
 
djpar said:
Thanks for the explanation.

Do you think credit contraction could offset this? Doesn't M3 contain this component and isn't it possible that another wave of credit contraction could unfold?
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One argument is that a huge amount of money that went to the banks to "ensure liquidity" was circuituous, they reinvested in treasuries...

That money is dormant from the velocity point of view. But how could it ever be given back to the government? The banks would have to cease taking Tbills in that amount, while maintaining their required liquidity rations. And the banks are not going to start calling in loans to keep the ratio as required. If they did, that would be a "credit contraction".

One thing that is often overlooked (Tippet has discussed this on this forum) is that vast amounts of wealth move into fixed assets and when they do, they do not much affect velocity. That is a function of consumer transactions. This is obvious if you consider the difference between spending 200K and buying a house for 200K.

Most everybody would, I think, consider more credit contraction to be very bad. So now we are going to see some inflation and Bernanke thinks, or at least says, that he can control it and keep it from getting out of control. That's what all the propaganda is about, to keep people in control.

But people react to what they perceive. If people react to the government printing trillions by buying metals, saving instead of spending, and paying off loans, they are reacting rationally. Similarly, if they react to printing 10s of trillions by dumping dollars as soon as they get them, that's a rational action in self interest.

The typical (wrong) responses from government are things like wage and price controls, clamping down on money moving out of the country, confiscating pension and retirement funds, restricting ownership of or trading in foreign currencies, restricting withdrawals from bank accounts. Historically.

There is some hope, as we are seeing right now in Congress with the discussion on the debt ceiling limit. Not a lot, but some. Brazil, incidentally, experienced hyperinflation and came out of it very strong. How did they do it?

They made it a felony for anyone to loan money to their federal government....
 
mhaze said:
One argument is that a huge amount of money that went to the banks to "ensure liquidity" was circuituous, they reinvested in treasuries...

That money is dormant from the velocity point of view. But how could it ever be given back to the government?
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FED sells there holdings even into what will be a progressively worsening bid?

The banks would have to cease taking Tbills in that amount, while maintaining their required liquidity rations. And the banks are not going to start calling in loans to keep the ratio as required. If they did, that would be a "credit contraction".
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Debts either being paid off or defaulting is also a contraction, no?

But people react to what they perceive. If people react to the government printing trillions by buying metals, saving instead of spending, and paying off loans, they are reacting rationally.
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If government printing is perceived to lead to substantial inflation, wouldn't the rational thing be to borrow and invest? Why pay off loans?

I can understand saving versus spending, but there's also saving versus investing, and I would think under the perception of persistent, uncontrolled inflation that would be a mistake.

Similarly, if they react to printing 10s of trillions by dumping dollars as soon as they get them, that's a rational action in self interest.
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Dumping them by investing in other asset classes, I imagine.

The typical (wrong) responses from government are things like wage and price controls, clamping down on money moving out of the country, confiscating pension and retirement funds, restricting ownership of or trading in foreign currencies, restricting withdrawals from bank accounts. Historically.
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Bad stuff.

There is some hope, as we are seeing right now in Congress with the discussion on the debt ceiling limit. Not a lot, but some. Brazil, incidentally, experienced hyperinflation and came out of it very strong. How did they do it?
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What are you seeing in Congress right now. I don't pay much attention to it. Can you expand on this so I'm clear what you are referring to.

They made it a felony for anyone to loan money to their federal government....
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Interesting. Can you suggest any reading on this subject? Thanks.
 
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Michelle's got the answer to our economic problems … a vacation ...

http://news.yahoo.com/s/ap/20110603/ap_on_re_us/us_michelle_obama_africa "Michelle Obama announces official visit to Africa"

To teach this, perhaps?

myplate_green500.jpg


:D
 
Here's the next leftist mime (… or should I say whine?):

... that the economy is not Obama's fault and he can't do anything to fix it: http://www.politico.com/news/stories/0611/56210.html

:rolleyes:

Well that's wrong.

The reason for the lack of a normal recovery is indeed Obama's fault.

And there is one thing he can do to help fix it.

Stop the demagoguery and step aside. :cool:
 
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