muses of the moment

January 30, 2013

Economist inadvertently discloses that “recession” will continue

Filed under: The Federal Reserve, The Financial Crisis, Unemployment, US Government Debt — totallygroovygirlfriday @ 1:47 pm

Update (1-31-13): to combat the spin on the GDP release, here is John Williams of summary:

– Although Recovery Never Took Place, Official Double-Dip Recession Likely Will Be Clocked from Second- or Third-Quarter 2012
– Reported Contraction in Real GDP Designed to Discourage Fiscal Reform?
Fourth-Quarter Nominal GDP Growth Collapsed to 0.46% from 5.91%
– Real Durable Goods Orders Contracted Year-to-Year, Despite Temporary Orders Boost from Year-End Defense Spending

“Frankly, this is the best-looking contraction in U.S. GDP you’ll ever see,” Paul Ashworth, an economist at Capital Economics, said in a note to clients.

Click here for full article.

The spin, the spin on the CONTRACTION in GDP this morning is truly priceless. Contraction has finally reared its ugly head last quarter as John Williams and other has been saying for some time now with their real stats. Really, we never had a recovery.

Call it what you will, GDP contracted last quarter and no manipulating of official stats could hide it.

However, brilliant economists everywhere say, no fear, because….

Economists said the surprise decrease in the nation’s gross domestic product wasn’t as bad as it looked. The weakness was primarily the result of one-time factors. Government spending cuts and slower inventory growth subtracted a total of 2.6 percentage points from growth.

Those volatile categories offset a 2.2 percent increase in consumer spending, up from only 1.6 percent in the previous quarter. And business spending on equipment and software rose after shrinking over the summer.

“Frankly, this is the best-looking contraction in U.S. GDP you’ll ever see,” Paul Ashworth, an economist at Capital Economics, said in a note to clients. “The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging.”

Groovygirl is confused, how are government spending and defense cuts a one-off? Do they know of a new war somewhere the US is going to engage in?

The US is in major debt, the bond market is under pressure, the Fed’s “printing” produces less and less, and the politicians keep kicking the “cliff” down the road. GG sees no increase in government spending, but a continued decrease.

GG also completely attributes the increase in consumer spending on inflation in prices and nothing else. (Real inflation rate is 10%.)

This contraction must continue, the only way it can (at least) net out is further inflation in prices.


Outsourcing: it doesn’t work at a certain point

Filed under: Economic Crisis, Odds 'n ends, The Financial Crisis, Unemployment — totallygroovygirlfriday @ 1:01 am

Boeing’s new Dreamliner is the perfect textbook example of why outsourcing doesn’t work. Not only does it mean fewer, if any, design and manufacturing jobs in the US, it produces a shoddy product that goes over budget anyway.

Click here.

Like anything else, outsourcing has a break-even point. Boeing just learned that the hard way. That is one of the problems with the American way of thinking: if it works, do even more of it. That is not how anything in economics, investing, labor, business, education, health, exercise, food, Fed, anything, works. Nothing. There is a point on any line where best way moves to less and then worst. It’s a bell curve. But humans are greedy and they always topple from the height of the top of the bell curve or tipping point. It’s a shame.

GG has mentioned this concept before in describing the 2007 housing market crash. There is a point when you run out of people to buy houses. Even non-living people. Just as there is a tipping point in the number of facebook users. And ipod users. TV and radio manufacturers went through the same tipping point.

Even gold buyers…but we are not there yet 🙂

A high in any cycle or wave is usually 2 or more tipping points coming together. The more of the tipping points coming together at the same time, the worst the low that is following.

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