Sinking ECONOMY vs. NeoCon-Artist Spin

[unlawflcombatnt]

SINKING ECONOMY vs. NEOCON-ARTIST SPIN

Today's GDP report showed the slowest quarterly growth since 2002. Consumer spending was the lowest since 2001. The NeoCon-Artist spin machine was immediately put in high gear following the report.

The immediate response by some was that the economy had just "hit a pothole." A more accurate statement would be it "fell off a cliff." The DECLINE in the Final Sales number to -0.3 from the previous +4.6 is especially worrisome. Also, the huge increase in inventories gives further indication that much of production contributing to GDP was unsold.

Below is a partial copy of today's GDP report from Briefing.com


Here's a link to Briefing.com's GDP report: GDP

Given that consumer spending is 2/3 of all economic activity, the 1.1% change gives further evidence that the economy is slowing down. Christmas spending would be expected to make 4th quarter spending higher, rather than lower. Had the 4th quarter not included Christmas, consumer spending would have been lower still.

With New Home prices declining sharply to a -3.4%, the source of home equity loan spending is also shrinking. Combined with a yearly decline in real hourly wages of 0.49 %, consumer spending can only be expected to decline further. (Wage information can be found at: BLS: Real Hourly Wages )

In 2005, consumers spent 115% as much as they earned. The savings rate has declined to below 0. Can consumers continue to increase spending when their income is declining and the source of their borrowing is declining in value? Will production continue to increase if consumers' ability to purchase that production decreases? Will capital investment increase if purchase of the production it facilitates decreases?


unlawflcombatnt

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[OrangeCountyDemocrat]

1. We're All Frickin' Doomed!! nt

[truth2power]

2. What's the idfference between GDP and GNP,

and which is a more valid indicator of the state of the economy? I do my best to understand all this. thanks.

[unlawflcombatnt]

3. GDP, GNP, & NDP

The term GNP has been essentially replaced by NDP, or Net Domestic Product. NDP measures the entire output of the economy. The difference between GDP and NDP is that NDP subtracts depreciation from the total. (Depreciation being defined as "consumption of fixed capital.)

Thus, GDP - depreciation = NDP.

For example, GDP would increase with any extra spending done to replace the "consumption of fixed capital" resulting from Katrina.

In contrast, the "consumption of fixed capital" caused by Katrina would be subtracted from total GDP to obtain the NDP.

In my opinion, NDP is a better indicator of the economy than GDP. NDP is certainly a better indicator of total "wealth creation."

unlawflcombatnt

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[truth2power]

9. Thanks. Bookmarked your blog...

"Economics in layman terms". This is what I need.

[unlawflcombatnt]

10. Thanks

Thanks for bookmarking my blog. Hopefully it'll help you understand the mess our economy is in. It's not a finished work, however. I'm still trying to figure it all out myself.

There are a lot of things that need to be done differently. The 1st step is a new president.

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[OneBlueSky]

4. GDP Growth: With and Without Mortgage Equity Withdrawel (MEW) . . .

http://www.financialsense.com.nyud.net:8090/Market/cpuplava/2006/images/0125.a.gif

[unlawflcombatnt]

7. GDP with & w/o MEW

Thanks for that post. It's excellent. I'm going to use that chart elsewhere. Puplava's Financial Sense site has got some excellent stuff.

unlawflcombatnt

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[kineneb]

5. looks like Christmas did not bail out economy

one should expect the 4th qtr to be better than 3rd. Interesting that inventories are so much higher...no one buying stuff- All those left over Christmas trees, lights, etc., along w/SUVs? Not good stats.

[unlawflcombatnt]

6. Christmas Buying

The lack of Christmas buying increase was what surprised me the most. Sales should have been MUCH higher, instead of actually declining. Had it not been Christmas season, the decline would have been even larger.

unlawflcombatnt

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[Ksec]

8. I just heard smirk bragging about how great the economy was

He said he plans on using his stellar economy to sell more tax cuts and prop up the coming elections. Listening to him you would think the damn economy was Clintonesque but we find out its slowly bleeding to death. Wages down, growth stagnant, giant corporations like Ford and GM becoming dinosaurs while min wage WalMart is their shining star of capitalism? You know its bad when police and fire stations, schools ,and entire city blocks are being closed up due to this great economy.

Nevermind the fact that all this success is being propped up by loans from commie countries driving the deficit to all time highs.. Yea Smirky.

[Neil Lisst]

11. I predicted record debt in December, and here it is.

And I also predicted it would show up about the time of the SOTU speech.

The country has been borrowing madly, and now, the due bills are rolling in.

There's a recession coming in 2006-2007.

[unlawflcombatnt]

12. Debt

I think you're right on target about a recession. According to economist Dean Baker, American's spent 115% of what they made in 2005. This is not a sustainable course.

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[KakistocracyHater]

13. the real world vs pollyanna Republicans-

they only do faith-based economies...