Why This Weak Economy Is Such A Surprise
by David Reavill
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Back in the 1980s, there lived a most unlikely sportscaster. Howard Cosell, a lawyer by training, was raised in New York. I doubt that Howard ever passed a football or ran a cross-country race. He was an ungainly figure. Yet he became one of the most popular announcers of his era.
At times Howard could be particularly acerbic. Taking to task the many football teams he covered. Whenever he delivered a ruthless assessment, he said he was just: “telling it like it is.”
Calling it as he saw it, not afraid to tell the unvarnished truth. No matter how many egos he might bruise in the process.
And that’s what his many fans appreciated about Howard. Many of us, myself included, failed to realize just how powerful that statement was. There is an art to “telling it like it is.” Something cathartic, in total honesty. He was getting it out there so all the public could see reality.
I particularly appreciate this characteristic of Howard’s today. Because we have become a nation where seemingly no one “tells it like it is.” Today our country is surrounded by those who “tell it like they want it to be.” Not a truthful evaluation of how they see the world. But a fantasy, brought to you to elicit a response. To put into your mind the world they want you to believe.
We saw that most vividly when the Bureau of Economic Analysis, the official agency that measured the nation’s economy, announced that our GDP had declined in the latest quarter.
Declined? How could that be? Our leadership class, from the President on down, had told us for months that this was a strong economy. That everything is hunky dory. All is well, thanks to their bold leadership.
But you and I know better. We’ve learned better since inflation took off nearly a year ago. I can tell you that things have been tight around this household since the cost to fill up my truck went from less than $30 to $100. That was a real hit in the old wallet. And a wake-up call that all was not right financially in America.
As much as we hate to admit it, these past couple of years has been tough financially.
And we’re not alone in seeing how weak this economy is. It is apparent in all the data. The Atlanta Branch of the Federal Reserve maintains an excellent model of the nation’s GDP, called the GDP Now Model. I refer to this often because it’s one of the few places to get a clear, unbiased assessment of the economy.
As you can see from the chart, throughout nearly the entire second quarter, GDP Now has been screaming that the economy is underwater. It is not expanding, and it is contracting. At the end of the quarter, GDP Now forecasts that the economy had declined by 1.2%. That’s just 0.3% above the first estimate of GDP by the Bureau of Economic Analysis, the official arbiter of GDP.
This economic contraction marks the second quarter in a row that GDP has fallen into negative territory, the traditional indication that the country is in a recession.
Yet, despite that fact, the Federal Reserve chose to raise interest rates. And not a little, but by 75 basis points. A substantial interest rate moves at this level. It is unprecedented. I cannot recall the Fed raising interest rates when the economy was in recession.
Then why did the Fed take this action? We all know the answer: to preserve the narrative, the fiction that this economy is healthy. After all, we wouldn’t want our esteemed leaders to be seen in a bad light.
Today everyone seems to be political. Putting a spin on all we read and hear.
When what we need is an obnoxious little man sitting in the corner:
“Telling it like it is…”
Economic News
In the past day, we’ve had six countries report their latest GDP growth rate. This past quarter has been particularly difficult as countries must manage the twin problems of energy prices and inflation.
Looking at these relative economic growth rates, it’s clear that the United States is beginning to underperform the rest of the world. Of the countries reporting, only the US reported negative growth. However, Germany wasn’t far behind with zero growth. France reported that their GDP for the quarter rose 1/2%, Italy and Mexico’s GDP up 1%, and Spain up 1.1%.
Incidentally, China is not far behind the US in reporting poor results. To me, it is becoming increasingly apparent that in today’s environment, the key to economic growth is energy management.
Today we will get a detailed look at the US Consumer. Beginning with personal income and spending. Analysts look for improvement here, and if this plays out, it should be a real boost to the economy.
Also, we’ll get a look at the Fed’s favorite measure of inflation, the Personal Consumption Expenditures Prices, a measure of the actual spending of consumers.
And finally, the latest survey by the University of Michigan of Consumer Sentiment. Remember that last measure; this index hit a record low.
In earnings today, positive results from our two big integrated oil companies, Exxon Mobile and Chevron. As well as positive results from pharmaceutical company Abbvie.
While Procter and Gamble, Astra Zeneca, and Sony Corporation are all trading lower.
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BIO
David Reavill
David Reavill
Financial Writer
writer + finance +iconoclast + hiker + Pennsylvania
#valueside
daily podcast + comment + thinker
valueside.com/links
The MSM is controlled by 6 cor[orations and less than 300 top executives who all read from the same Marxist songbook. They lie to you and you must obey their lies or be banned. That is the state of the US today. What are you going to do about it?
I recall the US Economy in Recession and Interest Rates of 17% back in 1981. Mr. Reavill either has a short memory or is trying to Gaslight people. The FED should be raising Interest Rates at a rate of at least 2 or 3 points a Quarter. You can’t stop inflation if borrowing is cheaper than Inflation and the Government is handing out worthless money with Deficit Spending. To fix an economy in decline you have to fix inflation first, since inflation is the driving force of economy decline buy making money less valuable decreasing buying power.
The problem with the economy is America is addicted to “free” money. No one saves money and that is why there is inflation. Over 75% of Americans are living beyond their means. Thirty-five years of economic neglect is now sending us into Depression. You would have thought that we would have learned a lesson from the Carter Economy when “Recession” finally peaked in 1981, or with the S&L Crisis of 1987, or the Housing Bubble of 2008. But No! Big Business is too big to fail and Government keeps bailing the Fat Cats out. Everyone wants free money and no one wants to save or even live within their means. There is a saying, “The Pigs will get slaughtered.”
If you don’t have at least a year of savings in the Bank, you’re screwed. You are going to need that much savings just to keep food on the table, if it’s available. The coming interest rates will make Banks rich and you very very poor. Inflation is going to hurt all of us as the Democrats try to buy votes in the Coming Election. We are already in a Depression!
In 1933, 4 years after the Crash, the height of the Great Depression, the dollar loss 24% of it’s buying power. People with savings were hit hard, but they weren’t in “Bread Lines”. Since Traitor Joe took Office buy power in real terms is down over 25%. Less than 33% of Americans have any Savings and 66% of those people with savings are draining those savings accounts. Those without savings are maxing out credit cards and headed for Bankruptcy. That’s about half of America. This is all Traitor Joe and the Democrat’s Fault, They destroyed the US Energy Sector and ALL MODERN NATIONS need Energy! With a Stroke of the Pen, Traitor Joe destroyed the US Economy. No President, No Government, should have that kind of Power!
Once the Energy sector is allowed to exploit every resource of energy there is, it will take 5 to 10 years for the Economy to recover, and that is only if the Government also adopts a Massive Manufacturing Growth Plan to expand the Economy and bring about true full employment with high wages. Everything the Democrat run Government is doing is contrary to the high wage, strong middle-class economy that President Trump was building. Democrats and the Rich don’t want high wages. High wages cut into Corporate Profits and High Wages reduce the need for Big Government. Do you really think the Covid Hoax was an accident? It was planned by powerful Democrats to destroy President Trump. When that didn’t work, their only other option was to steal the Election.
Democrats are just Pigs with Lipstick. Because Democrats sold stupid people on the idea that Government just hands out free stuff, most Americans are headed to economic slaughter. Most are Democrats. Yes, “You will own nothing and be happy.” You will be little more than domesticated pets of the Big Government Oligarchs and Bureaucrats. When they say, “Sit”, you will sit. When the say “Jump”, you will ask how high on the way up. You will have NO FREEDOM.
Beyond that, you will have NO LIFE. It is a stated goal of the World Economic Forum Cultist, the people who have taken over the Democrat Party, to cull the Human Herd down to under 1 Billion people. That means the New World Order will exterminate at least 7 out of 8 people on the Planet. In their eyes, poor people are just business overhead. People like this are now running the Government of the United States of America because you stood by and let them. All because you are greedy and lazy and wanted free stuff paid for by others. This is why Democracy is a failed form of Government! Most people are too greedy and too stupid to Govern themselves.
Your tin foil hat is slipping….
Those who do not study History are destine to repeat it’s mistakes. The only difference today is this has been a designed economic crash and the WEF has been telling how they will do it for over 30 years. Because of greed, most people refused to listen! Remember Bush 41 talking about the “New World Order”? Probably not!