As I stated in my post on June 19th, a little over six weeks ago, “…the next Great Recession locomotive that is picking up speed would never have existed, but because of The Fed, it’s on its way, running full steam, and coming straight at us.”
Today the Dow Jones tanked more than 500 points <yawn>. The government is only good for one thing…you can make money by placing bets that they will consistently and perpetually, make the wrong decisions. All you have to do is use common sense on what the government should do to stop hurting us and the economy, and then just put money down that they will do the opposite thing.
So since my post on June 19, we have seen GDP numbers for Q1 revised down from 1.9% to 0.4%, while Q2 prelim numbers came in at 1.3%. Obviously if 1.9% can be written down to a 0.4%, we can expect Q2 to eventually be revised down to negative territory…a contraction. Technically, we are already in contraction because many of the numbers used in the GDP calculation are suppressed by the government to make them appear better than they really are. Also not widely mentioned is that Q4 GDP from 2010 was also revised down to 2.3%. Notice how it’s always revised down. We need a 4% GDP just to break even, so that does that tell you?
Manufacturing numbers from all over the world are down, with the exception perhaps of Germany. Meanwhile Greek Bailout MCMXXI failed in a little over four weeks. While Europe goes bankrupt trying to bailout Greece, Italy and Spain have begun knocking on the European bailout door warning that they are next in line after Greece for a handout from the Germans. How long do you honestly think this can go on in Europe before the whole thing caves in on itself or all the Germans request Greek citizenship so they can get their own money back?
A Chinese rating agency downgraded U.S. debt. Standard and Poor threatened to downgrade U.S. debt if the debt ceiling was raised, but they have since been told by their handlers, the U.S. Government, that that would be a bad idea, and so they seem to have changed their mind. These same rating agencies missed the dot.com bursting, missed Enron and WorldCom, missed the housing bubble and collapse, and are now being told by someone somewhere, to ignore the coming U.S. debt collapse. The only thing they haven’t missed, is being wrong. I mean, if there was ever a definition for “useless” in the dictionary, the credit rating agencies in the U.S. would be it.
Personal income increased by a millimeter, which of course is a decline in real personal incomes when you adjust for inflation. The savings rate is up, perhaps the only bright spot on the horizon, which of course was promptly followed with the fact that consumer spending is down. Which is a good thing, but not if you ask a politician. To them, an American not deep in debt, is not a real American.
On the housing front, a fairly “tight” housing market has developed with only 2.4M homes for sale but this is largely due to the fact that 2M homes that should be on the housing market for sale are being retained off the market in some state of foreclosure by our favorite misfits of destruction…the banks. This hoarding by the banks, combined with people who are severely underwater on their homes and have thrown up their hands and pulled their homes off the market hoping childishly that “next year will be better” have kept home inventories from increasing, thus artificially maintaining too-high home prices.
Inflation continues to run away unabated as news reports continue to circulate that many food companies at your local grocery store, in order to remain competitive and forestall the inevitable inflationary pressures, have been shrinking the portion size of your favorite foods to increasingly smaller and smaller amounts to prevent an increase in price…for months now. So thanks to our government, you are paying the same, getting less for it, and nobody told you.
With such an atrocious GDP we can predict that the unemployment numbers being reported tomorrow will show an increase in the unemployment rate. This will add to the ills affecting the stock market and the broader economic sense that we are in for another economic catastrophe.
Gold made a new record high, yet again <yawn>. See previous comments from my yawn above.
Japan and the Swiss have decided they didn’t want to let all the other moron politicians have all the fun, so they too have begun devaluing their currency which of course hurts Japanese and Swiss citizens. That is what happens when the rest of the world goes to light-speed to destroy their own currency. Every country wants to have the weaker currency to help with exports, but since they are all following this same stupid philosophy they have created a “race to the bottom” to see who can implode their currency first. Japan and Switzerland, enjoying some of the strongest currencies in a long time quickly saw their own exports get hurt, and rather than do the right thing and allow their citizens to enjoy their increased purchasing power, they have decided to join the “race to the bottom” as well.
The politicians here in the U.S. made a big deal out of nothing by promising $2T in spending cuts over 10 years. If I hear one more reporter or politician talk about how this was a win-win for anyone, I’m going to vomit. We’ll never see the cuts, just so you know. And even if we did, it means nothing. $2T over ten years is $250B a year in cuts. But we add $1.5T a year to our $14T in debt, so how does reducing our new debt year after year from $1.5T to $1.3T change anything? All they did was decrease the amount of debt we add on top of our current debt. So in ten years we’ll have added $13T in debt on top of our current $14T in debt in order to save $2T?
Sounds like an idea only our government could come up with!
And don’t forget, this is just the beginning. More “stimulus” debt is on the way to “rescue” us from this current economic recession which will create more inflation, more insolvency, more downgrades to our debt, and while the world goes to hell in a hand basket, Angrywoodchuck will continue to broadcast until the lights go out.