First the good news. In case you hadn't noticed, the recession is officially over.
"Better than expected GDP is confirming that the Great Recession has ended," said Kevin Flanagan, fixed-income strategist for Global Wealth Management at Morgan Stanley in Purchase, New York.
That's fantastic. But the 3rd quarter numbers remind me of the scene in Pulp Fiction where Mia Wallace is dying from a heroin overdose and Vincent Vega stabs her in the heart with an adrenaline shot and she comes screaming back to life.
In other words, I think you can make the economy look like anything you want for one quarter. None of the real issues have been addressed, though. Real unemployment is still somewhere between 15-18%. While home sales have picked up, home prices are still dropping.
So what's a President to do when the country is looking for leadership but the only thing you've done up to this point is ape the moves of FDR which prolonged that depression until WWII? Why, you cook the books of course!
I'm referring to a few things that had a major impact on those ginned up 3rd quarter numbers. First is the spurious Cash For Clunkers scheme. Not only did it fail to accomplish its stated aim of putting more fuel efficient cars on the road, it turns out the American taxpayer paid an average of $24,000 for each piece of shit that was towed on to the lot to trade. Though the program only added 125,000 car sales to the figure, it accounted for 1.7% (more than half) of the 3.3% growth rate in the 3rd quarter.
Next comes the number of jobs created by the current stimulus package. Again, it looks like the White House has retained the accounting firm of Chef Boyardee to publish their findings because the official number has been overstated by 20% - and they got caught.
The government types are relying on the stupidity of the American people, and I can't fault them for that. The stupidity of the American people has been among the most reliable phenomena since the advent of the color television. However, the people are not so stupid as to not notice the fact that they have no job to go to in the morning, or that the number of bills stamped PAST DUE has really been piling up in the old mailbox.
It doesn't matter how high a rooftop you shout, "The recession is over!" from because it just ain't so. It will be interesting to see how much hay the media makes over 3rd quarter GDP numbers. I don't think they want any more egg on their collective faces. I'll bet they keep it pretty low key. Because when 4th quarter numbers come out negative because the adrenaline shot to the heart has played out, Americans are going to come to understand what Double Dip really means.
Government spending is an automatic stabilizer and since the government has no motive to be profitable, it can spend without regard for value - they could pay employees to dig a whole and fill it up again, and that would count towards GDP. This analogy is not that off - Michelle Obama has a staff of 24. Most of the stimulus package consists of transfers to state governments designed to make up for shortfalls in those budgets, and who knows what crap that actually gets spent on?
Employment figures were and are manipulated - for instance, despite mass layoffs in the automotive sector, July numbers were still seasonally adjusted upwards. I'd feign to say people are lying, but the whole truth isn't being told, which is equally dishonest.
And now we face the prospect of 25% of the populus currently receiving unemployment benefits losing eligibility within the next 3 months, and predictably, Obama is pushing for an extension of those benefits. The cause of this recession was the overarching notion that our economy is driven by demand - whereas demand was once artificially inflated by the private sector, it's now fueled by the public sector. The government is fighting the symptoms, not the problem - we're sure to face this again.
Cash for Clunkers definitely accounts for a major part of the past quarter's GDP growth. Apparently, it only took a day for the market to figure that out.
cash for clunkers was the biggest joke. honestly what the fuck has america come to? how about they do a cash for ipods program too, cause my mp3 player is starting to wear out. its totally cool for the government to take taxpayers money and give it to me so i can get a new ipod and and so Apple posts a profit to stimulate the economy. its a win-win situation right?
Stimulus funds are to act as a catalyst not a prop. As we have now seen Cash for clunkers did that quite well... http://mast-economy.blogspot.com/2009/08/clunkermania-top-good-news-eco…
Keep watching those ISM manufacturing numbers... the next report is out this week and will show that Q4 is now likely off to an even stronger start than Q3 http://mast-economy.blogspot.com/2009/10/q4-growth-likely-to-be-stronge…
Clunkers gave you a good look at what $3B will do when injected quickly into the economy. Guess what $700B will do over the next year? Most of those catalyst programs are just now coming online with new job creation just around the corner...
Don't be surprised by an extremely strong Q4.
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