Date: Fri Jun 02 2006 10:47
trotsky (@jobs report) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
a catastrophe - considering that this is a lagging indicator, i conclude that the economy has in reality been far weaker than government data portrayed it to be in recent quarters. in any event, as i never tire to point out, if one digs into the data a bit it becomes obvious how deeply flawed they are. according to shadowstats.com, if we used the calculation methods of the 1980's ( pre-hedonics and other statistical tricks ) , a reported 'real GDP growth' of 3% today translates into ZERO growth, which means that any given quarter where growth is reported to be below 3% is in reality an economic contraction.
the government counts dollars that no-one spends or receives, it counts jobs that no-one said exist, and it measures the effects of the Fed's inflationary policies in ways that do their utmost to mask them. in view of these politically motivated methodologies, a 'bad jobs report' is really a catastrophic jobs report.
the much-trumpeted 'recovery' has been the weakest post WW2 recovery in many important respects such as income and jobs growth, in spite of being goosed by the biggest bout of fiscal and monetary intervention in history.
the economy remains structurally weak and debt-dependent - that is to say, there would be no growth at all if not for a huge expansion in credit ( about $6 in additional debt for every dollar of GDP growth - it's the most expensive 'growth' money can buy ) .
meanwhile, the perceived 'value' of the collateral backing the debt is basically an illusion as stricken real estate speculators are now finding out. what does it matter if the goverment continues to report price rises when at those prices, there simply are no transactions possible? out-of-control stock market speculation such as what we've seen in the late 90's is bad enough, but at least you're in a liquid market and can liquidate with a mouse click to avert getting wiped out. it's not so easy to react to a margin call in real estate when your 'for sale' sign suddenly finds itself with unexpected competition in a 'no bid' market.
as a consequence, this huge misallocation of capital in real estate over the past few years is bound to create enormous long-term economic problems - it is highly likely to lead to a breakdown of financial intermediation as the bust progresses for instance. essentially the post-bubble Japan scenario, with the added twist that the US consumer has no savings to fall back on.
|
