Here is Nathan's take on the GDP, inflation, wages and he has more on the unfair income gains (5 fold) of the highest earners in his full blog post today.
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Coming in exactly on consensus of 2.0% growth, look for quarter three GDP to be subsequently cut in half or more in future revisions. Q2 settled on 1.7%, and I can almost guarantee that Q3 was considerably slower than Q2. Keep in mind that GDP is measured in dollars and then “corrected” via the deflator for inflation. Again I’ll guarantee that the deflator comes nowhere near capturing the destruction that’s occurring to the dollar. Below is the entire report from the BEA:
Q3 GDP
What you will find inside that report is that inventory build resulted in the majority of the “growth,” 1.44%. Inventory builds are only good if there’s demand to buy the inventory once it’s produced. Forced inventory builds occur when goods are ordered due to miscalculations of demand. Demand is misjudged when economic data is artificial – thus bad tracking and reporting of data builds economic distortions, inventory building at this time is one.
You’ll also note in this report that almost every category tracked, while reported positive, is DECELERATING substantially from the prior report. Take exports for an example: “Real exports of goods and services increased 5.0 percent in the third quarter, compared with an increase of 9.1 percent in the second. Real imports of goods and services increased 17.4 percent, compared with an increase of 33.5 percent.” The numbers seem large, but are much smaller than the previous quarter. Again, they claim these numbers are “real,” that is adjusted for inflation, but again I have to raise the B.S. flag to full mast on those numbers. Shipping data and tax receipts do not substantiate their trade data that again are measured in dollars and corrected by flawed inflation data.
All the income figures show the same trend, that income is supposedly up by their measurements, but not at nearly the same rate as the prior quarter. For example: “Current-dollar personal income increased $65.7 billion (2.1 percent) in the third quarter, compared with an increase of $123.5 billion (4.1 percent) in the second.”
Remember, these are the first cut and we know that all these numbers will be revised downwards. The “Price Index” portion of the report supposedly rose 2.3%, this is an increase from 1.9%, and did come in above expectations of 2.0%.
Frankly, with the dollar index falling 8.4% during the quarter against a competitively devalued basket of currencies, you can see how under-reported the inflation effects are. Should they have used an 8%+ deflator, then real GDP would have been close to negative 6%! And that’s probably a lot closer to the truth. But reality is another matter entirely, as one would have to subtract out financial engineering which adds massively to “production,” yet in reality produces nothing but heartache.
Here’s Econoday’s take on the subject, it may read somewhat differently:
Highlights
The recovery regained incremental strength in the third quarter, but the pace is still quite soft. Third quarter GDP expanded at a 2.0 percent annualized pace, following a 1.7 percent rise the prior quarter. The latest figure matched analysts' projections for a 2.0 percent gain.
The latest quarter was led by gains in inventory investment, consumer spending, equipment investment, and government purchases. On the negative side, housing investment fell back and net exports worsened on higher imports. Exports rose moderately.
How strong final sales are is still an important issue in terms of whether demand is picking up or not and it slowed by both key measures. Growth in real final sales to domestic purchasers slowed to 2.5 percent, following a 4.3 percent boost in the second quarter. Final sales of domestic product (adds in net exports) eased to 0.6 percent from 0.9 percent annualized in the second quarter. A big question is whether the boost in imports reflects optimism on the part of businesses that spending is going to pick up-and there is no certain answer. The surge in both imports and inventories at the same time implies optimism. But if demand does not pick up, the boost in inventories will be a negative in coming quarters.
Year-on-year, real GDP in the second quarter is up 3.1 percent, compared 3.0 percent in the second quarter.
Economy-wide inflation as measured by the GDP price index firmed to 2.3 percent in the third quarter, following a 1.9 percent increase the previous period. The median market forecast was for a 2.0 percent rise.
In a separate but related report on employment costs, we find that wages are not even close to keeping up. What does that tell you about inventory builds? This was a miss at .4%, the consensus was expecting .5%:
Highlights
A slowdown in wages & salaries made for a slowdown in the third-quarter employment cost index, at plus 0.4 percent vs. the second-quarter's plus 0.5 percent. The on-year rate is plus 1.9 percent vs plus 1.8 percent in the second quarter. Wages & salaries rose only 0.3 percent in the third quarter, down from the second-quarter's 0.4 percent. The on-year rate slipped one tenth to plus 1.5 percent, a rate just above on-year consumer price inflation which has been trending slightly over 1.0 percent. Benefit costs were unchanged at 0.6 percent though the on-year rate rose two tenths from the second quarter to plus 2.7 percent. Employment costs remain very quiet, giving the Federal Reserve the leeway it needs for further accommodation.
Note the overall slope of that chart! The bottom line for me is that we are experiencing monetary growth, while at the same time the real economy is continuing to contract. Wages are not anywhere near keeping pace with the monetary growth, this is creating the huge gaps between the top people who benefit from inflation and the bottom wage earners who suffer from it – the vast majority of people.
There is NO REASON to have an inflationary system like this! It is literally insane. It is designed to benefit the people who push debt, plain and simple. Yet, it’s absolutely possible to have a system where the government controls the production of money yet keeps the total quantity under control in such a way as to create price stability. Within that system there can still be private lending and even fractional reserves, the key is in ensuring that special interests don’t corrupt the system, again something that is completely doable given the proper TRANSPARENCY and checks and balances. There is only one inflation target that will work in the long run, that is ZERO. Targeting any other number is again quite literally insane, it is like designing your house to only last a couple of years before it falls down when you can easily design a much more solid house – we have the means and the capability to do so, all we need is the WILL to unseat those who currently possess the power of money production.
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