Post by unlawflcombatnt on Jan 17, 2007 15:08:32 GMT -6
1/17/07
Today's Industrial Production is another chapter in the Bush's latest novel, "Economic Growth Through Statistical Manipulation." Today's Industrial Production report shows an alleged +0.4% increase in December over November. A closer look, however, shows that both November and October Industrial Production numbers were revised downward by a sum total of -0.4%. Thus the reported "increase" over the previous month is exclusively the result of downward revision of earlier numbers. Without this downward revision, December's "increase" would have been 0.0%. Once again, a federal agency has produced economic "growth" through manipulation of statistics. Below is a modified chart from Briefing.com showing the 1/17/07 report on the top, with the previously reported numbers in parenthesis & italics next to the current (newly manipulated) numbers. The bottom chart is the "pre-manipulation" numbers from Briefing.com on 1/16/07
It's also worth noting the "Capacity Utilization" figures at the bottom of both charts. They've actually revised November's previously published industrial Capacity Utilization downward from 81.8% to 81.6%. That makes December's 81.8% appear as a slight improvement over November. Without this current manipulation, however, it's clear that Capacity Utilization has not increased any over the last 3 months, and has actually declined since September's 82.0% and August's 82.4%.
A declining Capacity Utilization rate indicates a declining demand for production from industrial facilities. It indicates consumer production demand is declining, reducing the output required from our industrial facilities. Also onsistent with this declining demand, Durable Goods Orders have declined sharply over the last several months. In fact, November's Durable Goods Orders of $214 billion was 6.5% less than September's (originally published) $229 billion. Longer term, this November's Durable Goods Orders are also 5% less than those of November 2005. A decline in industrial Capacity Utilization is exactly what would be expected from from a decline in orders for products.
Declining capacity utilization also reduces the demand for capital investment (which is used to increase capacity). Thus, true capital investment demand decreases as capacity utilization decreases. (There's no need to build more capacity when less of current capacity is being used.)
Combining the above situation with a market that is "drowning in a sea of liquidity" and markets that are "glutted with cash," and you have conditions of too much capital chasing too few investment opportunities. The end result is over-investment, mal-investment, non-productive investment, and even counter-productive investment. It's little wonder that bond rates are low. There are insufficient investment opportunities for this abundant liquidity, thus the low returns on bonds are still better than most capital equipment investment opportunities. Thus, this "sea of liquidity" goes into overvaluation of assets, creating bubbles such as that in housing. It also increases the money available to purchase debt, keeping interest rates low and allowing our government and the American people to borrow their way into oblivion.
This excess capital works against the best interests of the nation as a whole. The excess capital goes into increasing CEO and Corporate management salaries, building foreign production facilities where labor is cheaper, and buying American debt (allowing Americans to continue spending more than they earn). It also goes into campaign contributions, lobbying, and indirect bribes, which are used to help maintain this excess capital, and even increase the excess further. Last, but not least, this excess capital finances the Corporate media's efforts to brainwash the public about current policy-- to perpetuate the myths that our economy is doing well, that the upward redistribution of wealth is "good" for the economy, and that even more tax cuts for the rich and more subsidization of Corporate America would be "good" for all of us.
Government & Corporate propaganda are not convincing me. I hope it's not convincing most others. Hopefully, others aren't falling for the current fact-free, logic-deficient economic mythology.
Today's Industrial Production is another chapter in the Bush's latest novel, "Economic Growth Through Statistical Manipulation." Today's Industrial Production report shows an alleged +0.4% increase in December over November. A closer look, however, shows that both November and October Industrial Production numbers were revised downward by a sum total of -0.4%. Thus the reported "increase" over the previous month is exclusively the result of downward revision of earlier numbers. Without this downward revision, December's "increase" would have been 0.0%. Once again, a federal agency has produced economic "growth" through manipulation of statistics. Below is a modified chart from Briefing.com showing the 1/17/07 report on the top, with the previously reported numbers in parenthesis & italics next to the current (newly manipulated) numbers. The bottom chart is the "pre-manipulation" numbers from Briefing.com on 1/16/07
It's also worth noting the "Capacity Utilization" figures at the bottom of both charts. They've actually revised November's previously published industrial Capacity Utilization downward from 81.8% to 81.6%. That makes December's 81.8% appear as a slight improvement over November. Without this current manipulation, however, it's clear that Capacity Utilization has not increased any over the last 3 months, and has actually declined since September's 82.0% and August's 82.4%.
A declining Capacity Utilization rate indicates a declining demand for production from industrial facilities. It indicates consumer production demand is declining, reducing the output required from our industrial facilities. Also onsistent with this declining demand, Durable Goods Orders have declined sharply over the last several months. In fact, November's Durable Goods Orders of $214 billion was 6.5% less than September's (originally published) $229 billion. Longer term, this November's Durable Goods Orders are also 5% less than those of November 2005. A decline in industrial Capacity Utilization is exactly what would be expected from from a decline in orders for products.
Declining capacity utilization also reduces the demand for capital investment (which is used to increase capacity). Thus, true capital investment demand decreases as capacity utilization decreases. (There's no need to build more capacity when less of current capacity is being used.)
Combining the above situation with a market that is "drowning in a sea of liquidity" and markets that are "glutted with cash," and you have conditions of too much capital chasing too few investment opportunities. The end result is over-investment, mal-investment, non-productive investment, and even counter-productive investment. It's little wonder that bond rates are low. There are insufficient investment opportunities for this abundant liquidity, thus the low returns on bonds are still better than most capital equipment investment opportunities. Thus, this "sea of liquidity" goes into overvaluation of assets, creating bubbles such as that in housing. It also increases the money available to purchase debt, keeping interest rates low and allowing our government and the American people to borrow their way into oblivion.
This excess capital works against the best interests of the nation as a whole. The excess capital goes into increasing CEO and Corporate management salaries, building foreign production facilities where labor is cheaper, and buying American debt (allowing Americans to continue spending more than they earn). It also goes into campaign contributions, lobbying, and indirect bribes, which are used to help maintain this excess capital, and even increase the excess further. Last, but not least, this excess capital finances the Corporate media's efforts to brainwash the public about current policy-- to perpetuate the myths that our economy is doing well, that the upward redistribution of wealth is "good" for the economy, and that even more tax cuts for the rich and more subsidization of Corporate America would be "good" for all of us.
Government & Corporate propaganda are not convincing me. I hope it's not convincing most others. Hopefully, others aren't falling for the current fact-free, logic-deficient economic mythology.