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Page added on February 5, 2014
The US Economy Is Growing Much Slower Than You Think
Deceptive and Fraudulent …
“Products are paid for with products,” said French economist and free-trade proponent Jean-Baptiste Say. He meant that if you want to get something, you better have something you can trade for it. What would Say make of the latest US GDP report?
Last week brought two important pieces of news: one deceptive, the other fraudulent.
The deceptive news was that the Fed, in its last Ben Bernanke moment, would stay the course. The course in question is the “12-Step Counterfeiters Anonymous” program popularly known as “tapering” of QE.
The Fed says it will stay on the program, leading investors to believe that the central bank’s PhDs were steadfast in their commitment to end their bond buying … and that the economy was healthy enough that it didn’t need QE to prop it up. Neither of those things is true.
The fraudulent news was that US economy grew at a 3.2% annualized pace in the last quarter of 2013. We’re still in the weakest recovery since the end of World War II. But since 1950, the composition of the US economy has changed so substantially that GDP ‘growth’ no longer means what it used to mean.
“Disappointing numbers on jobs and housing also raise concerns about whether the economy is accelerating,” reports the Wall Street Journal. Wait. Jobs and housing are fairly important. If the news from those quarters is disappointing, what’s really up with the economy?
The explanation: “A big driver of growth in the fourth quarter was consumer spending, which grew 3.3%.” The Journal quotes Bill Simon, Wal-Mart’s USA CEO: “I never cease to be amazed at the American consumers. They figure out a way to make it work …”
A New Kind of Growth
We are not so much amazed as appalled. And we are not so much reassured at this recovery, however weak, as we are alarmed by it. Where did consumers get the money?
They didn’t earn it. So, they had to run down their balance sheets, either by spending their savings … or taking on debt. That makes this a new kind of growth: The more you grow the poorer you get.
The economy used to grow by making people wealthier. Now, consumers go further into debt, while their incomes are stagnant or falling. In 1980, a $7 trillion economy included $2 trillion of what City economist and author of Life After Growth Tim Morgan calls “globally marketable output” (GMO) – real wealth, the kind of stuff you can sell to pay your bills.
But then the economy underwent plastic surgery at the hands of quack policy makers. Now, it’s unrecognizable. Today, we have a $16 trillion economy. But how much of that is from GMO? Well, about $13 trillion is consumer spending. And various statistical adjustments. Only $3 trillion is what Morgan calls GMO.
That’s the real growth of the US economy since 1980 – a piddly, pathetic $33 billion a year. Barely enough to keep up with population increases.
Growth? Forget it.
19 Comments on "The US Economy Is Growing Much Slower Than You Think"
Makati1 on Wed, 5th Feb 2014 2:11 am
And that $33B is BS, NOT growth. The US stopped ‘growing’ in 1970 when we went to using Charmin for money and the US oil recovery peaked. It’s been downhill ever since.
DMyers on Wed, 5th Feb 2014 3:27 am
Deceptive and fraudulent are well chosen words in the context. As well as I can figure out, the following is how they contrive economic growth.
You begin with inflation. Let’s say inflation is around ten percent (10%). But they completely distort the inflation factor, manipulate might be a better word, to contrive an official inflation rate of say three percent (3%).
Given that scenario, you have what can only be explained as seven percent (7%) GROWTH! This would be a pretty good trick, if it weren’t now apparent that even an idiot like myself can see right through it.
Davy, Hermann, MO on Wed, 5th Feb 2014 1:41 pm
I am watching this financial crisis very close. We have been in crisis since 2008. It has not gone away the systematic risk has only increased. The Ponzi scheme has only grown. They have taken more cards from the bottom and added them to the top of the house of cards.
My friends this financial crisis is the clear and present danger. Confidence is liquidity. Without liquidity you have a “Minsky moment” where everything seizes up. In our delocalized local world that relies for the most part on a global economy and distribution this will lead to empty shelves at the dumb (grocery) store. From a systematic view point if the machine of trade and finance cannot reboot in short order we are talking food issues and with food issues we see calamity. There are too many people and not enough police or military to ever contain this let alone mitigate this. Look at Iraq liberation!
We are in a new normal. The system is corrupt and manipulated. Power has centralized. Capitalism in its pure sense is dead. We can only hope “They” can hold the sinking ship together long enough for some of us to make preparations. There are no plan B’s at the top I have seen. If we have a gentle decent then maybe the authorities can hold some semblance of civilization together but I have my doubts.
Finance is now too big too fail and those in charge are from a revolving door of patronage, money, and corruption. The system is hyper-complex and to the point of self-regulation or no true centralized control in the sense of steering a system. We are at the top of an energy gradient ready to head down. The most unstable factor is that of the weakest link. In my mind the weakest link is finance. It is the most complex system we have and its driving force is human psychology. That sounds like trouble to me
paulo1 on Wed, 5th Feb 2014 1:54 pm
I watched some cnbc last night. The booster club panel being interviewed will only admit to a pull back in stocks….maybe 10%. Personally, I think the drop in the next couple of months will be huge. Every day I check the markets a few times to see if the herd is trampling for the exits. When that happens there will be some honest and fervent questions out there by the mainstream public. Until that happens, the politicians will obfuscate and distort while their friends continue to stuff their wallets in a rigged game.
Great comment Davey Hermann, but of course I say that only because you beat me to it!
regards…Paulo
Davy, Hermann, MO on Wed, 5th Feb 2014 2:16 pm
Paulo, for some reason when I get up I have fresh meat to comment on while other bloggers are delayed. I guess the central timezone is the key to early comments. I know you all love my ranting on impending death destruction and mayham…1st thing in the am or maybe pm for those of you in asia. I forget sometimes we are a global blog…lol
Northwest Resident on Wed, 5th Feb 2014 3:19 pm
Davy and Paulo — You’ve probably both ready my pompous prognostications on “collapse” coming in 2015. The reaction I seem to get from this and the only other site/blog where I post my comments on regarding this subject is that “we have plenty of oil to stretch this out until 2020 or 2030” and “they (TPTB) are going to keep BAU going as long as possible (i.e., to the bitter end). But like you point out so well, Davy, the global financial situation is extremely vulnerable right now. And I’ve talked about panic. When one of the main driving forces behind the global economy is human psychology, all it takes is a small spark to set of panic, and if that panic spreads then this whole global economy could shatter almost instantaneously. People with their lives’ savings and their “guaranteed” retirement in stocks and bonds, and fund managers with their reputation and their clients’ money all on the line are very, very nervous these days, and with good reason. It just feels like it is all about to burst wide open. I hope, like you, not in the too-soon future.
Davy, Hermann, MO on Wed, 5th Feb 2014 3:31 pm
NR, I am with you on sooner than later because of the financial crisis. I am just not sure if the downslope will be like 1929. We are in a new normal. It could be worse!!! I am not smart enough to know this system. I try to google all the wild financial phrases and technicals. Hell bonds are a B**ch to understand sometimes
Markets are in red. Puerto Rico may be insolvent. Europe deflating. Yen/dollar skating close to a focal point of breakout downward. Then I read Bloomberg and they say the Big Bulls are holding tight because they smell blood and will buy the dip. The problem is like I read on “zero hedge” today. The problem is no longer just a liquidity problem it is a valuation problem. With all the manipulation and distortions what is real and what is phony. The fed can’t backstop the market anymore if it is the only buyer. You can’t tell me these folks with billions to invest don’t have white knuckles. They will fall the farthest. They are now the ones committing suicide. I don’t know if this is the big one but I imagine a 10% correction is not out of the question
Northwest Resident on Wed, 5th Feb 2014 3:50 pm
Davy, like you, I am a regular and voracious reader of financial news. I’m no expert, but it doesn’t take an expert to fully understand that there are no “markets” anymore when it comes to investing. All the rules and regulations and controls that used to be adhered to in order to maintain a semblance of a risk/reward and open “market” for trading have been subverted and/or tossed out of the window. The basics don’t apply anymore because everything is being controlled and manipulated by unseen forces behind the curtain. Traders these days don’t look at long fact sheets and investment research anymore to determine the viability of a good investment — instead, they read the tea leaves and try to guess what the Fed is going to do, or if the shadow banking system is going to go bust or not. It is surreal. And it is that unseen heavy-handed force behind the curtain that has everybody scared shitless — we’re all waiting for that heavy hand to clench its fist and finally bring the big hammer down on this 100% fraud and manipulation based economic system. When (not if) that happens, the impact will be shattering worldwide, and investors know it.
Davy, Hermann, MO on Wed, 5th Feb 2014 4:02 pm
ghung on Wed, 5th Feb 2014 2:17 pm
hyperpersonalized shopping experience.“
Yea, NR, it will be like ghung mentioned in another article. It will be a hyperpersonalized shopping experience for the big banks and hedge funds.
J-Gav on Wed, 5th Feb 2014 5:06 pm
NW – 8 years ago I predicted to friends, family and colleagues the 2008 debacle. Reaction? Disbelief, of course. I also dared to peg 2016 as a pivotal year for an energy crunch (based on flow rates and EROEI). Since the tar-sand expansion and especially fracking have brought substantial production gains (for the moment), I’ve pulled back on that position and now say “by 2020.” – Not a big change. But I still think by 2016, we’ll have hit other limits which should make it clear to many more people just how far gone we are. That’s it for my “pompous prognostications.” You say, 2015. We’re in the same ballpark. Let’s hope that Casey doesn’t fan in the 9th inning …
Northwest Resident on Wed, 5th Feb 2014 5:54 pm
J-Gav — Back in 2008 the only thing I was predicting was that I would soon be lead guitar player in a rock and roll band, rocking out the roaring crowds at the local beer joints. We see how that prediction worked out…:-)
My “pompous prognostication” of 2015 is not based on my own detailed analysis, but on the prediction of the 2010 JOE which I have mentioned and posted links to on this board several times already. Actually, that prediction was just for a 10% oil/energy “shortfall” in 2015 — but if we get a 10% energy shortfall, then collapse isn’t far behind. When the U.S. Military strategic planners go out of their way to produce an unclassified version of a normally top secret document, and they say point blank that 2015 is when the shit is most likely going to hit the fan, I take that warning at face value. The fact that everything is on the verge of breaking or is already broken here at the beginning of 2014 just lends credence to the 2015 timeframe. 2016 would be just fine by me, as would 2017 or later. But I’m ready for 2015. It seems like the smart thing to do.
Davy, Hermann, MO on Wed, 5th Feb 2014 6:33 pm
J-Gav on Wed, 5th Feb 2014 5:06 pm
NW – 8 years ago I predicted to friends, family and colleagues the 2008 debacle. Reaction? Disbelief, of course.
Me too J-gav on 2008 predictions. I was also right on with the high oil prices too. I am not claiming credit I was just following what I thought was the truth read on multiple alternative sites. I have been at this peak oil thing since 2002 in a serious way. It was a bubble and bubbles pop. We are in a bubble now but a new normal so a bit different.
COLLAPSE-1ST STEP DOWN-CONTRACTION-DEPRESSION-WHATEVER
My view is anytime with finance and the glass ceiling is 2020 vicinity as above and below ground factors ravish the oil supply. I will not predict OIL prices nor will I predict the end of markets, dollar, and globalism. These are particular items and others that will end but predicting these endings is a roll of the dice. What I am predicting is a large step down in standard of living. I see it going near the depression level standard of living. It will be different because we have different infrastructure and a global system but the level of economic activity relative to now could drop to that level. I am basing this on wealth destroyed by the financial crisis, loss of oil supply, and social disruption. The financial crisis will decimate FIRE (finance/Insurance/Real Estate), Oil supply will drop to 1960 levels, social disruption will be something like post WWII.
Davy, Hermann, MO on Wed, 5th Feb 2014 6:38 pm
P.S that is 1st step down. Second step I am still formulating in my head. I guess it will depend on when this 1st step starts. I need to study how long cannibalism of infrastructure and the ravishing of the social fabric will take before the 2nd step is initiated. I would imagine 5 years or less after 1st step down
Stilgar Wilcox on Wed, 5th Feb 2014 7:21 pm
Davey wrote: “There are no plan B’s at the top I have seen.”
Those holding power and those with boatloads of money will (inho) hold onto status quo even after being briefed on how dire things could quickly get, ignoring all plan B’s. Oh, of course they will attempt something like a worldwide debt jubilee or some such rearrangement of finances when shtf, a sort of post collapse too late in the game desperate attempt at a plan B (which will include them holding power and their money), but the bottom line is seven billion vs. precipitously falling EROEI, coupled with at some juncture descending crude flow, is a no win situation.
My ballpark is 2017 for ensuing chaos. The system has proven more resilient than I had previously thought, so 2015 seems a bit early. But there is no question financial stress is being added all the time. What might be the tipping point is hard to know. Gail the Actuary says it will be rising interest rates leading to cascading defaults.
rollin on Wed, 5th Feb 2014 7:46 pm
There is no real growth of the economy, any growth in monetary value is really inflation. Since inflation is well above the listed “growth” that means that the economy is actually collapsing.
Money has become more and more separated from the realities of the world. Money is mostly a way to keep consumers buying products that add nothing to the society but feed the corporate gullet. Have you noticed that many products just tie the consumer into further expenditures, forever? A giant self-serving conspiracy.
Northwest Resident on Wed, 5th Feb 2014 7:50 pm
To hammer on a point again that hasn’t won any popularity contests, but which I feel is valid nonetheless:
It isn’t so much a matter of how long the economy and fossil fuel and BAU in general can be stretched out into the future before it starts falling apart under its own weight.
It is a matter of when TPTB have positioned all of their strategic assets and completed all their preparations.
The global economy is on life support, being artificially kept “alive” by unseen forces. None of the responses that we see being made to our global crises are long-term solutions — they are blatant short-term solutions. The goal is to simply buy time.
TPTB (political, industry, intelligence, military and financial elite) took nearly the whole world to war in Iraq all based on a well-coordinated set of lies (WMD, Yellow Cake, etc…). TPTB, whoever they are, have no incentive to burn up all the remaining accessible oil or further drive climate change to the brink of disaster, just to preserve the lives of seven billion “little people” for a few more years. It is coming to an end, sooner or later. If survival of TPTB and what’s left of the human race depends on bringing BAU to a close sooner rather than later, they’ll figure out a way to do it. And it shouldn’t be too difficult — just pull the life support and let things spin on their own from there. Easy.
J-Gav on Wed, 5th Feb 2014 8:37 pm
NW – Yep, BAU buys time – and we all know for who … That’s precisely why they’ll be going all out to extend and pretend as long as (in)humanly possible.
Davy, Hermann, MO on Wed, 5th Feb 2014 8:58 pm
It is a matter of when TPTB have positioned all of their strategic assets and completed all their preparations.
extend and pretend
My ballpark is 2017 for ensuing chaos. The system has proven more resilient than I had previously thought, so 2015 seems a bit early. But there is no question financial stress is being added all the time. What might be the tipping point is hard to know. Gail the Actuary says it will be rising interest rates leading to cascading defaults.
NR, we know these wealthies et all TPTB are not dumb. We can be comfortable in the fact that they will have their bunkers and private armies. They may lack moral though. It has been shown throughout history how less sophisticated and poorer people overrun societies. Rome, China, and Mayas to name a few. Germanic tribes, Mongolians, and Aztecs may have been called barbarians but they made hash of their adversaries.
Nice one J-Gav Extend and pretend until the average joe six pack realizes he has been bent over and delivered goods. Then they will run to the bunkers and let the rabble sort things out. When the dust clears they will use their resources to establish their local fiefdoms kinda like Afghanistan.
Stilgar, if this market blows then there is a good possibility you will be in the ballpark. I am like you it has amazed me how resilient the system is. I made serious preparations for a crash in 2008 and I almost timed it right then everything got better. So, looking back I made some unwise investments. Preparations are a gamble.
Newfie on Thu, 6th Feb 2014 12:02 am
Never ending growth is a fairy tale that most adults believe in. ROTFLMAO.