Back in early 2010, I published an article announcing that we were entering a new market in accounting BS. The primary premise behind this article was that as things deteriorated in the US, the Government would resort to greater and greater accounting gimmicks and other BS in order to generate positive GDP and other economic data points.
At that time I wrote:
…we’re going to see economic data become even more divorced from reality, assertions that the economy is back on track, and that at worst there is the specter of a “double-dip” recession looming. Heck, even these fears are sugar-coated… literally (making an economic nightmare sound like an ice-cream sundae is a genius marketing move).
However, the latest GDP numbers from the US have exceeded even my worst expectations of economic fudging.
For one thing, the Fed lowered the GDP implicit price deflator from 2.0% to 0.3%. In simple terms, they are claiming that prices for goods and services in the US FELL this quarter… at a time when oil went from $70 to $90 per barrel, and food prices hit record highs.
Why would they do this? Because understating inflation makes GDP look bigger. If you don’t account for prices rising, you can claim that you’ve seen REAL growth as opposed to simple price increases.
As an aside, remember than even the Fed’s ridiculous CPI measure was 2+% during the period that the GDP report claims prices FELL from 2% to 0.3%.
I wish this was the only lie in the Q4GDP number, but it’s not. The Fed also claims personal consumption expenditures ROSE in Q410.
That’s not a typo.
According to the BEA, consumer spending rose 4.4% last quarter… despite crap retail sales, record food prices, AND a drop in imports. And if 4.4% doesn’t sound like HUGE jump to you, consider it’s a 3-YEAR HIGH. That’s right, according to the BEA the last time consumers spent this much was 2007, BEFORE the Depression/ Financial Crisis began.
Honestly, at this point why does the Fed even bother trying to make GDP sound credible? If you’re going to just make stuff up, why not shoot for the moon? We could be posting GDP growth of 500% per quarter and employment at 200%. Why not simply REMOVE inflation from economic data? Just claim the dollar hasn’t moved - EVER.
That way the numbers would be just as bogus, but at least we’d get a laugh. And laughter’s about the only medicine we’ve got to deal with the disaster that is the US economy today.
I believe that the same situation unfolding in the Middle East and Europe right now will be hitting the US before the end of the year. I don’t mean a revolution necessarily, but riots and protests, as well as food shortages.
Indeed, if you think the US is immune to this situation, you're in for a very RUDE surprise in the coming months. Imagine the impact and oil price disruption would have on food? Most supermarkets only have enough inventory to last 48 hours. You think they’d be well stocked with oil at $200 per barrel when every trucking company in the US is bankrupt?