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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Andy Sutton
September 7, 2011
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Last week the Commerce Department released its revised numbers for Quarter 2 GDP. The results were much less than satisfactory, with annualized ‘growth’ coming in at a pathetic 1.0%. Think of this as an economic stall speed. We know the GDP deflator allows the metric to be overstated to begin with, so it is VERY likely that America has re-entered the ‘great recession’ as it has been dubbed by the media. There are some burning issues in here that need to be discussed and they go way beyond the methodology of how GDP is calculated. I will end with the assertion, backed with output methodology, that is at least as reliable as what the Commerce Dept. offers that we never left the great recession.

Ben Bernanke, the official spokesman for Bankers, Inc. was quick to pontificate from Jackson Hole Wyoming that the second half of the year bodes very well for GDP and economic growth in general. This is where the shuck and jive starts. What nearly all commentators are missing here is that USGovt borrowing nearly ceased in the second quarter. On the surface, that might look positive, because it would indicate that a greater percentage of that 1% growth was real; that the economy was actually able to stand on its own, if even in a very small way. This is where the price deflator comes in. The GDP price index came in at a very tepid 2.4% in the second quarter of 2011 after coming in at 2.3% in the prior quarter. This number is a complete fabrication in that it certainly doesn’t properly discount the impact of price increases experienced on Main Street. Inflation metrics have been understating inflation for years in order to rip off transfer payment recipients. For example, the last SocSec cost of living adjustment came three years ago. Does anyone believe that the cost of living has remained unchanged in 3 years? The CPI, Core CPI and GDP price index have been manipulated to discount inflation and by definition, to overstate economic growth. Failing to properly discount for inflation is more than likely responsible for all of the 1% growth experienced in Q2 – and then some. I’ll provide more substantiation for that opinion a bit later.

Now the second part of the shuck and jive. Bernanke and everyone else knows what happened when the debt ceiling was raised. The government went on a borrowing binge, adding around $400 billion to the public debt within days of the bill’s signing. This bolus of new debt was pumped into the economy, and will go right into Q3 GDP calculations. When Q3 GDP shows a boost, Bernanke will get up in front of Congress, smile, and talk about how the Fed’s policies actually work, how government action is the best way to generate economic growth, and, by the way, please give us more power to create even better GDP results moving forward. Washington politicians who are hooked on the idea of a centrally planned economy will do the same. Think I’m cynical? Watch what happens.  The overall lack of jobs will only be of minor concern, but enough to likely justify another ‘stimulus’ attempt at some point before the elections next year. They’re already cooking up something to bail out underwater homeowners, calling that a stimulus.

Let’s go out a bit further. There is now an economic kill-switch built into our economy in the form of massive (and allegedly mandatory) spending cuts. These cuts need to be agreed on and passed before Thanksgiving or else automatic cuts will be triggered. So either way, some of the cookies and candy ought to be coming out of the equation in Q4. Has anyone noticed that very little attention was given to this reality? The debt ceiling deal has long been forgotten and we haven’t felt even a single nudge from the negative consequences yet. So we see a boost of GDP in Q3, and likely Q4 as well from the increased borrowing. The massive budget deficits are still firmly in place and are being built on daily. Once the mandatory cuts take place, GDP drops, depending on the timing of the cuts. However, it is very likely that through manipulation of the GDP price index, that an official recession will be avoided – in governmentspeak at least.