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EmailFriday, February 5, 2010
Executive Summary
- Recent economic news comes in three flavors: good, bad, and ugly.
- GDP, retail sales, and manufacturing surveys point up.
- Petroleum use has dropped to the same level it was at in the late 1990s, pointing down.
- State sales tax receipts, unemployment, and the federal budget deficit are ugly.
- The current expansionary track of monetary printing and deficit spending will continue until something external forces a contraction.
Today we are experiencing many confusing and conflicting signals in the economy. Perhaps conflicting signals are normal at a major turning point, and therefore we might be tempted to believe that we are about to embark on another vigorous leg of economic expansion.
Here we'll explore these conflicting signals and see what we can make of them.
Before we do, I want you to recall that I am of the opinion that the trillions of dollars (and yen, and euros, and rubles, and yuan, and so forth) will someday come racing out of their big-bank holding pens and ignite something that will look and feel just like an economic rally. For a little while. Then, raging inflation and an energy crisis will ensue. Given this outlook, I view any economic respite from the decline, no matter how falsely derived, to be a gift of time, allowing us the opportunity to continue to build the economic, physical, and emotional resilience in our lives and the lives of those around us.
You should be using this time to get ready for the next period of adjustment, which I expect to be both longer-lasting and more profound than the previous one.
However, in terms of parsing our existing situation so that we can maintain an appropriate outlook on where we are and where we are headed, there is much to be gained by keeping a close eye on current economic statistics.
Your faithful information scout,
Chris Martenson
Copyright 2010, Chris Martenson. All rights reserved.
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Comments
Good read Chris. I really like how you looked at the data from the point of view of energy - it's a great gut check on the numbers being thrown around.
However, I'm not sure even the 'Good' data is so great. For instance, same-store sales are up 3...
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Good read, thanks!
Chris wrote:
Petroleum use is back to the same level it was at in the late 1990s.
Here we might note that the economy was only $8.8 trillion dollars in 1998, yet today it is allegedly $14.3 trillion, some 62% larger. One explanation is that during a massive crisis we've managed to increase our petroleum efficiency by an incredible amount...
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Tom, good point.
On a constant dollar basis the economy is 26% larger today than in 1998. Of course, if true inflation was higher than reported inflation, this number will shrink accordingly.
In response to this report, reader Bill pointed me to an excellent piece by Eric Jantzen (who I had the distinct pleasure of meeting at the ASPO conference last year) that does a spectacular job of tearing apart the PCE mystery...
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Chris,
Great insight.
Is it possible that a factor in the sales tax reciepts dropping could be the stop of constuction in the housing industry. In our state, when a new home is sold by a builder they pay sales tax at the closing and when the the housing market crashed the sales tax from the sale of new homes stopped...
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The drop in oil and fuel consumption is not surprising.
Far fewer people are employed so they are not going to work. Air travel in terms of airline miles and passenger miles are way off. Manufacturing has always been the largest consumer of gas and oil and the have moved to China...
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One more thing, if you want a better measure of the economy, measure GDP against oil and gas prices, not the CPI or PPI deflators. Don't have the numbers in front of me, but I would venture that in spite of population growth, the economy is stagnant...
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Chris,
Perhaps it is time for ChrisMartenson.com to begin publishing the Official Shadow Numbers for several of the govern-ment fudged economic stats. e.g. GDP, Unemployment, Inflation Rate, National Debt per generally accepted accounting standards, and publishing them the day after the governments numbers are sent out as a trial balloon...
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Chris,
Couldn't agree more.
After the market saw through the "reported unemployment" numbers yesterday I was befuddled by the final hour surge in the market. Then I saw that the Fed purchased another net $12 billion in agency (Fannie and Freddie) garbage and it makes me wonder if this freshly minted money was used to prop up the market...
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