"Economists" were polled again and they say that the recently announced 3.5% spike in GDP is evidence the recession has ended. But Martin Weiss took that assessment to task today with a warning and some very astute analysis from John Williams and Jim Grant. The "recovery," they say, is a false dawn. Weiss goes so far as to call it a "hoax."
How did we get that 3.5%? Williams calculates that 1.7% was contributed by auto sales, the rush to trade in clunkers for free government money. Sales spiked to near normal levels for 30 days, then collapsed again after the "Cash for Clunkers" program expired. So the government simply bought 1.7% of the reported 3.5% increase. Another 0.6% came from subsidized housing construction. Housing construction? With 25 months of unsold housing and a raft of unprocessed foreclosures behind them, why in the world would anyone be building more new housing in this country? To be blunt then, we got another 0.6% by building something we simply don't need at all--wasted dollars. Lastly, Williams notes that another 0.9% came from companies replacing inventory. They were not ordering due to record low consumer spending, but now, with Christmas looming and inventories low, retailers had to order in new stock. Add that up and you get 3.2%, or almost all (92%) of the "recovery." And most of that was simply government stimulus.
So the real economy is not doing anything at all that an honest "economist" should consider healthy growth. Weiss quotes another analyst, Jim Grant, who estimates the government stimulus applied to try an stop this recession is 54 times greater than that applied to the Great Depression. In effect, we have the best recovery that government money can buy. But with deficits and total government debt now at truly staggering levels, how long can Uncle Sam continue to foot the bill?
Government spending cannot replace the real economy, and therefore an uptick largely dependent on government spending is, as Weiss puts it: "all part and parcel of the Great Recovery Hoax of 2009-2010."
Meanwhile nine more banks failed while we were all out celebrating Halloween and watching the Yankees working on another World Series. I was invited to a costume party in Carmel, one of California's most wealthy enclaves, where homes are still "offered" for multiple millions and art galleries abound. In the middle of a crowded bar filled with witches, headless ladies, ghosts, and other ghoulish figures, I looked out and saw a lone man, obviously homeless, pulling a small cart with a backpack filled with all his worldly possessions. It was an odd thing to see in a place like Carmel, and I'll admit that I wondered at first if he was really homeless, or if that was just his Halloween costume. Me? With only a few hours notice I decided to dress up as the most frightening thing I could possibly imagine. I donned my dockers and a nice navy blue blazer and went as a Wall Street Investment Banker. After all, they've done more damage to the nation than Godzilla, Rodan, King Kong, T-Rex or any other monster we've dreampt up.
So now the last of the Halloween candy will go on sale and the markets will stock up on turkey and pumpkin pie as we hurtle toward the next guidepost on the road to "recovery," Black Friday. It may have a new meaning this year if the "consumers" remain on their credit starved diet. Stay tuned.
How did we get that 3.5%? Williams calculates that 1.7% was contributed by auto sales, the rush to trade in clunkers for free government money. Sales spiked to near normal levels for 30 days, then collapsed again after the "Cash for Clunkers" program expired. So the government simply bought 1.7% of the reported 3.5% increase. Another 0.6% came from subsidized housing construction. Housing construction? With 25 months of unsold housing and a raft of unprocessed foreclosures behind them, why in the world would anyone be building more new housing in this country? To be blunt then, we got another 0.6% by building something we simply don't need at all--wasted dollars. Lastly, Williams notes that another 0.9% came from companies replacing inventory. They were not ordering due to record low consumer spending, but now, with Christmas looming and inventories low, retailers had to order in new stock. Add that up and you get 3.2%, or almost all (92%) of the "recovery." And most of that was simply government stimulus.
So the real economy is not doing anything at all that an honest "economist" should consider healthy growth. Weiss quotes another analyst, Jim Grant, who estimates the government stimulus applied to try an stop this recession is 54 times greater than that applied to the Great Depression. In effect, we have the best recovery that government money can buy. But with deficits and total government debt now at truly staggering levels, how long can Uncle Sam continue to foot the bill?
Government spending cannot replace the real economy, and therefore an uptick largely dependent on government spending is, as Weiss puts it: "all part and parcel of the Great Recovery Hoax of 2009-2010."
Meanwhile nine more banks failed while we were all out celebrating Halloween and watching the Yankees working on another World Series. I was invited to a costume party in Carmel, one of California's most wealthy enclaves, where homes are still "offered" for multiple millions and art galleries abound. In the middle of a crowded bar filled with witches, headless ladies, ghosts, and other ghoulish figures, I looked out and saw a lone man, obviously homeless, pulling a small cart with a backpack filled with all his worldly possessions. It was an odd thing to see in a place like Carmel, and I'll admit that I wondered at first if he was really homeless, or if that was just his Halloween costume. Me? With only a few hours notice I decided to dress up as the most frightening thing I could possibly imagine. I donned my dockers and a nice navy blue blazer and went as a Wall Street Investment Banker. After all, they've done more damage to the nation than Godzilla, Rodan, King Kong, T-Rex or any other monster we've dreampt up.
So now the last of the Halloween candy will go on sale and the markets will stock up on turkey and pumpkin pie as we hurtle toward the next guidepost on the road to "recovery," Black Friday. It may have a new meaning this year if the "consumers" remain on their credit starved diet. Stay tuned.
