THE DOT - if this turns orange or red be alert

Thursday, July 31, 2008

ain't that sweet - now they come with the recession

Suddenly we get the long hidden recession numbers. What a pity that all their obvious obscure assumptions turned out to be not worthwhile. Market manipulation by the Bush government is one of the most outrageous factors and one of their biggest accomplishments. They created bubbles in all asset classes with oil mentioned as their biggest accomplishment. A recent report by the pentagon claims that the additional 30k soldiers accomplished returning Iraqi oil production to the highest output in 5 years. One tril. taxpayer dollars and 4,117 soldiers having been invested so far and the 3rd richest oil reserves are secured for US oil companies not for the taxpayer who finances the war against the "evil forces" (although it is not so clear who were the evil ones).

So 4th quarter 07 contracted by 0.2 - well that still does not match reality, since adjusted by real inflation, America is in a recession ever since then. If you take a low inflation number, part of the real inflation might look like growth but is nothing but inflation. Most of the consumer spending rises came not from real higher spending but higher prices for goods and usually would have to be matched by rising salaries. The substantial lower inflation statistics compared to real inflation gave the winning edge for companies and government to underpay, hence the buying power was constantly shrinking. As long as the wealth effect by rising house prices and stocks were creating illusion of more buying power, people seemed not to have cared about it. Now that might change going forward.

Excerpt from Bloomberg

U.S. Recession May Have Begun in Last Quarter of 2007 (Update2)

By Timothy R. Homan

July 31 (Bloomberg) -- The U.S. economy may have tipped into a recession in the last three months of 2007 as consumer spending slowed more than previously estimated and the housing slump worsened, revised government figures showed.

The world's largest economy contracted at a 0.2 percent annual pace in the fourth quarter of last year compared with a previously reported 0.6 percent gain, the Commerce Department said today in Washington. Growth for the period from 2005 through 2007 was also trimmed.

The revisions now reinforce measures such as employment and production that already signaled the economy was shrinking. The National Bureau of Economic Research, the Cambridge, Massachusetts-based arbiter of economic cycles, defines a recession as a ``significant'' decrease in activity over a sustained period of time. The declines would be visible in GDP, payrolls, production, sales and incomes.

``We're in a recession,'' Allen Sinai, chief economist at Decision Economics Inc. in New York, said in a Bloomberg Television interview. ``It's going to widen, it's going to deepen.''

The government also said incomes grew less than previously thought, raising the risk that consumer spending will again stumble after getting a temporary boost from the tax rebates last quarter.

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