GDPNow vs Blue Chip
The GDPNow forecast started at 0.3% it has steadily risen to 2.1%. The Blue Chip Forecast went the other way.
GDPNow vs Nowcast
Nowcast did its usual flatline over most of the same timeline while GDP has done a steady climb starting March 12.
Mike “Mish” Shedlock
GDP is a crappy measure of production and “growth,” because it mostly measures spending. Spending/investing may be productive OR destructive. You simply cannot measure productivity by measuring the amount of spending. Lots of money was spent/invested in 1999 on .com’s, and in 2006 on real estate, but these were net capital destructive activities. When people and businesses are incentivized to save less and consume more, GDP gets goosed even though the reality is that capital is being burned up.
I think GDP institutionalizes the broken window fallacy. As long as people believe it measures economic health, it’s a useful statistic for governments and central banks to justify net-destructive policies that make the elite class relatively richer while keeping everyone else running on the treadmill trying to stay ahead of debt-slavery.
The disappearance of yield since 1980 (as in, why are my kids’ bank savings accounts SHRINKING 2%+ after CPI) shows that the powers-that-be machine has become very good at masking capital destruction as “growth.”
Not only does GDP measure something very different from growth, it also measures it in an official “meter” that a gaggle of privileged twits gets to arbitrarily and at their discretion, change to best suit the reading they want to achieve.
All one needs to know is that when govt grows GDP declines, and govt continues to grow. Even the OECD has conducted studies that prove this point.
Fortunatley, govt’s are running out of other people’s money, including those willing to buy unbacked govt debt.
Those in govt live in a state of denial, which drives their hypocritical Socialist agenda. They claim the “rich” are greedy, but it is their actions that are based on material jealousy and greed. What else justifies robbing other people, who may have more than they wish they had? What else explains AOC owing back taxes from over five years ago, while complaining about the rich not paying enough tax? Even the 10th Commandment says you should not covet your neighbors stuff. Maybe this is why so many Libs also loath religion.
Shrink govt and anialate the Left’s agenda, and GDP will expand, which raises everyone’s boat.
‘Fortunatley, govt’s are running out of other people’s money, including those willing to buy unbacked govt debt’
Is there a strike against NOT buying US treasury bills/ bonds by others so far? NONE
Why? There are almost 10 Trillions in Europe + outside earning NRP!
US currency is the LEAST dirty sheet and TINA!
Now, but not starting in 2020. In Europe the ECB is already buying over 90% of the member countries debt. Nobody in the right mind would buy Japan or Europe’s debt now, and then the focus will turn to the insolvency of the US, which will be obvious when rates start rising again. The coming recession will get the last of the bond bag holders on board, and then the no bid gap ups in yield will trap everyone who thought treasuries were safe.
As long as liquidity preferences remain, rates will remain low and have no correlation to government debt levels. Mouth breathers like Blacklisted have claimed “rates have nowhere to go but up” and “investors are going to sell off UST’s” for years now and each year it doesnt yall keep saying itll come the following.
Heed the monetary truth laid out by Milton Friedman:
“Higher rates are associated when money has been plentiful; lower rates are when money has been tighter”
While I have been forced to breath out of my mouth due to a nagging bad cold, I do not resort to name calling just because someone has not yet discovered the truth. With many so-called experts spouting THEORIES that have NOT withstood the test of time, it is easy to get misled. Even Snider and Freidmen acknowledged the flaws of these antiquated theories that believe increasing the money supply leads to inflation.
Also, I never claimed “rates have nowhere to go but up” and “investors are going to sell off UST’s” for years now”.
From a broad perspective, rates had nowhere to go but down since the Volcker high, but that does not mean there were not bounces as they stair-stepped downward. The reality is rates reached their 5000-year low a couple of years ago, and have started their stair-step higher. That does not mean there won’t be pull backs in yield. After all, there are more bond bag holders to be had before the confidence rug gets yanked. Unfortunately, it’s CB’s and govt (pensions, Social Security, and other agencies) that will get stuck holding the bag.
Think about it, If these monetarist theories worked, the omnipotent central bankers would not be so wrong for so long. Even Snider scoffs at their logic around QE, when he stated “QE worked because it lowered interest rates, huh?”.
The mere BELIEF that lowering rates will stimulate growth and produce higher rates and inflation is proof these witch doctors do not understand the role of confidence and global capital flows on their precious theories. Again, Snider often points out how flawed their math/faith-based models are, which Jim Sinclare would call MOPE (Mgmt Of Perspect Economics).
So, what was your point of quoting Friedman, who later admitted he missed this one – “Higher rates are associated when money has been plentiful; lower rates are when money has been tighter”.
Central bankers in Japan, Europe, and the US have proven this BELIEF is WRONG, after 10 years of QE.
CB’s, and politicians alike, have long believed they could suspend the business cycle, even though Paul Volcker wrote that he “rediscover the business cycle” that economists were convinced was not inevitable. It would be one thing if these theoreticians only believed we were sheep to be manipulated, but what makes them so dangerous is they truly think they have the right and mental capacity to manipulate the unwashed, ignoring the reality of the Invisible Hand.
I love Friedman’s articulation of human nature’s impact on economics, but even Friedman missed some important factors, as a result of the time his theories were developed.
The major problem with Quantity of Money Theory (QTM) is they were formulated during a time when govt was a much smaller proportion of the economy. Today, govt is 40% of the economy and their massive deficit spending is crowding out the capital that would normally go into the private sector. We also now live in a time when debt is money, as Treasuries can be posted as collateral. Since 1971, money is just debt that pays interest, which means interest expense continues to grow as you print. Govt should now simply print the money without interest, but their donors on Wall Street may not approve. The other main factors that invalidate these theories is they do not comprehend global capital flows, and the importance of confidence.
Artificially low rates has forced the big money into stocks, real estate, risky debt, and other illiquid assets, which is elevating an already severe crisis in liquidity. All it will take is a whiff of concern that a country like Turkey will default, and the stampede out of bonds will begin. Even though the loss of confidence has not yet reached main street, the velocity of money is at record lows, even with all of the QE, which also explains why CB’s have failed to create inflation and the gold bugs have been dead wrong.
When the confidence domino falls, which the establishment is doing their best to topple, the sucking sound out of govt bonds into private assets will explode the heads of theorists and mute the talking heads that rely on simple one-variable, linear thinking.
I would start with at least the first few posts below from Armstrong, or search his site to begin your re-education process.
The Federal deficit is running at 5%+ of GDP, yet GDP grows by just 1.5%-2.0%.
Doesn’t seem like much “bang for the buck”, to say the least.
When the majority of the budget is spent on war and wall street kickbacks it’s not surprising there is so little bang for buck.
Everything is closing or goin out of business (that not gov’t subsidized),so what gonna drive that pathetic growth?Ah Ah moar wait for it…….GOV’T!! which means soaring taxes, fees,borrowing,states are desperate for revenue,nothin off the table…………tax man is comin with a vengeance!!!