Postponing the Economic Rapture?
A new commentary from Brian Wesbury and First Trust Advisors titled "Economic Rapture?"
"While the economy could be doing better, real GDP has expanded for seven straight quarters – we’re now in the eighth. Corporate profits are at a record; the S&P 500 is up 100% from the bottom; consumer spending is $450 billion above its pre-panic 2008 peak, and private sector payrolls have expanded for 15 straight months.
We are not in the majority, nor are we ignoring our economic problems. We just believe the economy did not come to an end back in 2008 and we do not believe recent growth has been created artificially. But a large, loud and sincere group is still convinced the economy is broken and fragile. They see the recent slowdown in economic growth – real GDP growth looks to be growing at only a 1.5% annual rate in Q2 – as another sign that it really has been the end of the economic world. Gloom and doom are back on the table.
Never mind that much of the slowdown is so obviously tied to temporary Japan-related disruptions in manufacturing and tornado-related dips in home building. That doesn’t matter if you really believe the end is near. But, when we move through these temporary problems, when auto production overcomes the parts-related slowdown and spikes back up at about a 100% annual rate in Q3, real GDP will sharply accelerate again.
At that point, we suppose that those predicting the end of the economy will postpone their forecast once again."
8 Comments:
never mind that the only reason we are reporting real gdp growth is because we are using such a low deflator.
at any time pre 1992, we would still be reporting a significant recession.
The Casinos in Tunica went over the cliff around the middle of Feb. The Tsunami didn't occur until Mar. 11.
The recession around here started when gasoline got up toward $3.50/gal.
I like Westbury, but he's whistling past the graveyard.
Postpone?!?!
Hasn't it been gaining steam?
Indexes have dropped 5 weeks in a row
From Gregor Macdonald: The Energy Limit Model
You can imagine the gargantuan size of the grain of salt with which I take these long only guys in whose interest it is to paint a rosy picture.
GDP tells us little about the economy and the seen is, well...easy to see. There is still a lot of regime uncertainty (hundreds of new regs are going to be dumped on us in the near future thanks to an SEC gone wild, Dodd-Frank and Obamacare alone). The Fed is printing money at breakneck speed and we've injected an astonishing amount of moral hazard into a system that was already rife with it.
Sorry, just because we are not in the middle of a giant collapse today doesn't mean that I have the luxury of ignoring the increased risks we're faced with.
I remember guys like this from years ago. They were the same ones who were justifying squashed credit spreads with something very similar to "risk isn't risky anymore". It's a paradigm shift, you see. Blue skies ahead. Oops.
I think the economy will continue its slow expansion. But it should be noted that Brian Wesbury has never had a bearish thought in his life.
In particular, he was very bullish on the economy all throughout the fourth quarter of 2007, and even into Q1 of 2008.
Never mind that much of the slowdown is so obviously tied to ...
What about the expected end of QE2 this month? I don't think people fully understand what QE2 accomplished and what its expected end is doing. 40 years after the fact most people attributed a large role to monetary policy in the two 1930s recessions; why not now?
never mind that the only reason we are reporting real gdp growth is because we are using such a low deflator.
Amen, brother!
The GDP is the Keynesians' made-to-order equation to "prove" how right they are. It's difficult, to be sure, to come up with a measurement for the economy's performance -- in fact, it may be impossible.
But the unemployment figures or the savings rate would be more accurate than this damned aggregate spending crap.
If you hunt around you will always find some permabull out there who never looks at the actual details or the reality. The fact is that the US slowdown began in 2005 and GDP has been negative ever since. While the BLS has been manipulating the data and misreporting reality, the average person, who has a better idea about prices, has noticed that the inflation rate is much higher than the official posted rate.
Yes, Bernanke can stimulate the economy for a year or two by sacrificing the USD's status as the official reserve currency used by the global banking system. Yes, the BLS can make things look better. But those games will not eliminate the malinvestments that have to be liquidated out of the system before a true recovery can take place.
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