Thursday, April 28, 2011

The Little Economic Engine That Could

There's massive trouble in US land -
US economic growth slowed sharply in the first quarter to a 1.8 percent pace as governments slashed spending, the Commerce Department said Thursday.

After the growth hummed at a 3.1 percent pace in the fourth quarter of 2010, the department's first estimate for the January-March period showed weakness in the recovery from the 2008-2009 recession.

A 7.9 percent cut in federal government spending, and a 3.3 percent cut in spending by local authorities, were factors in the slowdown.

Also contributing was the sharp rise in fuel and food commodity prices, which slowed personal consumption growth to 2.7 percent from a 4.0 percent pace in the previous quarter.
In addition -

The dollar has yet to descend into a full-blown crisis but market watchers warn that ultra-loose U.S. monetary policy means that one could quickly materialize if the slide in the greenback gathers pace.

The dollar has dropped to new lows since Federal Reserve Chairman Ben Bernanke effectively slapped a sell sign on the currency Wednesday, with the greenback hitting historic lows against the Australian dollar and Swiss franc, and even to a major low point against the euro, which is hobbled by an ugly debt crisis.
The Real Effect
The Federal Reserve has thrown trillions of dollars at the downturn and the best that this has done is slow it down at the cost of making the plunge that much deeper. Proving once again, never underestimate the ability or sheer tenacity of crooks to hang on to their ill-gotten gains.

There are several important points in regards to the GDP. First, note the revision on the preliminary estimate. Second, note that this is an advance number, a guess if you will. Third, prior GDP numbers are being revised downwards. Finally, how many of the 'economic recovery' predictions used in countless government, company and individual balance sheets are now shot because the Feds lied?

No doubt that this will be spun as the recovery running out of steam. Ladies and gentlemen, there has been no recovery.  There is only a corpse of an economy, rotting away and occasionally twitching with the massive stimulus being applied.

Now the Fed is in a real pickle. Note the bottom of the first article which indicates that a "sharp rise" (cough - inflation) in  gas prices and food effected the recovery? This a direct result of the Federal Reserve's Quantitative Easing (Money printing) policy. This drives the economic numbers that we see, but it's now transforming the once bristling American economy into a zombie economy.

With silver and gold hitting record highs daily, the dollar hitting record lows, numerous wars and a government that has run out of maneuvering room watch for the "rules" to be thrown out the window. When survival is at stake, people get kind of weird. Watch for the Feds to begin locking their power down through edicts, regulations and dictates. Watch for states to start asserting authority and sovereignty, giving the Feds all the more reason to lock down further. But most importantly, look for cherished beliefs such as equality and diversity go out the window post haste as everyone makes a mad grab for their slice of the loot.

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