Taking a Dip
On June 29th, Richard Clark stated that, “we’re headed for a double dip.” Here’s what he wrote:
“While mainstream economists are quick to believe that the US economy is growing,” Mr. Clark states, “as the key stock indices indicate to them, the fact is … that it isn’t. After the first estimates of gross domestic produce (GDP) for the US economy came out, a wave of optimism struck and stock markets rallied. It seemed as if everything was headed in the right direction. Not so. In its third and final revision of GDP, the Bureau of Economic Analysis (BEA) threw cold water on all that. It reported that the US economy grew at just 1.8% in the first quarter of 2013 from the fourth quarter of 2012 – that’s 25% lower than its previous (second) estimates, when the BEA said the US economy grew 2.4%. Even worse, it’s 28% lower from its first estimate of 2.5%.
“The primary reasons behind the decline in GDP growth are that domestic consumer spending and exports from the U.S. declined. Going forward, as wages stagnate and shrink for most consumers, and interest rates rise, it looks like continued dismal consumer spending for the U.S. economy.
“Economics 101: When interest rates increase, consumer spending declines, because it costs the consumer more to borrow, so they step back from buying. Problem is, consumer spending is the backbone of any growth in the U.S. economy. If it decreases, our economic growth prospects begin to pale.
“Reality Check: What we have seen in the past few weeks are skyrocketing yields on U.S. bonds – suggesting that long-term interest rates are rising. The effects of this will eventually trickle down to places where consumers in the U.S. economy borrow in order to buy. Just one example of this kind of ‘place’ is the automobile sector. So consider this: Car and light truck sales were on path to increase beyond 15 million units in the U.S. economy – whereas in 2009, they stood at 10.4 million. But will consumer interest on cars be the same if interest rates on car loans increase? Of course not.
“And then there’s the second major threat to consumer spending – unemployment and underemployment. In May, there were 1,301 mass layoffs in the U.S. economy, involving 127,821 workers, an increase of 8.5% over April. When a person is unemployed, their spending is of course down and large credit purchases like cars go by the wayside.
“Conclusion: The optimism of many economic observers is based on nothing but blind hope. Once the hangover from the Fed’s easy-money policies goes away, U.S. GDP numbers will turn negative. And yes, that means back to recession.” –
[Speaking of “blind hope,” we’re not “going back to recession” – we’re plunging headlong into another Great Depression. Key stock indices – declining GDP growth – declining exports – rising interest rates … those terms mean nothing to the average American. A steady paycheck is all that matters. Consumers don’t stop buying when credit isn’t available – consumers stop buying when a paycheck isn’t available. The U.S. needs to create 50 million new jobs. That’s “Economics 101!]