“Products are paid for with products,” said Jean-Baptiste Say.
He meant, that if you want to get something, you’d better have something you can trade for it.
What then, would he make of America’s latest GDP report?
Last week brought two important bits of information: one deceptive, the other fraudulent.
The deceptive news was that the Fed, in its last Ben Bernanke moment, said it would stay the course. The course in question is the 12-step ‘Counterfeiters Anonymous’ programme popularly known as ‘tapering off‘.
The Fed says it will stay on it. By doing so, it has deceived investors into believing either that the central bank’s PhDs were steadfast in their commitment to get rid of quantitative easing (QE), or that the economy was healthy enough that it didn’t need it. Neither of those things is true.
Meanwhile, the US economy grew at a 3.2% annual pace in the last quarter of 2013, still the weakest ‘recovery’ ever recorded. But since 1950 the composition of the US economy has changed so substantially that GDP ‘growth’ no longer means what it used to mean.
“Disappointing numbers on jobs and housing also raise concerns about whether the economy is accelerating,” reports the WSJ.
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Wait. Jobs and housing are fairly important. If the news from those quarters is disappointing, what’s really up with the economy?
Then, the explanation: “A big driver of growth in the fourth quarter was consumer spending, which grew 3.3%.”
The WSJ then quotes Bill Simon, Walmart’s USA CEO: “I never cease to be amazed at the American consumers. They figure out ways to make it work…”
We are not so much amazed as appalled. And we are not so much reassured at this ‘recovery’, however weak, as we are alarmed by it. Where did consumers get the money?
They didn’t earn it, so they had to “run down their balance sheets”, either by spending their savings, or borrowing. That makes this a new kind of growth; the more you get the poorer you are.
The economy used to grow by making people wealthier. Now, consumers go further into debt, while their incomes are stagnant or falling.
In 1980, a $7trn economy included $2trn of what Tim Morgan calls “globally marketable output” (GMO) – real wealth, the kind of stuff you can sell to pay your bills. But then, the economy underwent plastic surgery at the hands of quack policy-makers. Now, it’s almost unrecognisable.
Today, we have a $16trn economy. But how much of that is GMO? Well, about $13trn is consumer spending. And various statistical adjustments. Only $3trn is what Mr Morgan calls GMO.
That’s the real growth of the US economy since 1980 – a piddly, pathetic $30bn a year. Barely enough to keep up with population increases.
Growth? Forget it.
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