GDP

2.9 Percent GDP Contraction Casts Doubt On Sustainability Of Economic ‘Recovery’

Remember that U.S. GDP “hiccup” from the first quarter?

It’s been revised. And let me just tell you, barf-o-rama baby. Barf-o-rama.

From a Reuters piece on the CNBC website earlier today:

The U.S. economy contracted at a much steeper pace than previously estimated in the first quarter, but there are indications that growth has since rebounded strongly.

The Commerce Department said on Wednesday gross domestic product fell at a 2.9 percent annual rate, the economy’s worst performance in five years, instead of the 1.0 percent pace it had reported last month.

While the economy’s woes have been largely blamed on an unusually cold winter, the magnitude of the revisions suggest other factors at play beyond the weather

(Editor’s note: Bold added for emphasis)

Wow, did I just read that last part right? Usually the MSM plays along with that oft-used weather excuse as bad government economic reports are concerned.

The general feeling I’m getting tonight from mainstream media outlets is one of “don’t worry, be happy.” Of course, damage control is in overdrive. Jeffry Bartash reported on the MarketWatch website:

The revised GDP report briefly stunned Wall Street and clearly unsettled the White House. President Obama’s chief economic adviser, Jason Furman, cast doubt on the report and argued the economy is much stronger than the first-quarter contraction implied.

Investors, for their part, shrugged off the backward-looking report. The economy appears to have rebounded in the second quarter and economists polled by MarketWatch predict growth will turn positive again, with a 3.8% increase…

(Editor’s note: Bold added for emphasis)

3.8 percent increase in GDP in the second quarter? After revisions? It will be interesting to see if they’re right.

Personally, I feel that abysmal first quarter GDP report is a worrisome sign the sustained economic “recovery” we keep being told about is getting long in the tooth.

“Taper” to go full reverse soon, like “crash prophet” Peter Schiff has been predicting?

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

“Bad to worse: US economy shrank more than expected in Q1.” Reuters. 25 June 2014. (http://www.cnbc.com/id/101787838). 25 June 2014.

Bartash, Jeffry. “Economy’s stumble in first quarter historic.” MarketWatch. 25 June 2014. (http://www.marketwatch.com/story/us-growth-contracted-29-in-first-quarter-2014-06-25). 25 June 2014.

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Peter Schiff: ‘We Have An Entire Economy That Is Supported On A Foundation Of Bubbles’

Tonight I watched Peter Schiff’s presentation at the MoneyShow Las Vegas back on May 12, 2014. The CEO and Chief Global Strategist of Euro Pacific Capital shared his current assessment of the U.S. financial landscape in “Too Big to Bail: Why the Next Financial Crisis Will Be Worse Than the Last”- as well as where he thinks we’re heading. Schiff warned attendees:

There is no economic recovery in the United States at all. There is no evidence of an economic recovery. The U.S. economy is in far worse shape than it was on the eve of the 2008 financial crisis. We have never been in as worse shape as we are right now. But they say, “Whoa! But the stock market went up.” Yeah, of course the stock market went up. You print enough money, you can make the stock market go up. Yes, the Federal Reserve succeeded in reflating the stock market bubble. But that’s all that it did. That isn’t evidence of a strong economy. Stock prices went up from 2002 to 2007. Does that mean we had a sound economy? No. We were on the verge of a complete implosion. The main difference though between the stock market bubble that we have today and the one that blew up, let’s say, in 2000, is that fewer individuals are participating. This is the bubble for the 1 percent. This is for the hedge funds, the private equity guys… The overwhelming concentration of buyers are very wealthy people. The average American is not participating in the stock market to the extent that he was in the 1990s. And so the Fed is not getting the boost to consumption that you would normally have from the wealth effect because a lot of people aren’t feeling the effects of the wealth because they don’t own stocks.

The same thing is happening in the real estate bubble, which the Fed has managed to reflate. The difference again between the real estate bubble we have now and the real estate bubble that popped in 2007 is again- the average American isn’t participating. Home ownership rates are at 19-year lows. You have hedge funds and private equity companies that are buying up real estate. Last month, I think 43 percent of all the properties purchased in America were purchased for cash. These are not typical Americans buying houses to live in. These are investors buying houses to flip, buying houses to rent out. This is not a healthy market. It is an extremely speculative real estate market thanks to the Federal Reserve.

So the Federal Reserve has managed to reflate two bubbles simultaneously.

And of course, the biggest bubble of them all is the bubble in the bond market.

So we have an entire economy that is supported on a foundation of bubbles…


“Peter Schiff at Las Vegas Moneyshow 2014”
YouTube Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Peter Schiff: U.S. GDP Fell From 2.8 Percent In 2012 To 1.9 Percent In 2013

“Investor Warren Buffett says the economy continues the steady improvement that began in fall of 2009 and he remains optimistic despite Russia’s advance into Ukraine.

Buffett appeared on the business cable channel CNBC Monday morning after releasing an upbeat annual letter to his Berkshire Hathaway Inc. shareholders over the weekend. Buffett is chairman and CEO of the Omaha, Neb., conglomerate.

Buffett said the reports he gets from Berkshire’s 80-odd subsidiaries in a variety of industries show that the economy is growing at a moderate rate, despite swings in investors’ mood.

“The American economy for five years has been moving at a fairly steady rate upwards —not as fast as people would like — but I think that absolutely continues now,” he said…”

-Associated Press, March 3, 2014

Well-known stock investor Warren Buffett has been bullish on the U.S. economy for some time now. Not so for a number of the “crash prophets,” including Peter Schiff. The Euro Pacific Capital CEO and Chief Global Strategist added a new entry Friday on his YouTube video blog The Schiff Report where he pointed out that U.S. GDP numbers for the past two years tell a different tale than the one Buffett shared with CNBC viewers this morning. Schiff observed:

The GDP numbers that were released today for the fourth quarter the government came back and revised down. It was a downward revision to fourth quarter GDP. They originally told us the economy grew by 3.2 percent in the fourth quarter. And today, they revised that down to just 2.4 percent. 2.4 percent.

Now, if you look at the entire year of 2013, the GDP grew by 1.9 percent. For the year.

In 2012- the prior year- the GDP grew by 2.8 percent.

Now, wait a minute. President Obama said in his many speeches in late 2013 that this is the year the recovery became real. That we finally have the real recovery that he’s been promising.

Well wait a minute. If GDP in 2013 was up by 1.9 percent, but it was up by 2.8 percent in the year before when the recovery wasn’t real- how is the recovery more real when the economy is growing more slowly now than it was before?


“Recovery Fantasy Persists Despite Contrary Data”
YouTube Video

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Monday, March 3rd, 2014 Crash Prophets, GDP, Recovery No Comments

Updated Pandemic Flu Model: Around 95 Million Americans Ill, 2.4 Million Dead

“Autumn is the hush before winter.”

-French proverb

In case you weren’t aware, autumn began today, September 22, at 4:44 ET. Fall is my favorite season of the year, when I try to get outdoors as much as I can. The next month or so will also be a time when I’ll be working hard getting prepared for my first winter in the new house- including stocking up on items to fend off/address a cold or the flu.

Speaking of influenza, the LiveScience website ran a piece this last week which served as a reminder of what could be in store for us one of these winters- a time when people are indoors and in closer proximity to each other, making catching the flu a whole lot easier. Tia Ghose wrote on Tuesday:

A recently declassified U.S. government plan for how to react in the face of a pandemic flu has some scary, but realistic predictions.

According to a 2009 Department of Defense plan, if a flu pandemic strikes, about 30 percent of the U.S. population could fall ill, with 3 million hospitalizations and 2 million deaths. Basic services, such as medical care or essential supply deliveries, will probably be disrupted.

In the plan, the government also says it assumes that a vaccine against a completely new flu strain wouldn’t become available for several months. Even after that, production will ramp up slowly.

(Editor’s note: Italics added for emphasis)

According to Ghose, a flu expert at St. Jude Children’s Research Hospital out in Memphis, Tennessee, backed-up those DOD projections.

Scary.

Back in March 2007, the non-profit, non-partisan Trust for America’s Health (TFAH) released a well-known report on the matter entitled Pandemic Flu and Potential for U.S. Economic Recession in which they said:

According to analyses by 3 major financial and economic research institutions, during a severe pandemic flu outbreak, the U.S. Gross Domestic Product (GDP) could drop between 4.25 and 6 percent. A “severe” outbreak is based on the 1918 pandemic, when 30 percent of the population became ill and 2.5 percent of those who became ill died. In modern times, this would translate into approximately 90 million Americans becoming ill and roughly 2.25 million deaths. An outbreak of this severity would almost certainly lead to a major economic recession.

(Editor’s note: Italics added for emphasis)

The Washington, D.C.-based organization added:

The CBO, the ANU/Lowy Institute, and BMO Nesbitt Burns developed national assumptions about what would constitute a “severe” or “ultra” pandemic outbreak, using estimates of a 30 percent attack rate and 2.5 percent case-fatality rate under “severe” and “ultra” scenarios. In 2005, the national population was nearly 300 million people. With these estimates, approximately 90 million people would get ill, and of those 90 million, roughly 2.25 million would die.

As I type this, the U.S. Census “Population Clock” says the national population is 316,736,690 persons. Updating the above model using the more recent 2010 Census data would show around 95 million Americans possibly falling ill from pandemic flu, with 2.4 million of those stricken potentially dying.

You can read that 2009 Department of Defense plan, “USNORTHCOM CONPLAN 3551-09, Concept Plan to Synchronize DOD Pandemic Influenza Planning, 13 Aug 2009,” via the LiveScience website here (.pdf format).

In addition, you can read the March 2007 TFAH report on their website here (.pdf format).

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Ghose, Tia. “Pandemic Flu Plan Predicts 30% of US Could Fall Ill.” LiveScience. 17 Sep. 2013. (http://www.livescience.com/39704-overnment-flu-pandemic-plan-revealed.html). 22 Sep. 2013.

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Peter Schiff Calls ‘New’ GDP ‘Propaganda’

“GDP Increased at 1.7 Percent Annual Rate, Higher Than Expectations”
-ABC News website, July 31, 2013

“US Economy: GDP Surprises, And Hiring Rises In July”
-NPR website, Jul 31, 2013

“Economy expands at brisk pace in 2nd quarter, defying gloom”
-NBC News website, July 31, 2013

I wouldn’t have expected anything less from NBC these days with their headline about the latest “National Income and Product Accounts, Gross Domestic Product, second quarter 2013 (advance estimate)” report.

In other words, the GDP report that was released on July 31.

From the U.S. Department of Commerce, Bureau of Economic Analysis:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 1.7 percent in the second quarter of 2013 (that is, from the first quarter to the second quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the first quarter, real GDP increased 1.1 percent (revised).

2nd quarter GDP grew at an annual rate of 1.7 percent. Check.

1st quarter GDP revised down to 1.1 percent. Check.

(Editor’s note: Is it me, or is GDP routinely getting revised downward?)

But what’s this about a “Comprehensive Revision: 1929 through 1st quarter 2013” I saw in the report headline?

A little farther down the page there’s this:

Comprehensive Revision of the National Income and Product Accounts

The estimates released today reflect the results of the 14th comprehensive (or benchmark) revision of the national income and product accounts (NIPAs) in conjunction with the second quarter 2013 “advance” estimate. More information on the revision is available on BEA’s Web site at www.bea.gov/gdp-revisions.

(Editor’s note: Italics added for emphasis)

A “revision.” I’d heard talk about this revision to how U.S. gross domestic product would be calculated starting in the 2nd quarter and going forward.

Not all of it positive.

Enter Peter Schiff. The “crash prophet” spent a good deal of time discussing this revision in his latest entry on his YouTube video blog, The Schiff Report. The CEO and Chief Global Strategist of Euro Pacific Capital said last Friday:

If you’re going to believe in GDP, what we have now- what the government is now reporting- is not GDP. It’s something brand new that the government just made up. But they’re going to pretend it’s GDP… they have changed the methodology of calculating GDP, to produce a bigger number. Why does the government want a bigger number? To make the economy look like it’s bigger. Therefore, if you take a look at all of our debt, relative to our GDP, it looks like the debt is now a smaller portion of the GDP, because we’ve magically made the GDP bigger.

Also, I think there’s another reason. The entertainment industry- movies, television, records (Editor’s note: records, Peter?)- all of this intellectual stuff. This is certainly part of the U.S. economy that is growing. And I think what the U.S. government wants to do is magnify the impact on the GDP on the parts that it likes, while minimizing the impact of other parts, like legitimate manufacturing and investment.

So what’s going to happen, is now, I believe, that the GDP, because of these changes, will grow faster than it would have had they not made these changes. It’s kind of like they hedonically-adjusted the GDP.

Schiff added later in the video blog entry:

This is all propaganda. None of this is real. But for some reason, the financial community, academia- they just accept it without question. And if anyone like me points to these figures and says they’re not honest, then “I’m a conspiracy nut.”


“Jobs, GDP, and the Fed: Propaganda Disguised as Information”
YouTube Video

You can read the latest GDP report in its entirety on the BEA website here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Peter Schiff Recommends This Much Hated Investment

This week, we’ve already heard from “crash prophets” Dr. Marc Faber and Jim Rogers. I musn’t forget the CEO of Euro Pacific Capital, Peter Schiff, who appeared on CTV’s Canada AM yesterday. Discussing the Commerce Department’s report that the U.S. economy grew by 1.7% in the 2nd quarter and the popular notion that we’re in a recovery, Schiff pointed out:

If you look at the fundamentals, if you look at the contracting labor force, the declining use of energy, the explosion of poverty in America and income inequality, all the record number of people on food stamps and on disability, all the part-time jobs that are replacing the full-time jobs that we’ve lost. All of this is consistent with a shrinking economy. But the government won’t admit it.

Meanwhile, the cost of living is rising rapidly in America, and we pretend that there’s not enough inflation. And Ben Bernanke is out there trying to lay the foundation for more QE, because he knows he can never taper. He’s just bluffing. He can’t tell the market the truth that the U.S. economy is completely addicted to his monetary heroin. And the moment he takes it away, it’s going to be a complete economic withdrawal.

It’s a familiar message from Schiff. However, he also warned whoever would listen about the housing bubble and economic crisis that roared its ugly head in the fall of 2008 until he was blue in the face… and it eventually happened.

And here’s what the author of The Real Crash: America’s Coming Bankruptcy—How to Save Yourself and Your Country icon is recommending Americans do to protect themselves before the next leg of the financial crisis commences:

Buy precious metals.

Okay. He’s been saying that for a while too.

But in an interview with Greg Hunter of USAWatchdog.com that was published on YouTube.com on July 28, Schiff, who’s also the CEO of Euro Pacific Precious Metals, tells viewers about one precious metals-related investment opportunity in particular that he’s incredibly-bullish on, even though others despise it right now. From the exchange:

I think right now you’ve got the best buying opportunity of the entire bull market in gold mining stocks- gold and silver stocks. That’s why, for the first time ever, I just launched on Friday of last week my first gold mutual fund. The Euro Pacific Gold Fund [EuroPac Gold Fund] invests almost entirely in gold and silver mining companies. You know, I started my mutual fund company about 3 years ago. But at the time, gold stocks were near their highs, they had a big run. So from a timing perspective, I didn’t want to come out with a fund right after a big run. I wanted to wait for a decent pullback, so we can start the fund at a relatively low point. And then have a nice track record.

You know, most people in the financial industry, when they launch a fund, they want to sell what’s hot. Because it’s easy. It would have been easy for me to launch a gold fund 3 years ago because everybody wanted to buy gold stocks. But now is a better time as an investor. It might be a harder sell, because everybody hates gold stocks right now. But that’s when you buy in cheap- when everybody hates it. But I’m willing to educate people so that they know what they should do. I don’t want to sell people what I think they want. I want to educated people and convince them to buy what I know they need. So it might be a harder sell, but this is a great time, I think, to be investing.

You know, they say on Wall Street, it’s easy to make money, all you got to do is buy low and sell high. Well, it’s easier said than done. Because you can’t sell high until you buy low. And I’m convinced, we are buying really low right now by buying the mining stocks. So people can buy themselves or check out some information on my brand new mutual fund that came out on Friday.


“Peter Schiff: Buy Gold and Silver Now, Money Printing Until We Have A Currency Crisis & More”
YouTube Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)

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Marc Faber: ‘One Day, This Financial Bubble Will Have To Adjust On The Downside’

I can’t believe it’s been almost an entire month since I last updated Survival And Prosperity’s “Crash Prophets” page.

Actually, I can, it’s been that hectic.

At least the blog’s off-and-running again.

Now, don’t expect too much from “crash prophet” Jeremy Grantham any time soon, as he’s off playing hooky from GMO’s Quarterly Letter, but there will be plenty on the latest investment activities and recommendations from Dr. Marc Faber, Jim Rogers, and Peter Schiff.

Speaking of “Doctor Doom,” as the financial media like to call him (along with Nouriel Roubini and Peter Schiff), Faber was recently interviewed by Hong Kong-based media, research, and consulting group The Prospect Group about the global economy (hat tip Trade The Newsroom website). Like myself, the Swiss-born investment advisor and fund manager has been consistent in his warnings of a coming financial crash. The publisher of the monthly investment newsletter The Gloom Boom & Doom Report warned viewers:

In general, if you look at the world, say compared to the 1950s, 1960s, and even 70s, it’s very clear that financial markets- official and less official- have grown disproportionately compared to the real economy. In other words, you have, say, a global GDP of- I don’t know what it is- $60 trillion or whatever it is. And you have financial markets that turn $60 trillion around in a week or less.

And I believe that one day, this financial bubble will have to adjust on the downside. Either it will adjust on the downside because we have an inflationary burst, or we have a collapse of the system.

We don’t know exactly how the end game will be played.


“Marc Faber on shadow banking, market psychology, & the global impact of American monetary policy”
YouTube Video

“We don’t know exactly how the end game will be played.”

I know one thing for sure.

The unwinding will be real painful.

Especially for those who never saw it coming, or did see it but didn’t do anything to prepare.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Peter Schiff On GDP Calculation ‘Makeover,’ Delaying Our ‘Day Of Reckoning,’ And Gold Speculators

Lots of catching up going on around here today. I just got finished watching Peter Schiff’s latest entry on The Schiff Report YouTube video blog. The CEO/Chief Global Strategist of Euro Pacific Capital zeroed-in on the “makeover” in calculating U.S. gross domestic product, delaying our “financial reckoning day,” and the situation small speculators may find themselves in after helping fuel gold’s price drop the other week. Regarding GDP, Schiff pointed out the following in yesterday’s video blog post:

When the government gets around to delivering the news for the second quarter, the U.S. economy is going to be quite a bit larger than it was during the fourth quarter. Now, it’s not going to be because we’re actually more productive, it’s because the government is going to launch a brand new methodology for computing the GDP. They’re going to change the way they’ve been doing it all these years. And they’re going to start to include a bunch of things that in the past, they never included. They’re going to include things that no other country includes when they calculate their GDP. And as a result of this makeover, these brand new additions, I think instantaneously the U.S. economy is going to be 3 percent larger. That’s a big number. It’s like 4 or 500 billion dollars of GDP is going to be conjured out of thin air just based on the change in the methodology for computating GDP.

You know, this is what the government does. They change the way they compute statistics. Unemployment’s too high? Okay, we’ll calculate it another way. Now it’s not as high. Inflation’s too high? Wait a minute, let’s find another way to calculate the inflation rate. Oh look, we’ve solved the inflation problem- there’s not that much inflation.

Now, the government wants the economy to appear bigger. Why? Well, because it makes the debt-to-GDP look smaller. A lot of people are talking about debt-to-GDP now. Well, if they can make the GDP larger by figuring out another way to calculate it, well now they can make that ratio appear better.

Also, people are talking about government spending as a share of GDP. Okay, let’s make the GDP larger, and that means that government spending has now come down as a share of this larger number.

Schiff, who correctly predicted the U.S. housing bust and “Panic of ’08,” had this to say about the coming U.S. financial crash:

The fact of the matter is, governments are borrowing too much, they’re printing too much, they’re spending too much, and it’s all in a vain attempt to try to artificially stimulate an economy that’s been overstimulated, and to delay the “day of reckoning.” And the problem is, the longer they delay it, the more we have to reckon with. And, ultimately, we’ve going to have to pay a huge price for the fact that we didn’t deal with these problems sooner, rather than later.


“Slow ‘growth’,GDP makeover, Keynesians demand more debt and inflation”
YouTube Video

Finally, Schiff, who’s also the CEO of Euro Pacific Precious Metals, talked about gold’s recent price drop, who he thought was behind it, and what may be in store for them. From the video post:

I think the major selling in the metals market has come from the small speculator that trades on the futures market, that trades on the ETF. That’s where all the selling has been. The small speculators. I don’t think the larger investors have cashed in. They’re probably holding on. And the real buyers, the buyers in the physical market- who are not just trying to jump on a moving train to try and catch a small move because they want to get in on something that’s going up- the physical demand has been ongoing and consistent for years. But you have had some of the “Johnny Come Lately” hot money among smaller speculators. They’ve jumped on, they’re the ones that have sold, they cashed out. In fact, I think you have a lot of small speculators that are now short gold, that sold into the lows, and that are holding onto these positions with losses. And we’ll see how long they can hold those losses as the price moves higher and we turn up the heat. I think a lot of those people that were quick to short the market are going to end up covering at much higher prices.

Good insights as usual from this “crash prophet.”

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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U.S. Economy Grew Only 0.1 Percent Last Quarter

Since the following economic news wasn’t being talked about too much in the mainstream media Thursday, I thought I’d share it here. From the U.S. Department of Commerce, Bureau of Economic Analysis website:

National Income and Product Accounts
Gross Domestic Product, 4th quarter and annual 2012 (second estimate)

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 0.1 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the “second” estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent.

The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, real GDP declined 0.1 percent. The upward revision to the percent change in real GDP is smaller than the average revision from the advance to second estimate of 0.5 percentage point. While today’s release has revised the direction of change in real GDP, the general picture of the economy for the fourth quarter remains largely the same as what was presented last month (for more information, see “Revisions” on page 3).

All that government intervention, all that stimulus, all that new debt. To which I say:

“Keepin’ your head above water…”

You can read the entire news release on the BEA webpage here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Eurozone Slipped Deeper Into Double-Dip Recession At End Of 2012

Bad news from across the pond. Europe is getting pummeled by a double-dip recession. Philip Blenkinsop and Annika Breidthardt reported on the Reuters website this afternoon:

The euro zone slipped deeper than expected into recession in the last three months of 2012 after its largest economies, Germany and France, shrank at the end of a wretched year for the region.

It marked the currency bloc’s first full year in which no quarter produced growth, extending back to 1995. For the year as a whole, gross domestic product (GDP) fell by 0.5 percent.

Economic output in the 17-country region fell by 0.6 percent in the fourth quarter, EU statistics office Eurostat said on Thursday, following a 0.1 percent output drop in the third.

The quarter-on-quarter drop was the steepest since the first quarter of 2009

(Editor’s note: Italics added for emphasis)

What is it we’ve witnessed in Europe on a consistent basis since the global economic crisis really roared its ugly in the fall of 2008? A sovereign debt crisis emerges in one Eurozone nation, the problem is literally papered over, and then another one flares up somewhere else in the region.

Lather, rinse, repeat.

Brian Blackstone and Christopher Emsden wrote on the Wall Street Journal website tonight:

The 2.3% drop in euro-zone gross domestic product in the fourth quarter, at an annualized pace, suggests that Europe’s economic and financial crisis is far from over. The region’s deepening malaise challenges European authorities’ insistence that fiscal austerity will lead to growth by boosting business confidence, economists say.

(Editor’s note: Italics added for emphasis)

Europe tries to tackle its debt problem by implementing austerity, and they get a double-dip recession.

America keeps borrowing, spending, and growing its debts, and we manage to keep our heads above water for the time being.

“Spending our way to prosperity.” That’s the course the powers-that-be have charted for us.

As if the rules of finance and economics don’t apply here.

I fear the coming lesson will be a painful one. History shows it usually is.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Blenkinsop, Philip and Breidthardt, Annika. “Euro zone economy falls deeper than expected into recession.” Reuters. 14 Feb. 2013. (http://www.reuters.com/article/2013/02/14/us-europe-economy-idUSBRE91D0CX20130214). 14 Feb. 2013.

Blackstone, Brian and Emsden, Christopher. “Europe Woes Deepen as Economies Contract.” Wall Street Journal. 14 Feb. 2013. (http://online.wsj.com/article/SB10001424127887324162304578303503840132168.html). 14 Feb. 2013.

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Quote For The Week

Something like the Dow going to 14,000. I can contain my enthusiasm about that. It doesn’t mean very much…

I don’t think the economic signs are going to change very much. The path of our economy, which, I think, 2 percent real GDP growth in the year 2013 is not a bad target- maybe 2.5. That hasn’t changed whether the Dow is 14,000 or 12,000 or 16,000.

-John “Jack” Bogle, chairman and founder of mutual fund company The Vanguard Group, on CNBC’s Squawk on the Street Friday, February 1

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Monday, February 4th, 2013 GDP, Quote For The Week, Recovery, Stocks No Comments

Labor Minister: France ‘Is A Totally Bankrupt State’

Speaking of France, how is the Socialist-led European state faring these days?

Not so great, it seems.

In fact, a pretty reliable source claims they’re bankrupt.

Graham Ruddick reported on The Telegraph (UK) website Monday:

Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage.

“There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”

The comments came as President Hollande attempts to improve the image of the French economy after pledging to reduce the country’s deficit by cutting spending by €60bn (£51.5bn) over the next five years and increasing taxes by €20bn.

(Editor’s note: Italics added for emphasis)

As I mentioned earlier tonight, some claim President Obama desires French-style Socialism for the United States.

If France’s economy truly is in shambles, and the U.S. President really wants to emulate them, well- here’s a glimpse of what Americans could expect. From an Investor’s Business Daily editorial yesterday:

Fresh after May 2012′s election, President Francois Hollande wasted no time raising government spending, hiking tax rates to 75% on those above $1.3 million in income, hiring 60,000 bureaucrats, cutting the retirement age for public pensions to 60 and undoing fiscal reforms by his predecessor, Nicolas Sarkozy. During his campaign, Hollande declared himself “the enemy of finance.” France today proves it…

Public debt has soared from 68% of GDP in 2008 to 90% in 2012, joblessness has hit 11%, and GDP growth of its $2.8 trillion economy is projected in 2013 at zero.

Tax hikes have driven the richest taxpayers from the country, making the $43 billion budget hole unlikely to be plugged by Hollande’s $26 billion tax hike. Meanwhile, a squeeze on business creates rising numbers of unemployed, who in turn demand state services.

Time will tell how this will all work out for the Socialists in France. But if history rhymes once again, keep in mind something former British Prime Minister Margaret Thatcher said in a 1976 interview:

Socialist governments traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them. They then start to nationalise everything, and people just do not like more and more nationalisation, and they’re now trying to control everything by other means. They’re progressively reducing the choice available to ordinary people.

Any of this sound familiar?

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Ruddick, Graham. “France ‘totally bankrupt’, says labour minister Michel Sapin.” The Telegraph. 28 Jan. 2013. (http://www.telegraph.co.uk/finance/financialcrisis/9832845/France-totally-bankrupt-says-labour-minister-Michel-Sapin.html). 30 Jan. 2013.

“Like The Bourbons, France’s Socialists Have Learned Nothing, Forgotten Nothing.” Investor’s Business Daily. 29 Jan. 2013. (http://news.investors.com/ibd-editorials/012913-642388-france-socialist-model-is-same-old-recipe-for-bankruptcy.htm). 30 Jan. 2013.

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CNBC’s Rick Santelli After GDP Report: ‘We Are Now Europe’

Here’s something I keep hearing with more frequency these days:

Barack Obama is transforming America into Europe.

More specifically, the U.S. President is pushing us towards French-style Socialism.

Now, I’m not so sure about that. But CNBC’s Rick Santelli sure seems to think there’s some truth to it.

Get a load of the on-air editor down at the Chicago Mercantile Exchange this morning when the fourth quarter GDP was announced:


“Rick Santelli Responds to Negative GDP Report: ‘We Are Now Europe’”
YouTube Video

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

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Wednesday, January 30th, 2013 Deficits, Europe, GDP, Government, Socialism, Spending No Comments

GDP Drop Blamed On Hurricane Sandy, Republicans

In the aftermath of Hurricane Sandy, some talking heads on the TV were saying how the U.S. economy would take a significant hit from all the destruction. I remember turning to my girlfriend and saying, “Well, there’s their out.” I went on to explain that if the economic numbers for the fourth quarter ended up being crummy, the White House would just go ahead and blame Sandy.

So while I was a little surprised to hear about the drop in GDP today (I thought enough “stimulus” was already coursing through the financial system), the same can’t be said about what the White House said this morning. Alan Krueger, Chairman of the Council of Economic Advisers, wrote on The White House Blog today:

According to the “advance” estimate released by the Bureau of Economic Analysis today, real GDP edged down 0.1 percent at an annual rate in the fourth quarter of 2012, amid signs that Hurricane Sandy disrupted economic activity and Federal defense spending declined precipitously, likely due to uncertainty stemming from the sequester. This was the first quarterly drop in real GDP in three-and-a-half years (see first chart below). Over the last fourteen quarters, the economy has expanded by 7.5 percent overall, and the private components of GDP have grown by 10.9 percent. During the four quarters of 2012, real GDP grew by 1.5 percent, the third consecutive year of economic expansion.

(Editor’s note: Italics added for emphasis)

Don’t get me started on that “economic expansion” bit, as it’s been oh-so-terrific for many Americans.

Hurricane Sandy’s economic impact and a decline in government spending last quarter is repeatedly mentioned in the blog post, leading some to believe that the Obama administration is blaming the economic contraction last quarter a good deal on that late October storm and the Republican Party. Reuters’ Mark Felsenthal wrote on Yahoo! News this afternoon:

The White House on Wednesday blamed the surprising contraction of the economy at the end of last year at least partly on Republican “political brinkmanship” for threatening to let defense cuts take effect.

White House spokesman Jay Carney said similar threats over a looming March 1 deadline when defense and other cuts take effect absent a broader budget deal could similarly hurt the U.S. economy and taxpayers.

“This is political brinkmanship with one primary victim, and that is American taxpayers and the American middle class,” Carney said at a briefing.

“Our economy is facing a major headwind … and that’s Republicans in Congress.”

(Editor’s note: Italics added for emphasis)

Since the campaign for the 2008 U.S. Presidential election, Barack Obama and the Democratic Party have consistently blamed George W. Bush and the Republican Party for the nation’s ongoing economic woes (I submit both major political parties are truly at fault and the damage began decades earlier). Believing that this strategy worked to retain the Oval Office in 2012, and based on Carney’s words today, be prepared to hear even more blamethrowing of this type going forward in President Obama’s second term.

In the meantime, the financial house of cards keeps growing more unstable with trillions of dollars of debt being continually heaped upon it.

Hurricane Sandy. The GOP. How about the “stimulus” being injected into the cancer (debt)-ridden patient is perhaps becoming less effective over time? Instead of a strong, sustainable economic recovery, we’re seeing a weak one that’s requiring constant assistance.

What QE are we on again?

Furthermore, Washington and the Fed are “running out of bullets.” It’s somewhat amazing they’ve managed to “kick the can down the road” this far.

Looking back on today’s GDP announcement and related events, it’s apparent the blamethrowers are alive and well in the nation’s capital.

And the proverbial brick wall- or our “financial reckoning day,” as some like to call it- keeps getting closer.

Be advised.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Krueger, Alan. “Advance Estimate of GDP for the Fourth Quarter of 2012.” The White House Blog. 30 Jan. 2013. (http://www.whitehouse.gov/blog/2013/01/30/advance-estimate-gdp-fourth-quarter-2012). 30 Jan. 2013.

Felsenthal, Mark. “White House blames Republican ‘brinkmanship’ for GDP contraction.” Reuters. 30 Jan. 2013. (http://news.yahoo.com/white-house-accuses-republicans-brinkmanship-spending-cuts-181022857–business.html). 30 Jan. 2013.

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S&P: U.S. Has 20 To 25 Percent Chance Of ‘Double-Dip’ Recession, Eurozone Enters New One

The economists over at well-known American financial services company Standard & Poor’s (S&P) are warning about a possible “double-dip” recession for the United States, and are saying the Eurozone has entered a new one. Agustino Fontevecchia wrote last Friday on the Forbes website:

There’s a 20% to 25% chance that the U.S. economy will suffer a double-dip recession, according to a report by Standard & Poor’s. The credit rating agency which downgraded the U.S.’ sovereign credit rating last year noted unemployment could peak above 9%, real GDP would contract 0.9%, and housing markets would once again collapse under their adverse scenario. The catalyst: Congress failing to reach an agreement to avoid the fiscal cliff.

No matter what happens, a strong economic recovery is “a long ways away,” explained S&P’s deputy chief economist, Beth Ann Bovino. A poor labor market, with businesses adding a paltry 97,000 jobs per month over the last six months, has kept the economic recovery in “slow gear.” (During the winter, the economy added an average 240,000 jobs per month, she noted).

(Editor’s note: Italics added for emphasis)

This warning of an economic slowdown echoes what S&P economists were saying a month prior. From the AFP website on August 21:

The odds the United States will slip back into recession next year have risen, ratings agency Standard & Poor’s said, citing risks from the European debt crisis and budget tightening at year-end.

The US ratings firm raised the chance of the US falling into recession to 25 percent, up from a 20 percent chance estimated in February, as the world’s largest economy struggles to recover from a severe 2008-2009 slump.

(Editor’s note: Italics added for emphasis)

Just this morning, S&P said the Eurozone was entering a new recession. Steve Gelsi wrote on the MarketWatch website:

The data are confirming our view that the [Eurozone] region is entering a new period of recession, after three quarters of negative or flat growth since the final quarter of 2010,” according to Jean-Michel Six, the rating agency’s chief economist for Europe, the Middle East and Africa.

(Editor’s note: Italics added for emphasis)

Sources:

Fontevecchia, Agustino. “Double-Dip Recession 20% To 25% Likely If Fiscal Cliff Hits, S&P Warns.” Forbes. 21 Sep. 2012. (http://www.forbes.com/sites/afontevecchia/2012/09/21/double-dip-recession-20-to-25-likely-if-fiscal-cliff-hits-sp-warns/). 25 Sep. 2012.

“Risk of US double-dip recession rises: S&P.” Agence France-Presse. 21 Aug. 2012. (http://www.google.com/hostednews/afp/article/ALeqM5hUW6S9xn4PTe3Oy6FaZ5SqADbALw?docId=CNG.9261c794f17a86efcc8
014d16fa164f9.121). 25 Sep. 2012.

Gelsi, Steve. “S&P says new recession hitting euro zone.” MarketWatch. 25 Sep. 2012. (http://www.marketwatch.com/story/sp-says-new-recession-hitting-euro-zone-2012-09-25?reflink=MW_news_stmp). 25 Sep. 2012.

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Christopher E. Hill, Editor
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