Public

In this post, I respond to the recent flurry of activity in print and in blogs about the dollar, US indebtedness, and the risks associated with both.

I was not a good father today.

Instead, I engaged in laboriously hand-entering data to satisfy a question that has been bothering me for a while.

The issue that was worrying at me was the apparent discrepancy I’d mentally noted between the happy-happy increase in existing home sales, as reported by the NAR last week, and what I remembered from the MBS mortgage application releases.

But who could be sure?

Perceptions can be tricked and need to be tested and subjected to fact-based inquiry.

This blog post is the most recent Martenson Report, which I am now making available for wider distribution.  I believe this needs to be read and understood by as many people as possible. 

Sunday, August 16, 2009

Executive Summary

Initial jobless claims rose last week, a bit higher than expected, but that’s not what was featured at the top of the article below.

Instead, the claim was made that because the number of people on the unemployment rolls dropped, that this was a signal that the labor market may be stabilizing. 

This is an inappropriate and misleading claim to make.

The release of the July unemployment report was filled with a wide array of distortions and inexplicable results (especially from the Birth-Death model), which have undoubtedly resulted in a better-than-warranted reported gain. In this post we’ll explore these oddities in some detail.

The news:

There were a couple of questions concerning the last blog post about the GDP that I would like to address.

Here’s the first one from willid3:

I wonder if the explanation for PCE and why corporate profits are down is that the vast majority of all income in the US is earned by the top 1 percentile of incomes. and by far they are the least likely to have been layed off. and the reason corporate profits are down, is that most corporations get profits based on volume, and thats based more on the lower 95 percentile of incomes. Who are the ones who are having trouble keeping their jobs, and whose incomes have been cut the most

First, it is important to note that I only made a claim about corporate revenues, not profits.  Corporate revenues are like your base salary, in full, while corporate profits are what’s left over after taxes and all legitimate expenses are deducted.

In the parlance of accounting, revenues are called "top line" results and profits are called "bottom line."    Into the top line goes everything that resulted in a cash transaction for your company.  Who owns the profits and how they are distributed are immaterial to the argument I laid out in the prior blog article which was that Personal Consumption Expenditures measure all the things that people buy and, as far as I can tell, people usually buy stuff from companies.

Which brings us to the second question.