We are surrounded by mixed messages. Is the economy recovering or stumbling? Are we are at the edge of a new energy bonanza or not?
One of the particular difficulties about trying to make sense of things these days is the shameless amount of statistical manipulation (i.e., official lying) for political purposes and for shaping market reactions — as well as the amount of paid PR material that is masquerading as real news from unbiased sources.
The level of sophistication in controlling messages is really something to admire, as long as one is unconcerned with the damage such spins and distortions are dong to our collective futures.
The Economy Is (Not?) Recovering
The mixed messages on the economy could stump the most careful observer, since nothing quite lines up. Sometimes you get those sorts of oddities during turning points, but you also get them when your official statistics are routinely debased and abused.
Starting with the fuzziest of numbers, GDP, we got a pleasant revision upwards for the third quarter to +2.7%.
Economy Expands by 2.7%
Nov 29, 2012
WASHINGTON—The U.S. economy expanded at its fastest pace since late 2011, but those gains could be reversed as superstorm Sandy and the fiscal cliff create a drag during the final three months of 2012.
The nation's gross domestic product—the broadest measure of goods and services produced in the U.S.—advanced at an annual rate of 2.7% between July through September, the Commerce Department said Thursday. The revised figure is up from the previously reported 2.0% gain and nearly matched economists' expectations for a 2.8% advance.
But the factors that led to the upward revision—growing inventories, strong federal spending and robust exports—may not persist. Add in other headwinds, and the economy could struggle to grow in the fourth quarter.
Of the main drivers of growth, two out of three are not very positive at all: strong government spending and inventory builds. The strong government spending is not likely to survive the Fiscal Cliff negotiations. And I prefer to factor out government spending entirely, as it is being 'funded' by Fed printing and is therefore not real.
Just as most analysts and economists are careful to note that superstorm Sandy is going to be a drag on next quarter's growth, it will be a positive later on. Similarly, then, if government spending represents a degree of emergency deficit spending today, there should be a corresponding drag later on, as those funds are not increased, but actually reduced. Remember, for an economy to grow, each period of time must be larger compared to the last. Thus, the only way to get a boost from government spending is for it to constantly grow, and that's just not going to happen. More on why in a moment.
by time2help 
