Submitted by Jim Quinn of The Burning Platform
Have you noticed the latest sound bites coming from the punditry in
the corporate mainstream media? Here is the latest wisdom flowing from
the lying mouthpieces of the ruling oligarchy (Wall Street, Washington
The economy is recovering and employment is growing.
Consumers are deleveraging, saving and using cash for purchases.
Retailers are doing fantastic as consumers increase spending.
These are the three themes being proclaimed
simultaneously by the mainstream media. Every time I hear these themes
proclaimed, I want to shout out like Joe Wilson – “YOU LIE!!!”
How can consumers be deleveraging, saving and increasing spending at the same time? Let’s examine the facts to see who is lying.
The fallacy that the economy is recovering
and employment is growing can be put to rest by an examination of the
BLS data accessed here: ftp://ftp.bls.gov/pub/suppl/empsit.cpseea1.txt.
The number of Americans employed over the last few years is as follows:
2007 – 146.0 million
2008 – 145.5 million
2009 – 139.9 million
2010 – 138.9 million
It seems there are 7.1 million less
employed people than there were three years ago. Contrary to the spin
from the White House, there are 1 million less people employed today
than during the horrific 2009 year. Luckily, another 6 million people
left the work force, or we’d really have a problem. The truth is that if
the government actually counted everyone in the country who wants a
job, the unemployment rate is not 9.8%, but 23% and it continues to
The GDP of the US peaked at $14.5 trillion in the 3rd quarter of
2008. Today it stands at $14.8 trillion, two years later. GDP has gone
up for one reason and one reason only – the Federal Government has
borrowed trillions from future generations in order to artificially prop
up a system already crumbling from the weight of too much debt.
Highlights from the GDP calculation are:
- Private investment is $216 billion lower today than it was in the 3rd quarter of 2008.
- Exports are $80 billion lower today than they were in the 3rd quarter of 2008.
You may ask yourself how can GDP be higher if private businesses are
investing less and exporting less. The answer of course is your friendly
neighborhood Feds. The Federal government is spending $128 billion more
today than it was in 2008. The last piece to the puzzle is the beloved
consumer, who accounts for 70% of GDP. Good old Joe Sixpack has ramped
up his spending by a good $470 billion since the 1st quarter of 2009.
With this figure, we must be in a strong recovery. Larry Kudlow says so.
A little more digging on the BEA website reveals some interesting data:
- Personal income has risen by $300 billion since the 1st quarter of 2008.
- Strangely, private industry wages have DECLINED by $213 billion since the 1st quarter of 2008.
It seems that personal income has risen due to two major items. You
will be glad to know that government wages have risen by $58 billion and
drum roll please: government entitlement transfers have increased by
$523 billion since the 1st quarter of 2008. The Federal government has
borrowed hundreds of billions from future generations and paid it out in
the form of unemployment benefits and other social programs so that
consumers would spend it today. This is how you generate a positive GDP,
without generating a real recovery. And, of course, if the government
used an honest CPI rate, GDP would still be negative, just as it has
been for most of the past decade.
The great consumer deleveraging lie has been ongoing for the last six
months. The savings rate has “surged” from 4.8% in the 2nd quarter of
2008 to 5.8% today. The savings rate is calculated as what is left over
when you subtract personal consumption expenditures from disposable
personal income. The surge in saving is the result of the Federal
government borrowing from the Chinese and handing it to consumers to
spend. If the government wasn’t transferring these funds from future
generations to current generations, the savings rate would be 1.2%.
Revolving consumer debt (credit cards) has declined by $173 billion
in the last two years. This must mean that consumers are deleveraging.
Total consumer credit peaked at $13.9 trillion in the 1st quarter of
2008 and currently stands at $13.4 trillion. It sure looks like consumer
deleveraging. Consumers must have paid off $500 billion of debt. But,
the facts obliterate this fallacy. The Wall Street banks have written
off in excess of $600 billion since the 1st quarter of 2008, as reported
by the Wall Street Journal.
This means that consumers are actually charging more on their credit
cards than they were in 2008. Having your debt written off, rather than
paying it off says much about the great economic recovery of 2010.
The false reports circulating on network news programs is that
Americans are paying cash, rather than using credit cards. This is
completely false, as both Visa and Mastercard reported increases in
transaction volumes in their last quarters. Having worked for a big box
retailer, I know that the average credit card transaction is 50% to 70%
higher than the average cash transaction. If people were truly charging
less, the average ticket at the major retailers would be plunging.
Retail sales would be plunging. They are not plunging, as the major US
retailers report decent comparable store sales in the 2% to 5% range.
The National Retail Federation has forecast November- December
holiday sales will rise by 2.3 percent from a year ago, the most since
2006. A Bloomberg survey taken Dec. 2 to Dec. 8 showed economists raised
projections for consumer purchases, the biggest part of the economy, to
2.6 percent for next year, up from their 2.3 percent estimate the prior
A little reality check about retail sales is in order. According to
the US Census Bureau, total retail sales over the last few years are as
- 2007 – $4.5 trillion
- 2008 – $4.4 trillion
- 2009 – $4.1 trillion
- 2010 – $4.4 trillion (estimated)
The fact is that there are thousands more retail outlets today than
there were in 2007, and total sales are still below the level reached in
2007. Not only that, but even using the government manipulated CPI,
inflation has risen 8% since 2007. On an inflation adjusted basis, 2007
retail sales in today’s dollars would be $4.9 trillion. Using the real
inflation rate of 20% over this time frame would generate an inflation
adjusted retail sales figure of $5.4 trillion. As you can see, the great
retail recovery of 2010 is a sham. Comparable store sales increases of
3% are inflation adjusted decreases of 5%. If you drive around with your
eyes open, you would think the hot new retailer in America is called SPACE AVAILABLE.
I hate to be a wet blanket during this festive holiday season, but
the truth is that there is no self sustaining recovery happening. The
powers that be, with the help of their lackeys in the mainstream media
are desperately trying to convince you that everything is alright. It is
not alright. It is getting worse by the day. The only people spending
are Lloyd Blankfein and his ilk, while middle class Americans sink
further into despair and debt.
Who’s lying? You know.