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Under(lying) Today's GDP Revisions (Or: "The Church of the Third Revelation")
We probably can't get more relevant commentary on today's absolutely massive downward GDP revision than that penned today by Goldman Sachs' Edward F. McKelvey:
This was a much larger than normal revision for the third pass on a given quarter, knocking what once was a fairly robust 3.5% bounce down to a mediocre 2.2% (from 2.8% prior to this revision). All sectors except the trade balance -- a focal point of last month's downgrade -- saw some downward revision. Revisions were particularly deep in business investment -- to -5.9% from -4.1%, worth two tenths of the revision -- and in inventories (also worth nearly two tenths).
That would be those sectors that should, one would think, be among the easiest to count in the first place, especially on the second try.
Goldman is being very kind here. Goldman started off the day with this from GS Breakfast Bytes:
GDP for Q3 (third estimate)... not much change, though risks lie to the downside. GS: +2.8%; median forecast (of 73): +2.8%, ranging from +2.5% to +3.7%; last (Q3 second estimate) +2.8%. The third cut on a given quarter does not usually produce much of a change in the growth estimate. In this case, the risks against our assumption of no change lie to the downside, reflecting large downward revisions to construction spending for August and September. Like many others, we do not see a meaningful probability of changes in the +0.5% estimate for the GDP price index or the +1.3% figure for the core PCE price index. (Emphasis ours).
It is difficult to get a more direct sense for how much mind share government bailouts (and government figures) have managed to command. That even the most pessimistic member of the "consensus" (n=73) managed to overshoot the mark by nearly 14% and the average sailed full speed into a 27% pop-up should remind us of three things:
- The Bureau of Economic Analysis of the United States Department of Commerce has ceased to be (if it ever was) a reliable outlet for economic data. (Be this the result of misfeasance or malfeasance depends on the reader's propensity to credit conspiracy theory).
- That what passes for the professional prognosticator class these days is pathologically incapable of realistic appraisal.
- That the largest single expression of a Keynesian "injection" in the history of Keynesians or injections (or the planet) struggled to create even the most anemic growth. Net the double counting of stimulus funds it seems difficult to imagine even a remotely encouraging (or positive) "growth" figure could be tortured out of the economic realities that would be so plain if one but looked out the window to forecast them.
If it isn't clear to everyone by this time that the United States remains firmly in the grips of a massive "shadow recession," then we can only credit this ignorance with some unshakable and deeply rooted form of denial or a seriously reckless case of willful blindness. Either way, we would like to commend the current powers that be for their tour de force performance in establishing themselves firmly both as the most masterful of bullshit artists to occupy the beltway (and that's saying something) and simply the most economically inept (and expensive) team ever to hold national office. The risk adjusted returns on this particular ruling clique would make the pre-dollarization Zimbabwe carry trade look attractive.
If there is a silver lining to be found here it is probably that this little experiment might finally drive a splintered wooden stake through the heart of John Maynard Keynes' ghost (or at least irradiate Paul Krugman's ravings to within 50 rads of his professional life).
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Feeling like your insane when you're the only person who recognizes the truth is the cruel fate of common sense.
Thank god for ZH or I'd have committed myself by now.
Do you ever wonder what it would have been like if you had taken the blue pill instead of the red? I do. all the time.... I'd have far less grey hair, thats for sure.
I just laughed when that revised print popped up. what a joke.
http://www.youtube.com/watch?v=Z7BuQFUhsRM
Cypher was the only one that actually made a free choice in the whole movie.
I disagree completely.
So you're saying everyone that followed the path out of the Matrix and into reality didn't make free choices? Are all of us here on ZH passively going through the motions or did we choose this for ourselves?
If anything, I would call Cypher a big fat vagina that couldn't handle the deeply penetrating phallic truth and sought an easy way out.
Yea but god damn did you see how good that steak looked he was eating?
@besodemuerte
"phallic truth"
Now that's a new one.
It's always blown my mind how men use one of the strongest and most powerful human body parts to denote weakness. Ever been in a delivery room?
+100, Anon.
It's been awhile since I've seen a news story regarding a vagina that victimized someone. Don't get me wrong, I see your point where perhaps you missed mine. The heart is an incredible body part as well, but you don't see it going around raping people do you?
The truth hurts, as does an uninvited dick (so it seems). Let's not make it more complicated than it needs to be.
Considering that the blue pill was half the cost - yeah, it gets tough sometimes...
http://www.youtube.com/watch?v=HNLp0GRPJt4
Not to worry, by 4:00 today, with the Dow up 90 on no volume the MSM will be singing the praise of the ongoing "strong economic rebound" (AP) and "broad based recovery" (Reuters)... the pundits on CNBC have already unanimously declared victory by stating that this Q's revs downward mean the "good stuff" will be pushed out to Q4, so look out for upgrades to the experts' Q4 GDP estimates any day now.
The fact that those Q4 revisions will in turn also be revised downward dramatically won't matter, since we are in this perpetual positive feedback loop where all news is good, always was, always will be, and the beautiful scent of fresh green ink pervades the land.
yup u got it
its 4.15
recap off the day:
higher home sales and S&P high for the year
nothing on 40% GDP revision
Yes it is true. Insanity can be caused by an acute sense of reality.
Fucking fantastic post Marla.
I'm probably going to Wal-Mart after work today to buy some more ammo.
Dollar is no good, PMs are no good, there is no escape. Got guns?
Your Walmart has ammo? Mine has been sold out since May. I was able to get it once this year only and that was because I happened to hear when the shipment came in. I bought half of what they got that night before it even hit the shelf.
Yes and it's quite affordable to boot. I bought three boxes, then drove over to Dick's and bought a box of HPs. I spoke with the Wal-Mart salesman for awhile, he says their handgun ammo is lucky to last a day or two and that they never know when shipments are going to arrive.
Very well said MS.
3.5% - 2.2% = 1.3%; 1.3%/2.2% = 59%.
The BEA overstated Q3 GDP by 59%. And counting.
If that's the going accuracy standard, what's the point of releasing anything?
I wonder if BEA considers accuracy a "core competency"?
That's a 41% improvment over (whenever). You and Marla need to "get with the plan."
Your math is an abomination.
No, the math is correct.
2.2 = "true" GDP growth
3.5 = "inflated" GDP growth
2.2 * (1+x) = 3.5
x=0.5909
Hence, originally published GDP growth was a 59.09% inflation of the "true" GDP growth.
Read again what he wrote. "underestimated Q3 GDP by 59%"... not GDP growth, but GDP, in nominal terms.
Quant -
If you're going to appoint yourself 'Grammar Sheriff', at least quote me correctly. I said, "overstated", not "underestimated".
To be precise, I should have included the word "growth" after "GDP". But given that I showed my math (using all growth numbers), I'll bet most people picked that up.
Finally, my math is correct. BEA overstated GDP (growth) by 59% and counting. My oversight was one of grammar, not arithmetic.
Now hurry off before you miss Mad Money :)
So Q3 is flat when you factor in 2.2% govt stimulus. Doesn't feel like a corner being turned.
Reporting here from main street, it's bleaker, and I see more frustration and exhaustion. People are worn out.
Can't wait to see the +5.0% Real GDP number get reported for the 4Q... so we can see it revised to +2.5%.
This actually makes more sense than the employment numbers the government reports.
Market obviously loves it. Range breakout in the works here!
Range breakouts require big volume and wide price spread. The market is on vacation.
Ok, so by your reasoning, since volume has been pitiful most of the year, we're still in the same range since March? :)
No reasoning, the fact is The SPY first hit 1100 on OCT 19th, its has gone nowhere since. Its in a narrow range, looking very tired and very weak.
Retail index. New High today. Nough said.
I'm not the brightest bulb in the chandelier, but when I look at the huge revisions areas like imports, exports and durable goods, I have to believe that the gov't revision to 2.2% is still way to high.
http://bea.gov/newsreleases/national/gdp/2009/pdf/gdp3q09_3rd.pdf
I can't wait to hear what John Williams of Shadowstats.com has to say about this latest revision. Poor John is running out of adjectives to describe the ongoing farce.
Yeah, need to borrow a page of Dilbert and invent new ones:
I'll go first. These are all "something bad" adjectives:
Pooptastic. Fecktardid. Clusturded. Pollutistic.
Maybe a few good adjectives, but these are still bad:
Joynihilist. Endtastic. Fundangerous. Excellenteric.
Okay, that should be enough for next week anyway. Use them in good health.
cougar
LOL
Nothing like a good hearty Tuesday afternoon laugh. I'm going to pass these on to John and beg him to use one of them in his next report.
Just in time to insult the inlaws!
LOL, BITCHES!
Maybe the BEA's job will be easier for next quarter if they just say that the GDP was fundagerous with a bit of fecktardid data. We'll know what they mean and they won't have to make shit up.
Kevin Phillips had a piece called "Numbers racket: Why the economy is worse than we know" published in The Atlantic back in May of 2008:
http://harpers.org/archive/2008/05/0082023
And certainly all of the problems Phillips identifies are much worse now than they were then. Caveat venditor and caveat emptor.
And people still have the temerity to mock Shadowstats' Williams, whose uber-bearish forecast is in the numbers...
Thanks for posting that article, excellent piece.
"Second is the Gross Domestic Product, which in itself represents something of a fudge: federal economists used the Gross National Product until 1991, when rising U.S. international debt costs made the narrower GDP assessment more palatable. The GDP has been subject to many further fiddles, the most manipulatable of which are the adjustments made for the presumed starting up and ending of businesses (the “birth/death of businesses” equation) and the amounts that the Bureau of Economic Analysis “imputes” to nationwide personal income data (known as phantom income boosters, or imputations; for example, the imputed income from living in one’s own home, or the benefit one receives from a free checking account, or the value of employer-paid health- and life-insurance premiums). During 2007, believe it or not, imputed income accounted for some 15 percent of GDP. John Williams, the economic statistician, is briskly contemptuous of GDP numbers over the past quarter century. “Upward growth biases built into GDP modeling since the early 1980s have rendered this important series nearly worthless,” he wrote in 2004."
More Phillips goodness:
http://www.npr.org/templates/story/story.php?storyId=89642189
The silver lining is the current availability of silver for lining. Regarding Keynes, if they dug up and burned Wycliffe's bones for the "sin" of translating the Gospels from the Vulgate, how much more should Keynes' miserable frame be violated? Let us jettison his remains into space so that he might no longer infect the academy.
Bullshit artists? These assholes are the Michaelangelos and Monet's of Bullshit. Throw in a little David Copperfield and David Blaine in there, too...
It was entertaining watching Steve LIESman on cnbc this morning trying to put lipstick on this pig. I wonder what that weasel will be saying when the s_ _ t finally hits the fan...
Easy. "Manure is the best fertilizer. After it hits the fan, it is spread around the economy spurring growth in all segments. What data are you looking at? Are you an idiot? This is great news!"
That should be pretty close to it.
as much as i hate the bls, bea, and every other lying sack of shit in the usa government, we must recognize that the gdp comes with a sampling error....all of the revisions were within sampling error...thus to allege incompetence is without merit....
of course that does not mean that the bls is not a sock puppet for the liar-in-chief occupying the oval office.
[gdp comes with a sampling error]
Just about everyone here understands this implicitly. The gripe would be that:
A) the revisions appear subjectively to fall outside what everyone is assuming to be the sampling error, and
B) if the sampling error really is wide enough to embrace these kinds of revisions then their methodology sucks wind and the reports are useless on the face of it, and
C) they always seem to revise downwards and not upwards long after the fact, suggesting not a random variance around the mean "truth" but a systemic over reporting of numbers to the up side. We must assume this is done for political purposes as no other purpose appears to apply. The politicization of what ought to be an objective exercise is itself pure evil.
So sure, you are right. But you are still wrong. :)
cougar
no sir....i am not wrong....your assumptions A & B
lack substance....per my reading of john williams'
explanation the sampling error is +/- 3.5% on gdp....
thus every single estimate within tolerance is
correct but also of very limited value. any revision
within sampling error is also statistically correct.
any frustration with the numbers is without
justification....any number within tolerance could
actually be contraction or expansion of gdp....
we simply do not know and nearly all of the
supplied change numbers are correct....
most people read gdp numbers as solid single
reliable numbers and then moan and groan about
variances - such is without statistical merit....
even if systematically revised downward the
changes are still within sampling error and in
fact bolsters the claim that they were initially
sound....
If you post a GDP of 3.5% you are saying that it could actually be +/- 3.5%, wouldn't this be a sampling error of 100% in either direction?
Or is it say 3.5% GDP with +/- 3.5% which would be a range from 3.38% to 3.62%?
If it is the first example then what is the point of sampling if you could be wrong by 100%?
Could you imagine an election poll where say a candidate was was predicted to have 50% of the vote with a sampling error of +/- 50 points.
Amen, Cougar, a big AMEN!
In a country that cares only about certitudes that can be proved by numbers, as God and all other certitudes have been thrown out as so much b.s.....
That these numbers could so far off....
Maybe we should question numbering itself, as just another dated philosophical construct....
Now Im in way too deep.
Well, at least our banking system is healthy, rosy, solvent, and loaded with excess capital and plenty of loan loss provisions.
Just waiting for an opportunity to pour a shitload of gasoline on the next commodity fire courtesy of access to the discount window.
Oil maybe? Food perhaps? Something of importance to the residents of this planet undoubtably.
i'm detecting your sarcasm, dh. :)
for what it's worth, you are among my "must read" posters. take care.
Rothbard pointed out in "America's Great Depression" that the modern GDP series is bullshit anyway since it includes government spending, which ultimately can only be stolen at the point of a gun from the productive class. As far as I know, nobody publishes a "corrected" view of GDP (that subtracts government spending), but that would be an interesting graph to see. If anyone has a link to such a creature, I'd appreciate it.
You can ballpark it using NIPA figures from the BEA, it breaks out the GDP.
http://www.bea.gov/national/index.htm#gdp
http://www.bea.gov/national/csv/dpga.csv
'We don't need no education.
We don't need no thought control.'
-Pink Floyd
'Don't be blinded by the lies in your eyes
Do you know the enemy?
Do you know your enemy?
Well, gotta know the enemy, wah hey
Silence is the enemy'
-Green Day
'You know, I know this steak doesn't exist. I know that when I put it in my mouth, the Matrix is telling my brain that it is juicy and delicious. Jesus. What a mind-job.'
-Cypher (Matrix)
'It would be so nice if something made sense for a change.'
-Alice
When this depression started about 20 percent of the mortgage-backed securities held by the banks were rated AA or lower.
So let us premise this post with the assertion that, the 'What Just Happened?' Crisis and the concurrent 'I Can't Believe that it is not Capitalism' Plan which has resulted in the entire housing stock of these United States of America -where a mortgage is held- to be, in aggregate, UNDERWATER (you can look it up!), has eventuated a gentle downgrade of AA to A. One might further suppose, per quantum mechanics, that there is an alternative universe where such a 'mild' thing could occur.
On October 6, 2006 Citizen Grant produced a chart from Paul Singer, general partner of Elliott Associates, that was originally presented at a Grant's conference showing a home price depreciation of 7% or more would wipe out all MBS classes below AA- i.e., A and lower). We're not talking haircut, we're talking decapitation. The dead parrot sketch would most certainly apply. Le acarreó la muerte!
These aren't money good, they are money gone.
As of Q3 2009, per the Securities Industry and Financial Markets Association, total mortgage backed securities including GNMA, FNMA, FHLMC, CMOs, CMBS, and private-label MBS/CMOs totalled 9,213,700,000,000.
What's 20% of that? About 2 trillion.
But wait gentle reader, by late 2010, Goldie says financials will have taken approximately $2 trillion, or 95% of the 2.1 trillion in total forecast write-downs and loss provisions.
Whew that's a relief. Recovery 'tis right around the corner of a circular argument.
Its' still a subprime world : enjoy the steak!
Good stuff AM, as always
Thank You , Thank You, Thank You ZeroHedge!!!!!
I have been reading all the financial information that I can lay my hands on and the fundamentals simply do not add up to what the gooberment is telling us. They are simplying lying their asses off, and most should be in jail or given a death sentence for how much damage they are doing.
The current crop of Fed boys, the SEC, congressmen, government civil servants are all lying to us and have done more damage on us that Al Quaeda ever thought of doing!!!
Throw in the nationalization of medical, banking, and compensation packages, and we have a serious breach of the constitution here. Yes I am stating the obvious.
What is not so obvious to me is how the Lame Stream Media is missing all this. Do they do any "journalism" anymore or are they simply cheerleaders for political party du jour???
Again, THANK YOU to ZEROHEDGE. You guys keep it up.
You do Texas Proud!
Autos went from 1.6% of the 3.5% initial GDP report, to 1.45% of the 2.2% final. Cash for clunkers went from 46% of GDP growth to 66% of GDP growth.
Given that autos contributed 0.2% in 2Q, the U.S. economy probably grew a bit over 1% without cash for clunkers.
Oh boy, 2010 is going to be an interesting year, I can hardly wait.
You won't know anything about what happened in 2010 until 2011, maybe 2015.
You don't even know from reliable accounts what happened in most of 2008 and all of 2009.
The era of knowing anything is effectively over forever. Now, it's good guesses. Now, it's second guessing. Now it's using past lies and revisions as guesstimates of what patterns of lies they are feeding us in the future and how to adjust the new lies with subjective parameters gleaned from past lies so that a thin sliver of truthiness can be artificially constructed from the re-calibrated lies.
It's the new New Math. It's a model of the truth based on the deep analysis of lies.
cougar
James Grant:
Consider for instance, January-March 1983, the first full quarter of the retrospectively brisk recovery from the 1981-1982 recession, the last cycle where the unemployment rate topped 10%. Growth at an annual rate of 3.1% was the advance, or flash, estimate, disclosed in the second quarter of 1983. In the first revision to that advance estimate, however, released in the third quarter, 3.1% was whittled down to 2.6%. But that was not the final word, nor anything close to it. Ten revisions later -the most recent produced in the third quarter of 2009, just the other day- annualized growth for the third quarter of 1983 was fixed at 5.1%.
Oh great. It's worse than I thought.
We still don't even know what happened in 1983, perhaps the most studied period of time in modern economic history.
The rabbit hole. Has no bottom.
That's just ... fecktastic.
cougar
"That's just ... fecktastic."
LOL. No quoting yourself Cougar. That would be narcissistic and Excellenteric. :>))
BTW, spell check doesn't like your new words. Marla, how do we get these added to the ZH spellcheck?
For those who didn't read Cougars new words, I'll post them below.
---------------
"Yeah, need to borrow a page of Dilbert and invent new ones:
I'll go first. These are all "something bad" adjectives:
Pooptastic. Fecktardid. Clusturded. Pollutistic.
Maybe a few good adjectives, but these are still bad:
Joynihilist. Endtastic. Fundangerous. Excellenteric.
Okay, that should be enough for next week anyway. Use them in good health.
cougar"
Enron Enron Enron Enron Enron
Question: From which firm did the Treasury Depratment and Federal Reserve obtain the idea of using SPVs to "contain" damage in the financial system.
See? All hope is not lost.
Heh, heh.....they are paying big bucks for nothing
but pieces of paper in the stock market.
The entire recovery is a fraud, but as long as they
keep revising GDP and unemployment long after the fact, they
can just keep the fraud going:)
Surprise!!!! The current administation is more than
just a sellout to the the corporatistas. It is a
pro-active scammer. The United States of Enron.
Who's buying the treasuries that are tanking on all this
"good" news? Could it be the banksters? Bwahahahahahahaha.....
How can they grossly and consistently overstate both
GDP and unemployment and then simply revise them
when noboby is looking. Isn't this a big-ass story?
Has the world gone mad?
Was anyone still thinking that the Gov data process was a science? Even a very poor one?
The only question remains is: What percentage of the process is innocent (but flawed) guess work, and what percentage is deliberate propaganda?
This isn't even the fodder for conspiracy theory any more. It's an honest evaluation and should have a solid answer. Say, 50/50? Maybe 70/30 in favor of "guessing"? Trying to be fair here.
cougar
What have you got against chicken entrails?
http://www.youtube.com/watch?v=3uYuScZOyiM
Unfortunately, I doubt that the ghost of Keynes will ever be exercised. Most of the people who champion Keynesian trash do so in an attempt to cloak their social policies and constituency payoffs in a veil of legitimacy.
Even the Republicans were unable to finally bury these ideas during the Bush years. The temptation is just too great.
The Monetarists have the answer, but that answer has no attraction for those who hold power around the world. Moreover, that answer can never be allowed to be tried, because it would destroy the almost two centuries of power brokering and social engineering on which the current corrupt system rests.
Exactly. If you want your name to live in history, you can't do better than lending pseudo-intellectual legitimacy to some ageless and hopeless wish like something for nothing or eternal life.
Mr President....lie to me.
A 'Shadow Recession'?
Let's be a bit more empirical...
The Great Depression? No, the Great Deception.
The Great Moderation? No, the Great Modification.
Let's examine the timeline here:
Next set of events:
- There may not yet be a recovery
- Then the Great Recession becomes the "Great Deception" along with the "Great Repression" of information
- All this equals the "Greatest Depression"
- Bankers take their bonuses and head to the Caribbean to hide under a rock with Coronas as the market collapses and Twix bars become worth more than US Dollars.
- If there is a recovery then we need to print dollars to sustain it JUST IN CASE
- If the recovery is slower to appear we must print dollars to speed it up
- If it is "oops" no recovery..might be in a depression we print dollars since it is necessary to fight deflation
Bottom line: Same "solution" is used for the same scenario of problems which ironically was caused by the "Solution" in the first place. Screw middle class, squeeze middle class, punish middle class for saving and enslave their future generations with debt. God Bless What was formally known as America. The founding fathers are probably wishing they spent a little but more time on the Constitution during that hot Philadephia week. They falsely believed that it was idiot proof. You would think with the success America has had that it would be. It is however not tyrant proof.We're not quite sure what the problem is, but the solution is print more money, give it to the bankers and let them distribute as the situation suits.
The fact they keep a big cut for themselves whatever else happens is just one of those unintended consequences.
I'm not so sure. Franklin did add "if you can keep it" when describing the fledgling Republic.
Excellent point. No piece of paper constrains government. It must be restrained by the people.==>EPIC FAIL
“I apprehend no danger to our country from a foreign foe. Our destruction, should it come at all, will be from another quarter. From the inattention of the people to the concerns of their government, from their carelessness and negligence, I must confess that I do apprehend some danger. I fear that they may place too implicit a confidence in their public servants, and fail properly to scrutinize their conduct; that in this way they may be made the dupes of designing men, and become the instruments of their own undoing.”
Daniel Webster
[June 1, 1837]
Washington D.C motto:
If at first you don't succeed, lie and lie again.
Conclusion: The hedge funds and prop desks who keep
the ramp going are happy about all the lying.
Maybe someone can point out the error in my thinking, but it seems to me our leaders continue to insist our economic malaise is nothing more than a "crisis in confidence." If they could just get everyone to start spending again, why everything would be just fine.
Remember Bush's odd advice after 9/11, for everybody to go shopping? And all this recent stuff like Cash for Clunkers. And right after the housing market is shown to be a bubble, they come out with first-time homebuyer's allowances.
Fitting right into that picture would be intentionally high GDP preliminaries to give people a false sense that "things are really improving."
Maybe the real solution is for Americans to use their brains to invent and innovate and not to make billions by shuffling papers around just this side of banditry.
It was said that Akerlof & Shiller's Animal Spirits was the most widely read book in DC when it hit. We seem to think that Liesman also enjoyed it.
Yep. This information management crap is nothing but a government mind phuck designed to revive the animal spirits in a spent consumer. The government is trying to convince us that this Cialis induced recovery is the real thing. The question I continually ask myself is whether they actually believe this stuff. My own thinking is that the government is providing the cover for the financial industry to communicate the message of cautious optimism with clients without the unpleasant guilt attached with telling blatant lies, because the embarrassing truth can't be spoken of. Their livelihood depends on our false confidence so they continue to tell us pleasing little lies to prop up our failing egos.
Well, looks like the short sellers have been defrauded.
There's a constituency no one could care less about.....
even when they're right.
(BLS x BEA)^ Holiday Retail Sales = BS
Obama is fuming that his health care bill hasn't been passed yet, because is window of opportunity that somebody created is slamming shut as we speak.
There is POS bill that the left
and the right are united in condemning.
Everybody else is watching "Dancing with
Whores" on TV and has no idea what's in
store for them.
"Dancing with Whores" hahaha. That'd be a great idea for a TV show in fact.
Nah, old news, already been done... It's called "Rock of Love Bus"
http://www.vh1.com/shows/rock_of_love/season_3/series.jhtml
Time to go long zeros? They're getting
cheaper by the minute.
Oh....lest we forget, the retail sales numbers have been
a scam as well.
Obviously, one is always tempted to ask, OK so that's the published number, lets look just below the surface and see if it holds up. Your basic statistical number review. Never take economic numbers, or any numbers for that matter, on face value.
The real crime is when the fudged number reduces retirees Social Security, or limits some other type of social program. Here obscuring the truth does direct harm to the people.
So how relevant is GDP with massive Government and FED stimulus programs, not much. So what is really going on? One data point is tax revenues, see link.
http://fms.treas.gov/mts/mts1109.pdf
Also understand, that tax revenues are influenced by stimulus, but the effect is focused on contribution to income and payroll taxes. If you compare revenue for OCT and NOV for FY2010 to FY2009, there is a decrease of 13.149% and FY2010 included stimulus whereas FY2009 (2008 OCT NOV) did not. This shows how GDP is not a reliable indicator of economic health.
At this rate FY2010 revenue is on track for $1.83T. This is a disaster. Because our deficit for 2010 could be around $1.5T. So the amount of debt the US would have to finance (new + scrub) in FY2010 could be around $5T. We will see in Q1 and Q2 the capacity for buying our debt. If T yields go up, our scrub will become increasingly expensive. Also, if the FED enacts another QE treasury buy program, I think you will see another surge in flight of capital out of the US, and its associated decline in the USD.
The real problem with our fiscal policy is that the debt keeps increasing year on year. How can we finance this massive US debt year after year?
One of the problems I see with many politicians is they look at the Debt to GDP ratio as a way to judge if our debt can be financed. Dept to GDP is perhaps a better measure of financial leverage, if the debt incurred was for productive investment, and not to buy bad bank debt.
For a nation like the US, consuming the vast amount of excess world investment, debt to GDP does not say much as to our ability to finance increasing levels of debt. The problem is the magnitude of the debt relative to the world capacity to invest. Especially, in the upcoming year where much of the word will be de-leveraging like 2009.
I think there is a certain amount of slack built into the T pipeline, so the yields will gradually increase. But, I think a point will be reached when the FED will be forced to take action. That is, QE2.
Mark Beck
I concur ... interest rate rise cant be allowed to kill the banks. So QE2 is guaranteed given lesser appetite
by foreign demand for T's.
It seems the 'Full-Stop' is when interest on debt
consumes 40% of budget. That means cuts in
entitlements and defense, further feedback into the deflation loop.
On the flip side, the market sells into BB's gaping
Maw precipitating a bond collapse.
Pick your poison.
This isn't inflationary. We barely have a pulse.
Yeah. This is all we bought with CfC, $700B in TBTF bank back-stops, bk FDIC and 130 dead banks, and assorted (sordid) back-room cash handouts to WallStreet.
All that, and just over +2% GDP
And you gotta figure they were digging under the statistical sofa cushions just to get +2%.
The real number without the water wings is probably -1% and underwater. Which would align with what everyone is seeing on the streets.
cougar
BINGO! NAIL ON THE HEAD!
$2T+ of stimulus, and that's it!? Either one of two things happened: Keynesian "pump-priming" failed completely, OR it staved off a potentially -10% downturn. (I guess there's always a third possibility- it merely postponed an inevitable -10% downturn.) Dare I ask if anyone has the empirical research readily available at the click of a mouse?
(What am I saying... Research based on statistics like this?)
I'll take door #3
I agree with the "nail on the head". +1 too.
The empirical research has been done and recently presented. Check out Elizabeth Warren's recent report from a couple of weeks ago (she's the head of the Congressional Oversight committee for this). To paraphraze her, the Fed(s) managed to stop the panic, but they haven't fixed the problems.
IMO, this is guaranteed to happen again, especially since the only thing that the Bankers have learned is that they can get the U.S. Taxpayer to cover their gambling losses. The BIS has reported that the amount of derivatives out there has increased again, recently.
I don't understand what the problem is here. Commerce only missed the current "accurate" GDP number of 2.2% growth (give or take....) by 59% in its first try and 27% in its second try.
Just try underestimating your personal tax obligation by 59% and then 27% and see how long you can get away with it. LOL.
Another classic MS. It keeps getting more unbelievable every day as we continue our trip down the rabbit hole.
If you thought this downward revision was a farce wait till 1q 2010. It's going to be the mother of all facades. 4.5 percent gdp growth. Full of great expectational energies, sound and fury signifying NOTHING.
I keep wondering what alternative Universe I have wandered into--it sure as hell isn't Kansas anymore.
So who is the biggest cheat? China and its never-revised GDp number which takes just 2 weeks to report, or the USZ, takes 3 revisions over 3 months from end of quarter, always downwardly revised figure with a margin of error of 3.5%? I guess the USZ is a more refined cheat.
Keynesianism has been disproved repeatedly, and yet the problems that it causes and escalates simply get blamed on something else - naughty sounding word like "greed" or "capitalism", for instance. Didn't you hear, it's because of free markets that AIG, GS, BAC, an C got bailouts - not Keynesianism, /end sarcasm. When the system collapses new scape goats will be found for those that cannot be recycled. I hope you are correct, Marla, but I'm not so optimistic.
I'm getting too old for this chit.
In my Day, we just said "It's a dog. It's not dead, but he ain't feeling real good. Everybody behave accordingly."
That's how things got sorted out. i don't understand this trying so hard to go nowhere fast.
Instead, we declare a liquidity and "confidence' crisis for field upon field of disfigured assets. Build liquidity vehicles with a clone brother of the dollar, who lives only to torment the real dollar, which doesn't have much tangible underneath it. Then we replace the liquidity vehicles by buying up assets which may or may not get through their respective markets. Depending upon with what we reward the Dealers, who farked the assets and their markets in the first place.
You need Dr Kildare to surgically reverse the repos and easing. Instead, you have Beaver Bernanke.
And then there's his brother Wally over at Treasury, who's playing forward for the Wall Street Derivatives Team. Three school districts here in Pennsylvania are selling their students for medical experiments. They have to make up the millions they lost on swaptions over an interest rate swap. Do you know the average IQ of a school board member. They are measured in bp spreads of the yield on a 30 Day note. And they are being told to play in that game? How many phone calls per day is Kaufmann going to have to make to Shapiro before she realizes this isn't supposed to be a re-enactment of her performance at FINRA. And time is awastin'. Oh, and good defense, Wally.
Meanwhile, we're running our economy and driving our markets with statistics by bureaus whose numbers consistently prove that statistical validity and reliability are forgotten ancient artifacts. And we replace them with models and alchemy which fulfill our hopes and dreams. Knowing someday, well beyond their usefulness, those numbers will be some form of not-accurate enough to fill a fractal function and abberate the reality of that time.
So it nets out to planning to get the data ASAP, but guaranteed wrong,.. and there are no statistical boundaries or sense of propriety for how wrong it can be. (the BLS still owes us the truth about 850K invisible people.)
Why not use darts.
As a civilian observer of these financial wars and dues paying member of what used to be the Middle Class (that fight is almost over, in case you haven't walked down Main Street for a while. Now, it's just a matter of getting the quiet of us out of sight and the loud ones out of the gene pool), i have no skin in the economic idealogue non-debate. As a secular, there are a host of reasons to shortsheet Keynes' pap. This "recovery" ain't one of 'em, because it wasn't Keynesian. Just like the "capitalism" immediately preceeding, it was a brutal fraud of convenient utility and self-beneficial composition of those with access and copyrights.
Ya can't title this tragedy as Keynes or Friedman or whoever, doing so is but a distraction. Act II was written by a whole cast of characters who wrote it for themselves, using greater names than they as an excuse.
And now they want to re-run Act II, and sell it to us as a complete III Act play.
Miss Singer you write like a Cherabim Angel. Your words reach far and clear.. with the added excitement that if the thunder don't get me, the lightnin' will.
And I appreciate all of the contributors to ZeroHedge. I have to stretch real hard to breath it all in. But, I'll be having something to carry with me. Most of us don't understand all of this which has been and is now. But I'll give it a shot and pass it along. And I'll thank you kindly.
As my timeline already lays long behind me, I still hope I can pass on a better capitalism to my children and do all I can, so that I don't have to ask them to forgive me for the bill which comes with it.
"Miss Singer you write like a Cherabim Angel. Your words reach far and clear.. with the added excitement that if the thunder don't get me, the lightnin' will."
Captures the colour and mood...genuine old school sweet talker. Bravo!
Wow.
That... was... awesome (er, I mean endtastic).
I say, that was some kick-ass there pardner, I tell you what.
Mark Lundeen has developed a way of measuring GDP using data that (so far!) isn't manipulated. He has compiled and analyzed Electrical Power Consumption, going back to August 1929.
Think about it. When a factory shuts down, it stops EPC. Ditto for the closed shop in a strip center.
He found that since mid 2007 the economy has contracted over 5%, and that the rate of contraction is accelerating.
This is one of his older posts (August 2009), chosen because it discusses his methodology:
http://www.gold-eagle.com/editorials_08/lundeen080809.html
Wait-
Am I remembering this right?
Wasn't 2.2% the exact number that Goldman Sacs revised their 3rd Q estimate down to 24 hours before the first report came out?
Ineptitude pays.
Great comments here, as usual at 0H.
Many seem to feel that puffed up GDP figures are bad. So, what should we do? Publish the true numbers?
We all know economics is at least 50% psychology.We don't want to just blow another bubble but the economy is on life support right now. Don't we need to re-establish a firm pulse before we can think of treating the chronic diseases? At least massaging the GDP numbers doesn't cost the taxpayer.
"The truth? You can't handle the truth."
Oh, we can.
For many, standing in the queue to feed the Liberty Tree, will be a relief not a sacrifice.
How do I know?
Regards.