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The Single Largest Driver of the US Economy is About to Collapse
The markets continue their dead cat bounce while the economic data worsens.
First quarter US GDP was revised down from an annual rate of 2.4% to 1.8%. The drop was due to lower personal consumption expenditures than initially forecast.
This is the crux of the US’s current economic woes: consumer-spending accounts for roughly 70% of our GDP. And QE does nothing to help incomes, which drive consumption.
The US Federal Government has subsidized a weak economic recovery via food stamps and other social program, but the private sector is lagging with most of its hiring coming in the form of temporary or part-time jobs.
The Wall Street Journal ran this graphic yesterday. Anyone who is banking on consumers to continue spending as they have is out of their mind.
Regarding the stock market, it’s important to note that all market collapses follow a similar pattern of:
1) The initial drop breaking support
2) Bouncing to re-test support
3) The larger drop
The S&P 500 has completed #1 and is now in #2:
This move could take us as high as 1,625. However, if the market fails to reclaim its trendline we’re going down as far as 1,500 in short notice. And if we take out that level we’re in BIG TROUBLE.
If you have not taken steps to prepare for a market collapse, we have a FREE Special Report that outlines how to prepare your portfolio. To pick up a copy, swing by:
http://gainspainscapital.com/protect-your-portfolio/
Best Regards
Graham Summers
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linear graphs applied to CURVED price charts like S&P? Sorry, Fail.
Unless you're an options trader back-testing for swings vs cost basis what's the point of the linear chart?
NONE.
consumer spending can easily be replaced by government spending as they take more, print more
It's amazing how far the real economy can go on food stamps and shoestring budget stimulus? This should be no surprise--chump change can create real vibrant economies if the money is spend into the economy and not chase asset bubbles.
Unfortunately most money now will have to go in order to support elite's wealth: few realize that wealth accumulation=debt.
I spent my debt on PM's in 2004.
It's amazing how far the economy can go on a queer black guy reading from a teleprompter.
The stock market does not matter.
Bernanke is wrong to care about the stock market.
Everyone else who worries about the stock market is also wrong.
The only way to heal the economy is for the fraud sectors to collapse and die.
NOTE: gains in stocks are balanced by losses for workers and regular folks.
Consumer spending up, incomes down. That means once again the plastic is being charged up. Spending beyond means. Obamacare kicks in full blast 2014, taxes up. Illegals will be pouring in to take advantage of the free green cards by the tens of millions eligible for full federal benefits to go with their state benefits.
I don't see a problem.
Everybody is always trying to sell something...
Well, just revise the GDP upward to fit the model. Just like EU.
Problem solved.
Let's drink some Merlot.
"First quarter US GDP was revised down from an annual rate of 2.4% to 1.8%. The drop was due to lower personal consumption expenditures than initially forecast."
Sorry, but not exactly accurate. The drop was due to the markets FREAKING THE HELL OUT AFTER THE LAST FOMC AND THE FED NEEDED TO DO SOMETHING TO MAKE US THINK THEY AREN'T GOING TO TAPER. Thus the "revised" GDP number. Looks like we need more QE after all....amazing.
This is the engine of the global economy? Not an economist but that does not look entirely sustainable to me.
Generally in Europe is 30-35% and even less in the other countries.
But hey, this is why Europe is in recession. Remove the unsustainable borrowed consumption and US will be in to, and even considerably more sever one.
Coming to the neighbor new you.
A part time worker does not have the excess cash in their pocket to spend to support the economy. All western economies are growing this mechanism to avoid having to declare what the true and real employment level is actually like so you defer the problem to another day. Fine! No problem with that you end up with this.
An economy in an even worse position to support the end asset prices of things like houses, levels of student loans actually anything that was priced at pre 2008 levels when the majority are at this income level.
Most likely peirce the upper trendline. They just won't let it do what it wants and are still in control at the moment.
Wait until ACA takes us into recession next year. In one state in Midwest, health insurance premiums are expected to rise up to 81% for young/healthy and those with above average income. If yields stay as they are or higher, interest on the debt will cut into GDP further as there will be less money to fund the nonsense the government wants to waste money on and the additional 10k a day retireing into the a system of unfunded liabilities that has reached 124 T. QE and deficit spending are not promoting growth...it is making is much worse both in US and abroad. World debt to GDP is now 313%. Mathmatically inpossible to make solvent on growth. Ben's helicopter will have true duel mandate: throw money out to keep the ruse going and then swoop down and give wealth/standard of living haircuts once the "nobody saw it coming except those who actually opened their eyes" moment happens. Of course, when Bill Gross places a 60% chance of a global recession in the next 5 years, as he did recently, and people like Kyle Bass, David Stockman, etc consistently show how false the math is, it will be harder to avoid the truth....but by then all of "their" money will have been moved.
If those who believe in magic vs math are correct, the US/world will contunie to "grow" at a pace to offset this and the markets will keep going up, good (wage) inflation and then bad inflation will ensue and those involved in the monopoly will continue to be the major beneficiaries, while the rest will at least be able to keep their head above water.
If those who believe more in math are correct, like Kyle Bass and most on here than we have maybe 2 years before things really become unhinged and in the process treasury yields etc will approach 1% or lower (10 yr) as the govt will do everything possible to avoid the being blamed.
Don't you mean, the single largest source of ransom to the criminal .1% just collapsed?
Maybe the Obama's can spend 100 million at Wall Mart instead of visiting his BIRTH PLACE! Just saying....
Things are going downhill fast. Maybe Krugman was right and we should plan for aliens.. we could be out of this in 18 months. http://tinyurl.com/mem7o7x
This POS economy has been at death's door for five years.
If it's going to collapse, I wish it would do so. A fresh start, a wipeout of the failed banks and investments, it would be just the medicine to allow me to take a major tension dump.
Ahhhhhhhhhhh.
You should probably compare the current problems with the known technical default measure as in Japan and from that on the current rate of travel should give you a GOOD ESTIMATE OF WHEN IT WILL OCCUR AT THE LATEST.
And Breathe................so what, either you are prepared or you are not.
If you are prepped with food. water and PM (For the yanks Guns and bullets) you have nothing to worry about, if you ain't then I would get busy prepping or busy worrying.
consumer consumption down confidence up. wtf
charge it!!
It appears not only is this a jobless recovery, it is a consumerless recovery.
jobless...consumerless...ad almost infinutumless
We don't need no stinking people.
I wonder if Bernanke would notice/change his destroy-real-economies plan if the human population just disappeared...
Who needs consumers anymore? That's so 20th century. You have your banks play with other people's money in systems that are rigged with HFT and the fed hands out free money as well. Consumers only exist to perform menial tasks for menial rewards that all ends up going to whatever company, which dumps it into the funds that jack up everything. Simple eh?
printing baby. bad news is the best news!!! bennie is printing.... amazing. when will it end?
An economy based on benefit-dodging(temp/PT employment) growth is not an economy known to prosper. The more that such grows, the more distrust exists.
Graham use to write much longer pieces than this, but give the man credit, his message has been the same since 2009. Even a broken clock is right twice a day. Unless you keep f*#$-ing with it, in which case it may never be right. Or fixable. Sorta like the US economy. Financialized since 1971.
we can all be like the FED and the US gov. we can spend ever more money...without the income. That should end well. PRINT, PRINT, PRINT.... Instead of just giving Wall Street money printers....why not just sell them at staples....then we all be richer
If all the stimulus money that has been fed by the Bernankenstein to his bankster minions would have been distributed to Mainstreet America, we would have vastly recovered by now.
Inflation would be no greater than it will ultimately be anyway.
Overall citizen debt would have been significantly reduced and consumers would now be able to borrow and spend themselves into another fantasy frenzy of ostentatious over-consumption that would have increased government tax revenues and kept the criminal banksters afloat so that they would be able to rob and pillage the population for decades to come.
We are being led and governed by morons.
If all the stimulus money that has been fed by the Bernankenstein to his bankster minions would have been distributed to Mainstreet America, we would have vastly recovered by now.
Destroying the value of a currency is never a good idea. It punishes the thrifty and encourages malinvestment no matter to whom it's given.
Consumer unspending is only 70% of the GDP. With almost everything (non-Fed supported) selling at 80-90% discounted, it's hard to see why people don't need that 638th sweater...or 14th iPad...and oh yeah, 1 moar plasma screen for little Johhny's room so he can watch Beeber singing "live at Carnegie Hall" and dancing with the Idols at the same time.
...while non-stop Twittering and "Friending" his friends.....
You can't do all those things at once, you would be a psychotic trainwreck.
Oh wait... That's why the sheeple don't see 99.99% of the shit that is coming to them.
Phoenix, you are so smart. #PaycheckToPaycheck
Mr Summers and everyone else on ZeroHedge -
Please avoid that horrid phrase 'dead cat bounce'
It is very unkind ... many of us love cats, who have a loyalty and affection that puts many human beings to shame
"ZeroHegders' are "dog people" - no pussies!
Be glad you are not a cricket or a mouse.
Domesticated cats are nasty creatures who decimate the bird and rodent populations and like to torture their prey (because they are so well-fed by their owners) And when your cat snuggles up to you, it considers you to be part of their family, not the other way around.
Dogs Drool, Cats Rule
arh, tastes rike chikin
That one left me catatonic...
Decimated? Nasty creatures? Hyperbole alert.
Although there is a sizable percentage of inconsiderate dog owners, cat owners in general are worse. An even smaller percentage of cats than dogs are properly licensed, vaccinated, or neutered.
Cats are typically ( and often illegally) allowed to wander freely, breed excessively, spread disease, and create a feral cat population that is destructive to wildlife.
The feral cat population in the US is estimated at 60 million. (Question: how many wild bird deaths result annually?)
http://www.feralcat.com/kelson.html
Who gives a shit?
Feral cats are a problem because people get them as kittens then release them into the neighborhoods as juveniles, often after the males start spraying Not due to the fact they are unlicensed. Who are you, Michael Bloomberg?
All this could be easily solved by .22lr, if any could be had..
Are you suggesting that the problem that can be eliminated with a .22LR is Michael Bloomberg...or the feral cats.....or perhaps both?
In either case, I would be glad to contribute to the clean-up effort.
Maybe in the UK where they think it's a crime to keep a cat indoors, even in a high-rise condo. People who abandon dogs and cats should be horsewhipped.
yes, those rats living in my attic were an endangered species.
The bats who occasionally sneak inside are no match for Mr. Ramses.