The "Sham" Recovery And Uncharted Territory

Tyler Durden's picture

Submitted by John Rubino via The Dollar Collapse blog,

The Consumer Metrics Institute is generally a pretty subdued bunch, as befits their job interpreting economic statistics for money managers and other economists. But lately they’ve been sounding, well, apocalyptic. Here are a few snippets from their analysis of the US GDP revision released this morning:

On the government’s questionable use of inflation to arrive at real GDP:

For this set of revisions the BEA assumed annualized net aggregate inflation of 1.26%. In contrast, during the first quarter (i.e., from December to March) the seasonally adjusted CPI-U index published by the Bureau of Labor Statistics (BLS) rose by 2.10% (annualized), and the price index published by the Billion Prices Project (BPP) rose at an annualized rate of 5.35%. As a reminder: an understatement of assumed inflation increases the reported headline number — and in this case the BEA’s relatively low “deflater” boosted the published headline rate. If the CPI-U had been used to convert the “nominal” GDP numbers into “real” numbers, the reported headline growth rate would have been a much more modest 0.96%. And if the BPP index (which arguably best reflects the experiences of the American consumer) had be used as the “deflater,” the economy would have been reported to have been contracting at a -2.30% annualized rate.

On falling US imports:

But once again that bad news was more than completely offset by an even larger drop in imports — which now added +0.06% to the headline number after removing -0.32% in the prior report. Since this mathematical “addition” to the headline number can be the consequence of decreasing domestic demand for foreign goods, it is arguably a sign of a weakening economy. It may also be merely a sign of softening commodity prices.

And the big one, plunging incomes:

And as mentioned above, real per-capita disposable income took another hit: it is now reported to have dropped by an annualized $796 from quarter to quarter. Real per-capita disposable income is now down $209 annually from 1Q-2011 — a full two years ago.

Their summary:

At best this new release reports an economy with lackluster growth, created at great expense by a combination of unprecedented fiscal and monetary stimulus that have obviously progressed well past the point of diminishing returns. To be fair, many other national governments would be thrilled to be reporting a 1.78% annualized growth rate. But that observation in itself (without mentioning the plunging export numbers) also reflect global economic headwinds that do not bode well for sustaining even lackluster numbers over the balance of the year.


And we continue to note the one truly serious domestic issue within the data:


– Real per capita disposable incomes took yet another hit. The astonishing annualized contraction of real per capita disposable income has now reached -9.21% — dwarfing the -7.52% contraction rate recorded in the first quarter of 2009 (the worst quarterly contraction recorded during the official duration of the “Great Recession”).


From time to time we may quarrel with the quality of the BEA’s deflaters. And frankly we may even find that at face value the lackluster numbers amount to nothing more than a sham “recovery.” But the most shocking part of this report is glaringly obvious from the real per capita disposable income numbers: all of the unprecedented fiscal and monetary stimulus has left American households materially worse off than they were two years ago.

Final thoughts
For the income of the average family to fall by 9% in one year is indeed a huge hit. The savings rate is around 3%, so that would imply a 6% draw-down of savings, or a commensurate drop in spending. Hence the falling imports (which might explain the recent bad news out of China). Now combine this with soaring mortgage rates and CMI’s opinion that this is “nothing more than a sham recovery” doesn’t seem hyperbolic at all.

Ironically, for the financial markets cratering household income can be interpreted as good news because it will prevent the Fed from easing back on the monetary throttle. The question now is timing. Will the slowdown make it all the way to the top line — with falling GDP in the second half of this year — in which case we’re back in 2008, staring into the abyss. Or do the financial markets anticipate never-ending debt monetization and keep blowing up the equity and bond bubbles? In which case we’re in totally uncharted territory.

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Bad Attitude's picture

What? You mean Dear Leader and his overlords have been lying to us sheeple? It's a sham? I'm shocked, I the you, shocked!

Forward (over the cliff)!

Richard Chesler's picture

Sham is Obozo's middle name.


NoDebt's picture

A small number of rich, a large number of poor and just enough middle class to service the rich.  As it has been in most societies throughout most of history.



BandGap's picture

Has anyone connected the dots between what the NSA is/was doing and all the utter bullshit happening in our government? A lot of 180 degree turns makes me think more than a few people are being blackmailed by information collected by dubious menas. Call me paranoid but this is the Chicago Way.

And EVERYONE has something to hide.



NoDebt's picture

Not to my knowlege.  But you put your finger on it.  When all that matters is the power struggle in DC, the NSA capabilities are the "holy grail" for keeping your opponents down.  They all want this power.  It will NEVER be dismantled.  Only fought over who gets to control it. 

Now imagine the next logical step:  Give the IRS access to the NSA data collection network.  Frankly, I'd be surprised if they haven't done it yet.

As "Wall St." was the instruction manual for..... um...... Wall St., so "1984" was the instruction manual for government.  The long wait is over.  It's arrived.

Jumbotron's picture


Speaking of Vince the Sham-Wow guy....i think his new product "The Schticky" is also appropriate here since inflation as given us by the Bernanke....will be giving us "The Schticky" up the wazoo in the not too distant future.

Here is the now hard to find...controversial "Problem with the shedding pussy?" version of Vince's 'The Schticky" ad


francis_sawyer's picture

Here's how 'SHAMS' generally turn out in the end... [on a long enough timeline]


BandGap's picture

WTF was that? Please elaborate.

In the end confusion reigns. I miss the 1970s.

francis_sawyer's picture

'Sham' lost to 'Secretariat' in all 3 Triple Crown races... It just kept getting worse & worse [for Sham]...


BandGap's picture


I forgive the 70s for disco. I love the 70s now.

francis_sawyer's picture

This will make you feel better...

July 12, 1979 ~ Comiskey Park, Chicago, IL


thismarketisrigged's picture

is there anyone capable of sending a fake tweet out to maybe crash the markets, even if it is for 2 minutes?


i cant stand this green on my screen.

Sudden Debt's picture

You could always check out a Japanese financial site that has a DOW Ticker....

Green is red... red is green...

SheepDog-One's picture

Why even pay any attention to tick by tick market? I just have ZH on one screen, ammobot on the other placing some orders.

Fuck Bernank, the fake charade, and I hope they all gag and choke to death on their fake bullshit.

SKY85hawk's picture

A trading question, seriously.  You are one of the few posters that always sounds like the voice of reason.

What can I read or do to learn to trade in these choppy waters?




g'kar's picture




Fake President

Fake Congress

Fake Economy

Fake Money



McMolotov's picture

Reminds me of Radiohead's "Fake Plastic Trees." Gravity always wins, bitchez.

Boozer's picture

Good to see you back McMolotov as I enjoy your posts.  Thought perhaps you had been

hauled away to FEMA camp.

McMolotov's picture

Just needed a temporary break from the shit-show. FEMA camp comes later.

YHC-FTSE's picture

Thought you'd been "Snowdened".

Been missing your comments since the end of May. Good to see you back mate.

g'kar's picture

I'll be in Cell 666, see you there!

Sudden Debt's picture


I think they're talking about a Gymnasium...

McMolotov's picture

All of the unprecedented fiscal and monetary stimulus has left American households materially worse off than they were two years ago.

"We are spending more money than we have ever spent before, and it does not work. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration we have just as much unemployment as when we started ... and an enormous debt, to boot."

—Henry Morgenthau, Treasury Secretary under FDR, 1939

SmallerGovNow2's picture

Classic Mac, thanks for that gem...

SheepDog-One's picture

2 years ago? Now let's compare today to 10 years ago.

adr's picture

If the money spigot keeps flowing, the middle class will be completely destroyed.

If the free money stops, the rich will be destroyed.

Wonder which one they will choose?

SheepDog-One's picture

So then the 'rich' will live off of the 'poor'?

Something tells me 'the rich' should have read the story about killing the Golden Goose. 

Atlantis Consigliore's picture

Spell black market?  anyone the next gdp growth sector including medical care.


km4's picture

sham bam thank you maam 

Rustysilver's picture

OT: Russia withdraws all its personnel from Syria including the naval base. Something about to break.

SheepDog-One's picture

Wait....I thought when Russia put IN troops and ships in Syria that meant something was about to break.

Unprepared's picture

"something" is always about to break.

sbenard's picture

It's NOT a sham recovery! It's more like a SCAM recovery!

monad's picture

What if all the numbers were always fake? Or at least irrelevant? 

kevinearick's picture

who isn't participating...and why is marriage at an all-time low?

Priorities & Multiplier Effects

“We are the people our parents warned us about.”

So, how do you turn a flattop around on a dime and accelerate in the process?

Yes. Microsoft is a piece of crap.

Yes. Apple is a piece of crap.

Yes. Google is a piece of crap.

Yes. GM is a piece of crap.

Blah, blah, blah.

But what has the empire spent $30T in future income to protect, to save its own arse? Where do all the problems intersect?

If you look at the empire margin, where all it its crap surfaces, what do you see?


Boeing is retiring planes right off the end of the assembly line to produce more, and it is responsible for all marginal production. From the perspective of the empire majority, global compliance pacification, Boeing is the solution.

Ultimately, labor gets paid to fire people, not to roll out developments, but you want to have your prototypes ready before you begin.

Now, who do we fire? It’s not the idiot hiding in the CEO’s office, and you have to rebuild Navy from the bottom up…by firing operationally from the top down…hmmm….

The flattops have the same problems as the cruise ships, because they are built for entertainment. Ignore the fireworks anxiety.

Choose your priorities on the margin with feedback appropriate to your development and everything else will take care of itself. Across the empire, entertainment trumps work, which is why it’s a circus, of, by and for passive aggressive clowns and their aggressive Chihuahuas.

You can fix this problem, from anywhere in the economy, depending upon the acceleration you want, or you can let the middle class die off. Each generation has its time. Complaining about previous generations doesn’t get the job done, and serves the empire. Recycle.

Unless a welfare police state is your goal, the Dreamliner process is a nightmare. Throw it in the cesspool with the Internet and get on with your life, productively. The cornerstone of every community is its school. Build it while others sleep.

If you need to wire around the global HR co[n]mpliance function, and most of you do to complete the bridge out, create new job titles and write new job descriptions to eliminate empire licensing requirements; hire those with bad credit records, no recent criminal activity, and no more than two criminal convictions; and learn to employ aggressive behavior effectively. Become more aggressive if you are passive.

If Social Security and Medicare are so great, why are retirees working and in constant fear of failing health? Why do they need pills from the system, to deal with the system? Why is that you cannot trust a doctor, a lawyer, or a priest - professional birth control “in a vortex of intrigue, betrayal and violence (R.T./S&S/BCE)?”

If divorce is an option, it’s not a marriage. Three generations are the minimum requirement to build a bridge. And Military Law excludes civil marriage authority for a reason.

Meatier Shower's picture

I'll take never-ending debt monetization for $17T Alex.

22winmag's picture

Obama's 100 million dollar vacation in Africa isn't really a vacation... it's a trade mission that will improve our economy.