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In The First Quarter $250 Billion In Federal Debt Bought Negative $74 Billion In GDP
As everyone knows by now, in Q1 the US economy "grew" (we use the term loosely because the correct term is shrank) by the lowest amount in Q1 since 2009. More to the point, the -2.9% collapse in GDP was the 17th worst quarterly print in US history.
That much is largely known by now. What may not be known is that while there has been at least one quarter in the past 5 years in which the US economy shrank on a CAGR basis (at least until a new and improved definition of GDP revises that away) since 2009 there has never been a quarter in which the economy shrank sequentially in nominal terms. Which is what it did in Q1, when it declined by $74 billion.
Which brings us to the topic of marginal utility of debt, extensively covered here in the past. In brief, it describes how much in "economic growth" every dollar in federal debt buys. The bad news: in Q1, US total Federal debt rose by $250 billion, to a record (duh) $17.6 trillion. This debt "bought" a negative $74 billion in GDP, which declined to $17.0 trillion. Said otherwise, this was the first quarter since the end of the recession when debt rose (by a whopping amount), and when GDP declined sequentially in nominal terms.
Which, for the Keynesians out there, those who hold that absent substantial debt injections, either in the public or private sector, an economy is unable to grow, should be a flashing red light. Because US public debt expansion is now "tapering" if only until some time in 2017 when the healthcare cliff slams the US and the US Treasury will be working in overdrive to fund the US welfare state. And if said debt impulse is gone (and certainly the private sector is nowhere near being able to offset the public sector injection), it also means that GDP will suffer alongside it.
Ironically, it may well be that the slow down in drunken sailor debt issuance, something Obama has been happy to boast about in recent months, is precisely what caused the economy to grind to a halt: not the weather, not the BEA's incorrect accounting for Obamacare.
If indeed this is the case, and unless the private sector debt creation really picks up the pace (and we are not referring to student loans here although these most certainly are used for other purchases besides tuition and room & board), which it won't considering the collapse in mortgage lending, prepare for everyone to be shocked as the Q2 GDP estimate, somewhere around 4% also tumbles in the coming months.
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Aaaand that's how we know we're fucked. Well, just one more way that we're fucked.
ssshhhhhh you terrrrrrist .... just BTFATH like a good little serf ! !
does this spell the end of Keynesianism?
I was logging on to say the exact same thing. Fuuuuuuucked.
So whats gonna happen next?
There's only one solution. More bullshit. It's the only solution that has a proven track record. Why stop now?
Why stop now?
Exactly. Everyone obeys their every word. Why should they change?
So, how badly would GDP have fallen without that $250 billion in deficit spending?...
Just shows what a travesty the GDP numbers are when you get to count spending money you don't have as part of what the economy 'produced.'
All we need for GDP growth of 10% is for the government to print and spend $1 trillion every quarter.
"It's a travesty of a mockery of a sham of a mockery of a travesty of two mockeries of a sham."
Since the marginal utility of giving money to corporations has diminished utility, I propose that the FED should give the same amount to each citizen.
Then when the marginal utility of giving money to citizens has diminished utility, I propose that we give the same amount to thier pets....
It's for the children...
The motives behind common core math keep getting clearer...
"winning"
That is a whole lotta cheddar to be tossing into the black hole called the american economy.
pods
RE
More like moldy Gouda
Even Keynes wouldn't support what these assholes are doing. At least he had morals.
Tyler, please pick a position
1) prepare for everyone to be shocked as the Q2 GDP estimate, somewhere around 4% also tumbles in the coming months.
2) And now, we all await as the US department of truth says, with a straight face, that in Q2 the US GDP "grew" by over 5% (no really: you'll see).
"please pick a position"
Grab yor ankles...
There are not enough up arrows available for this comment.
The fetal position.
Quick, make it $500 billion. Then we might only lose $35 billion.
Well, fuck; let's just make it $2Trillion and tell eveyone we broke even.
Ok, dammit; let's just make it $3 Trillion and buy ourselves a trip to the Dairy Queen. I'm hot and wanna sundae.
There is logic.
There is reason.
There is thought verified by experience.
And there is central banking and government accounting which uses none of the above.
how many bonus dollars will it buy at the end of the year?
dont forget, the Fed printed over $200 B in the Q1 as well, stoking massive inflation. back out inflation, and GDP dropped 3.6%.
Would we be backing out:
1) FED level inflation,
2) John Williams/Shadow Stats inflation,
or,
3) the in-your-face grocery store inflation?
I will split the difference and suggest that real GDP dropped at a 10% annual rate.
The -$74 billion quarterly GDP drop is nominal (not inflation adjusted), the 2.9% annualized drop is real (inflation adjusted).
Using the nominal figure of a $73.6 billion drop, that comes to a nominal GDP drop of 1.7% annualized. Applying a realistic inflation rate of say 5% gives a 6.4% drop in real GDP annualized.
I want to hear Krugman's thoughts on the matter. I need a good, hearty laugh today.
Krugman - thoughts
Dumbfounded tool bag
Kurgman is to thoughts as bag of rocks is to a microprocessor.
krugman's thoughts: "we need to spend moar, which means we need to print moar. the government isnt doing enough."
DATELINE: PRINCETON;
Reacting to a severe negative revision to Q1 GDP, a drunken Paul Krugman was seen smashing local windows with a sledgehammer, rambling incoherently about how the government must repel a non-existent alien invasion...
Krugman will look at these data and say, "See! I told you we needed to spend a whole lot more!"
Same date, different interpretation. They never quit.
Very simple: We didn't spend enough!
As well you know, that broken record will say we need MORE printing kick in the turbo chargers! More I tell you more!
I wish they would.
-1 for misspelling MOAR
Lew ! Dammit, man, quite dithering over that sodden hard-drive and hand up moar ink cartridges !
Man the presses you dogs, full speed ahead !
( the wind was still, the water was smooth as glass; and the dreaded Vix slumbered drunk in the stinking hold )
http://krugman.blogs.nytimes.com/ You mean this isn't your homepage?
Game at end. Please be prepared to wait a long ti,e after pressing "reset" button.
If you ran your household this way they would be up your ass with a turkey baster full of sulfuric acid.
No doubt. But since they're (.gov and Duh Fed) running their households this way, they're trying to get a turkey baster full of sulphuric acid up our collective asses.
There's such a fine distinction between the two...
the terrible abuse of our monitary system is now in plain sight, but few americans or for that matter the world will hear word one on the destruction of not just USA but much of the world by these CB's& Fed . IMO run by yews for the .01%..until someone can show me otherwise.
"Good debt is represented by money, the money represents the product of work, the work is necessary to meet the demands of living. Bad debt is represented by counterfeit, the counterfeit represents the absence of product, the absence of product represents the impersonation of work, the impersonation of work represents the necessity to steal to meet the demands of living." - OC Sure; Debts and Wages
Behold...the daily EOD VIX ass pounding....
When the boat is sincking in shark invested waters, you pump like crazy... It doesn't matter how much water you get out... You just pump... You might live 5 more seconds... Maybe... So you pump... You know you'll sinck... You know the sharks will get what they want... But you pump....
This should be good for a laugh:
http://www.deepcapture.com/deep-capture-files-major-lawsuit-against-the-...
Just think of the drag on the economy when we start paying those trillions back and unwinding the Fed's QE Programs....
Oh yeah...nevermind.
If the economy shrank at 2.96%, shouldn't it be rounded up to 3.0% and not down to 2.9%? I'm just saying.
( waves hand ) "This isn't the math you're looking for." ( rubs beard )
Its like paying $3.999 for a gallon of gas. See its not $4, its all good. Can't wait till we print more to get that GDP up up up. Of course with more $$ out there and GDP improving, oil will probably hit $140 a barrel which will cause a drag of 2%-3% on GDP and probably the next recession, (Beacause we're not in one now). Welcome to the circular firing square economy.
the fruits of a crack economic team,
firing on all cylinders, with both eyes
forward looking; sentient, wise and on
task, onward!
This AUSTERITY is gonna kill us, KILL US!!!!
We need more stimulus, MORE STIMULUS!!!!!
Come on the problem is glaringly obvious.... They didn't spend enough. I don't care how much they spend, they should have spent moar.
So we should see somewhere around 150 billion dollars of price inflation spread out through various products.
The difference has to go somewhere, numbers dont just disappear .
Well, it could be going into the stock market too.
As Krugman says: Macro-economics isn't a morality play. The models don't determine who wins and loses, they just predict more goodness if there's more spending, and the only way to get more spending is with more money.
Scotty, we need more MONEY!!
Please someone set me straight.
So, 250 billion in debt equals negative 74 billion in GDP. Is this not a negative 324 billion swing in GDP for the first quarter since debt is not a labor produced product. Annualized, this would be 1.296 trillion in GDP shrinkage.
On a related topic, if the Govt wants inflation would it not be inflationary for everyone in the private sector to get a raise?
Re: if the Govt wants inflation
The government wants good inflation.
Re: would it not be inflationary for everyone in the private sector to get a raise?
That's bad inflation.
Please, stop trying to equate accounting with mathmatics !
They are two entirely seperate ways of contrasting numerical information.
Math is predicated upon the respectful observation of numbers interracting peacefully with themselves, adding and subtracting, multiplying and dividing, unmolested and of their own accord through the seasons...
Accounting is all about brutally fucking numbers in the ass for three months at a time, telliing them crazy shit while gang-sodomizing them, and then making a huge show of lying about it publicly when the three months have expired..
+(2.96) for the best laugh of the day.
where's Dennis Gartman to explain this ?!?!?!?!?
Obama is a stupid bitch
Q2 will be positive but after that.... look out below.
You're probably right, Q2 2008 was +2.0, Q1, Q3, Q4 and Q1 09 made the list above
It is no secret that O'bummer is intentionally destroying the US and discrediting its government. It seems clear that is what he has been assigned to do by his master(s). He may also be stupid and lazy, but that is irrelevant.
What I find interesting is that given the opportunity to be completely corrupt, the rest of government and the military has apparently gotten on the band wagon. One would think that there would be some morals and ethics even at that level of the parasite elitists.
Buh....buh....buh....wait.
The Prez said that we would be back down to $500 billion annual deficits. But we had $250 billion in Q1. That would annualize to...wait...I can't type and count on my knuclles...ah...there...$1,000 billion aka 1 tri$$ion.
Of course we COULD have a $125 billion added debt in Q2 and Q3 and then no additional debt in Q4. Yeah. Thats the ticket. And with ObamaCare kicking in and CO2/EPA skyrocketing induced skyrocketing electricity rates we would likely end up with a surplus!!!! Happy daze are here again.
Confession: What with that situation down on the Rio Grande, I sold all of my gold and put it in Proctor & Gamble and Kimberly-Clark. You know - Depends, Huggies - all that stuff.
This is like standing in your own grave and shoveling the dirt back in over top of you...
'Love The Way You Lie' seems appropriate background music...
Dimininshing Marginal Return of Debt.
So what is our debt ceiling set at these days?
er, I mean... THEIR odious debt ceiling?
You can only take so much LSD... and then you don't get high regardless of dosage.
Janet should be so proud.
What would it have been without the recent revision that includes things like movie rentals?
Good thing they’re tapering. Surely the tapering ends in a month’s time though.
Are you aware.
US Q2 GDP Announced – July 30, 2014 (Advance Estimate)
http://www.bea.gov/newsreleases/news_release_sort_national.htm
US Federal Reserve – Next FOMC Meeting – July 29-30, 2014
http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
Same date. US in recession, surely that means an end to the taper in a month's time?
America imports around five hundred billion dollars more from other countries every year than they export. This means we have a giant trade deficit, when we add this to our massive government deficit it is easy to see that we are living far beyond our means.
The Fed has been superbly entrepreneurial when it comes to Ponzi schemes or pseudo-economics hocus-pocus that has allowed the current situation to develop. The Fed must at some point begin to ponder a real exit strategy and end the massive and corrosive stimulus that the economy has come to expect. To make matters worse little has been done to address our structural problems and make America more competitive, this will thwart growth going forward. More on this subject in the article below.
http://brucewilds.blogspot.com/2014/06/exit-strategy-from-qe-remains-elu...