Captain Rick: The U.S. managed to crawl out of the GDP recession zone in its ‘final’ report for Q4 2012 to post a dismal 0.4% GDP, second worst since the end of the Great Recession in 2009. The first estimate in January reported –0.1% GDP, in the recession zone. 

GDP (Gross National Product) is the broadest means of quantifying the health of an economy.

In my previous GDP report, I stated: “If Congress gets tough and addresses the debt crisis head on, I suspect it will present a deeper, temporary plunge into negative growth territory. If Congress continues to ‘kick the can down the road’, I suspect we will see less of a dive in GDP early on…but will set the stage for a much deeper dive in a year or two…possibly as deep or deeper than the ‘Great Recession’ of 2008-2009”.

The U.S. Congress passed and President Obama signed legislation to “kick the debt can down the road” AGAIN as reported in my previous post. While these actions have no effect on GDP for Q4 2012, they will effect GDP for Q1 2013 and beyond.

image

The red line in the chart above indicates the 3% level that the U.S. GDP must maintain to keep up with population growth. GDP has been far short of that for many years. In spite of the positive hype we are hearing in the mainstream news media, America is traversing extremely dangerous economic waters. Hype does not fix problems… credible action does. Unfortunately the world is seeing ‘zero’ credible action out of the politicians who represent the citizens of the United States of America.

Prognosis for the future…where are we headed?

I see several troubling economic factors that parallel the times leading up to the ‘Great Recession’. The world stock markets have reached a new high, passing those reached just prior to the stock market crash of 2008. Like then, I see no justifiable reason for the market rise. Today’s market reminds me of a bunch of gamblers in Vegas looking for a place to throw all of their dollars to bet it all. The market is again inflating into a balloon ripe for explosion. Real estate prices have been climbing at a fast pace, as is real estate speculation…similar to that witnessed prior to the bursting of the real estate bubble, prior to the Great Recession. I can not predict how much farther things can go before a repeat of 2008 occurs…or perhaps worse, but I feel that a down slide is coming soon. Much will have to do with congress’s handling of the debt crisis (very dismal at this point). It will be further complicated by the multi-trillion dollar cost of Obamacare (the worlds greatest socialized, welfare medical program). In addition, we must remember that multi millions of baby boomers are beginning to collect Social Security from a trust fund that has been totally robbed of funds to finance the U.S. Government and its politician’s thirst for deficit spending. It will all play out in a very ugly scene before the world’s eyes during the next few years.

I welcome your comments, likes and shares!

Info from previous reports:

Fiscal Cliff: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

U.S. Debt Crisis: https://atridim.wordpress.com/category/u-s-debt-crisis/

GDP: https://atridim.wordpress.com/category/gdp/

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Comments
  1. tincup33 says:

    Most troubling to me has been the wanton printing of trillions of dollars out of thin air. Total federal debt, including unfunded liabilities, is upwards of $100 Trillion, with a T. It’s an astronomical sum that can never be repaid, no matter how much taxes are raised or how much economic growth we eventually achieve. The ONLY way to deal with such debt is to inflate it away, which will happen, sooner or later, with so much new money chasing about the same number of goods. We’ve seen how this ended in the Weimar Republic and Zimbabwe, and its not pretty.

    • atridim says:

      Sincere thanks for your comment. Your words present a real reality…especially “The ONLY way to deal with such debt is to inflate it away”. This is so true. Looking back, inflation has cut the buying power in half every 10 years. A commodity that cost $1 ten years ago, now costs $2. So, the governments current $1.7 trillion debt could be diminished to a value of $850 Billion in ten years. The problem I see is that there is not much inflation these days, due mostly to federal interest rate set at near zero for the past several years. It appears that the days of demising the appearance of the size of the U.S. debt by inflation is coming to an end. This U.S. Government trick may no longer work. Another stark reason why the U.S. must deal with its uncontrolled deficit spending soon.
      Captain Rick

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