Surprise! Unexpected! Economy contracts in fourth quarter
How long can the media continue to be surprised by negative reports on the economy? And why are the rest of us not surprised?
Or is the media only feigning its surprise?
Now, I understand that this is the first quarter since the 2008 crash that the economy hasn’t grown at least a little tiny bit. And I understand that most economists had predicted at least modest growth this quarter. Thus, the “surprise” of the experts.
But I still don’t see why they’ve been so surprised. How could the economic climate be good with the uncertainty of the fiscal cliff negotiations, the debt ceiling fight, the very real problems of unemployment and the deficit and looming Obamacare and payroll tax raises for all (even if they’re technically the result of the end of a temporary cut)?
The proximate cause of this particular downturn is thought to be defense cuts, and some other indicators seem okay. But nothing looks what one might call good. And why, pray tell, would it?
I’ve made no secret of the fact that I’m no whiz on economics and/or finance. But my gut and my brain tell me that the economy is one of those complex creatures, subject to the law of unintended consequences and a host of other things we understand only poorly, if at all, and that predictions are inherently shaky, whether by learned economists, politicians, or little old me. But that anyone is truly surprised by the economy doing poorly at the moment is—well, it’s surprising.
As I see it, the situation is that we must balance our need to cut government spending and shrink the deficit with our need to stimulate growth, and because it’s a fact in recent years that a lot of our economy is dependent on government spending, these become contradictory impulses. We must create a climate where people believe things are getting better, because people’s economic behavior is in part psychological (I think Romney’s mere election would have helped create at least a bit more of that climate, but we’ll never know if that was correct, because we never got a chance to find out). We have to balance the need to raise revenue through taxes with the need to not burden people unduly and decrease their spending.
And on and on and forth. I also suspect that our current economy still has some not insignificant bubble aspects, propped up in part by the government in a sort of endless loop, rather than reflecting true vibrancy.
[NOTE: IF you want to read a ton of articles on what this 4th quarter report means, just go to memeorandum and start clicking.]
I heard El Rushbo remark that now Democrats are bragging/braying that this is the best economic contraction they’d ever seen.
The standard with this President has been set so low that this is called good news by Dems and the lapdog media. It is mind boggling.
My conservative coworker kept telling me that the economy is improving.
I kept responding that I don’t understand where you are getting that information and that the number of unemployed is the same. The number of new jobs isn’t going to improve much with the Obamacare looming over employers as well as EPA and every other government agency producing new rules each year.
I emailed him the story and he was surprised. I said this is what I’ve been saying that I don’t understand why people believe the economy is going to improve.
Any improvement will be incidental.
Any improvement is companies taking whatever gains in market share they can but they will do so without hiring many more people.
The only people that are surprised that the economy is weak are those that man the sunshine pumps.
Government does not create wealth. Measuring total GDP, which includes government spending, creates a false sense of prosperity when deficit spending is significant and prolonged.
Private sector growth is the only growth that matters because ultimately it is the private sector that has to pay all the bills.
Even J. M. Keynes only recommended deficit spending to stimulate growth for short durations when business contracted. He would never have endorsed what is done in his name today.
We continue to borrow over 6% of GDP. Not only do we have to stop inflating our appearance of prosperity by this action, we will also suffer currency devaluation by the amounts that we have borrowed in the past and can not pay back on a timely basis.
Our only chance to avoid contraction is to grow our way out of the problem. Technology advances productivity which gives us hope. Government market interference through burdensome regulation, market restrictions, and taxation that reduces investable capital and savings create a drag on growth.
Do you believe that we will return to the averabe growth rate we enjoyed post WW II to 2007?
Remember that Obama really did nothing dramatic to affect the economy in his first term for good or bad except to borrow lots of money. His initiatives are now going to bite (Obamacare, Dodd-Frank, EPA restrictions) and they will bite hard.
As a partner in a small business we have no clue what our health insurance premiums will be except dramatically up. Our young employees had cost us less than $200/month (single) and because of the mandated change in age ranges from the current 5-1 to a 3-1, we will pay at least $500-$600/month for them with no reduction in rate for older workers. Most of this will hit in 2014 but a lot is happening now. But all firms look ahead and plan at least one year so this will be bad.
Young peoples job prospects will get worse, not better. THis may wake a few of them up.
@ MJR it really is 1984 isn’t it? The “best contraction ever seen”??? How do they get away with such blatant contradictions. I couldn’t understand how the public swallowed such statements when reading 1984 (War is Peace, etc). Now I am living this nightmare where people just go ahead and agree with such total BS…. How much more depressed can we conservatives get, I wonder?
Whether those in the media reside with the mendacious lies of the economically literate or the obtuse gullibility of the economically illiterate is less the issue than that the public’s perception continue to be manipulated.
Besides, why argue with success? It has worked up till now and what choice do they have besides? Admitting the truth (if they even recognize it) would be a career ending act of Seppuku or Harakiri.
Thus they will continue to haul water for Obama, the democrats and the left, all the while maintaining that we can tax ourselves into prosperity. A proposition equivalent to “a man standing in a bucket and trying to lift himself up by the handle”.
The situation reduces to the following choice; the long term growth and ever present inequity of capitalism or the stasis and ever deepening poverty of socialism which inescapably transitions into either totalitarian communism or dictatorship.
A slim majority of Americans accept the proposition that they can trade a little liberty for a measure of security. They shall lose both and have neither.
The blind are leading the blind into the ditch, dragging the rest of us along while adamantly denying their blindness.
None are so blind, as they who will not see.
…and the recession begat the double dip recession and that the triple…
Perhaps, maybe, at about the time of the octuple dip, the depression will become apparent. Thank Obama’s god that Republicans still exist or we’d be obliged to resurrect the idea of harbinger comets to protect his immaculate reputation.
prattle prattle prattle..
who cares? once you find a source that sucks, why keep sucking at it to play with it and delve into it?
at what point are you going to just tick off that its called propaganda, the news does it, the feminists normalized it, and thats that, and move the freak on to something that has meaning, bearing and that we can use as people?
how many discussions about “look the liars are liing again”…
they are not lying…
and you dont get that.
they re scripting…
you can see how they think in an article that reports a study that when men act like women and do house chores the women dont want to have as much sex with them… (of course… ever see the hero in women porn harlequin romances doing dish work? or do you see him doing what the feminists do in the coochie snorcher that could? rapes her and its a good rape?)
WRONG… you dont know that.
got it?
you know the figures of reports
the reports dont qualify things outside the reports
so… if people invest in the stock market it goes up… wonderful
if people dont and the state buys assets to make an asset pool for the fed to borrow against to buy more assets… is that wonderful?
but you would report we know…
duh… the soviet union collapsed becuase ogf this kind of bs… and you still hvent learned it…
too busy discussing pet fantasies, your not learning anything… just becoming more confused.
[edited for length by n-n]
To Outsmart ObamaCare, Go Protean
Don’t fire staff to avoid the 50-employee trigger. Make them corporations.
http://www.ibmadison.com/In-Business-Madison/January-2013/Wall-Street-Journal-To-outsmart-ObamaCare-go-Protean/
Step Into the Office-Less Company
How One Tech Firm Manages 123 At-Home Employees Scattered Across 26 Countries and 94 Cities
http://online.wsj.com/article/SB10000872396390443571904577631750172652114.html
large companies and such just managed, while trying to sucure their future by negating smalelr firms abilities…
just drove smaller firms to try the hollyweird movie model, and ibm and ms model for teams and so on.
so while we dip into the pisswater, to see if its still pisswater… i am looking to ways to adapt, to get around, and so on…
i have better things to do with my life and its outcomes than to waste my time on prattle in which the liars keep lying, there is no way to stop them, and the subjects are meaningless even if truthful!!!!!!!!!
if i didnt break with that bs, no one here would find out about protean companies, and how soviets adapted, and so on.
you would just get someone asking you to taste the think that was so distasteful…
misery loves company
break the chain…
Take that, Mitches!
Yes, but how far apart are the contractions while we’re giving birth to this new era of hope?
I’m not going to provide any reasonable analysis on this today. I’m really enjoying throwing tomatoes.
If there’s any chance you can delete my last comment, Neo, I’d appreciate it. I don’t like advertising my email on the internets. 🙂
It is safe to predict the MSM will explain this is not Obama’s economy.
physicsguy, 2:30 pm — “@ MJR it really is 1984 isn’t it? The ‘best contraction ever seen’???”
I figured I’d better get the quote exactly correct. I had written (1:52 PM) “I heard El Rushbo remark that now Democrats are bragging/braying that this is the best economic contraction they’d ever seen.”
But exact words are bound to be better than whatever M J R figured he heard Rush Limbaugh saying (while out walking the pooch and scooping up pooch poop).
So without further ado, here’s exactly what Rush said, along with a link (Rush’s transcript) for anyone looking for context:
http://www.rushlimbaugh.com/daily/2013/01/30/wizards_of_smart_surprised_by_shrinking_economy
“You know what the Democrats are out saying? This is the best looking contraction that there’s ever been in this country. And, of course, the media’s repeating that. That’s not a surprise to you and me.”
holmes: I did even better than that. I kept the content and changed the name to “holmes.”
artfldgr: once again, you misunderstand me (and misquote me as well–I never said I “know,” I used the phrase “I understand.”
You focus on something you think I’m saying and then you do a huge riff on it. But much of the time the misunderstanding on your part comes from the incompleteness of language itself and the difficulty in conveying a total thought, which if spelled out in its entirety every time would result in book-length posts. For example, my meaning here was, “I understand that this is what the reports have been reporting”—it does NOT imply that I know as a certainty that those reports are true and represent a complete assessment of our economic reality. Of course I don’t, and I’ve never said that and never would. I am talking here merely about what the reports have been and why people say they’re surprised by the lack of growth (as reported in reports) this quarter.
I could spend hours attempting to correct the misunderstandings of my message that I see in your comment here, as well as other comments. But I don’t have the time right now, so I’ll just stick to a short response.
I’m not sure why these misunderstandings have become more and more frequent lately, but they have. I don’t know what the remedy would be, either. As I said in this previous response to a similar complaint of yours, I write about what interests me and I think there is much value in writing about media lies, for the reasons I explained there. If you disagree, you disagree, and I suggest you start some sort of webpage yourself and post links in the comments section here to the posts you think people might be interested in, that say things you think are important.
by the way
i also noticed that many here have adopted the verbiage and tone of the totalitarian academics..
we must
this has to happen
and on and on
its a rotten habit, but while trying to avoid totalitarianism, you cant stop appealing to it to fix things.
at waht point you going to get that your totalitarianism is no better, and there is no WE?
everytime your evoking WE, your evoking collective action that doesnt exist without state force
we must balance our need to cut government spending
who is this we? you? me? other readers?
NONE of us here are the people concerned with that, nor do any of us here have any influience on that, and the only way to get that is to give power to someone to act… ie totalitarian
perhaps if this was a CFR meeting, and we could all chat, you might influence someone who then would go back and act… but its not CFR, the people who have that place are too busy with realty to be discussing this weeks fantasy reality, which will change next week to suit the conditions needed.
so, your going to have to figure out how to get that outcome without that WE… your not napoleon marching from elba…
your just you..
and i am just me
and most here are so far removed from what we your talking about, its a waste of our lives to go there.
which then begs the question, which side to you serve… not in will, but in action…
as i said, no one cares what the horse thinks
they just care that it goes the way they want
they dont care what you think and what you believe and what your dreams are and what you think will be the thing to fix all things.
they just care that you waste your time, and that is as good a time waster as anythi8ng else
which is why it was always put in the basket with the old definition of masturbation – self pleasure.
ever notice that when you prattle, its the same old crowd… but when you actually talk about something that mayh mean somethning, you get a bunch of interferring leftists here.
when the enemy is making a mistake in your favor, dont correct them… right?
this is so freaking old i can drum up 50 year old dicussions about the same thing.
[edited for length by n-n]
artfldgr: same thing; same misunderstanding.
“We must” means, of course, “I think this is what we need to do.”
I am not dictator, nor am I dictating. But I cannot write in a way that qualifies every single statement of mine with “this is just my opinion.” Nor can anyone else. It is understood by most readers that this is what is meant—my opinion. This is a blog, after all.
And “we” is a convention of speech, not collectivist thought—to mean “we” Americans, “we” the voters. Not as some sort of mindless bloc, but as a general direction that in my opinion would be a good direction for “us” (should I put everything in quotes?) to go.
In summary, I will repeat the very brilliant words of Karl Popper, “It is impossible to speak in such a way that you cannot be misunderstood.”
You know, this really is outrageous. Random errors would fall on either side of the true value, but the errors are ALWAYS on the high side, and later revised downward.
Clearly are systematic errors in the methodologies of the economists, or straight-up propaganda.
Neo- thank you!
I saw a comment on Breitbart that said this was basically a Rorshach test, and I think that’s right. Those who view the government as the solution will point to the contraction and the lowered spending and say, “A-ha! We were right!” And of course, you look at it from the conservative perspective and say, “So these are the numbers, even given our unsustainable spending and slight spending decreases? We’re screwed!” And of course, the latter is correct.
Ah, but Chrysler and one of the other automakers are posting the biggest profits in YEARS, so that must mean the economy is growing. 🙂 Seriously, many people don’t seem to understand that just because a business is doing well doesn’t mean that they’re hiring.
http://www.weeklystandard.com/blogs/dems-tout-claim-best-looking-contraction-us-gdp-youll-ever-see_698863.html
Dems Tout Claim: ‘Best-Looking Contraction in U.S. GDP You’ll Ever See’
10:56 AM, Jan 30, 2013
The Weekly Standard
By DANIEL HALPER
In response to the news today that the economy contracted -.1 percent in the final quarter of last year, Democrats are touting the claim that this is “the best-looking contraction in U.S. GDP you’ll ever see.” The claim was originally made by chief U.S. economist for Capital Economics Paul Ashworth.
“The drag from defense spending and inventories is a one-off. The rest of the report is all encouraging,” Ashworth also claimed.
The claim was quickly seized upon by Democrats, looking to share good news about a contracting economy.
Democratic party communications director Brad Woodhouse quickly began spreading the word on Twitter:
[ snip ]
The GDP Rorschach test
by John HaywardJan 30, 2013 9:11 AM PT0
Today’s grim Commerce Department report of GDP contraction (actually, it will probably end up being very tiny growth, once all the revisions are in) is a Rorschach inkblot test for students of the Obama economy. The optimists say the decline in government spending brought down the numbers. The pessimists wonder how anyone could think that’s good news. “Sure, the economy looks awful now, but that’s only because the unsustainable government spending that’s been propping it up for the past year petered out!”
And if we’re going to look at GDP without government spending included, we ought to be consistent about it. As it stands, this is one of those magical statistics – like unemployment – that can be media-massaged into good or bad news, depending on what they choose to include in the mixture of any given report.
Take government spending out of the mix, and you’re left with an economy propped up by strong consumer spending… during a Christmas season noted for its deep discounts, which relieved inventory surpluses that probably shouldn’t have been there in the first place, just as consumer confidence hit a one-year low. No worries, I’m sure investors will recover their optimism and pick up the slack… as soon as they forget every damn word Obama said during his second inaugural address.
There it is.
The governor of CA has announced that there will be no deficit this year.
What will the actual be? Will it be close to the projection?
No.
And he won’t be able to blame those rascally republicans this time either.
According to the Mouth of Sauron, I mean Jay Carney: “…. the GDP number we saw today was driven in part by in large part by a sharp decrease in defense spending, the sharpest drop since I think 1972.” This may be “sticky” but it is highly misleading. In the 3rd quarter of 2012 DC spent $810 billion and $908 in the 4th quarter of 2012. Any contraction in defense spending was more than off set by an additional $98 billion spent in the 4th quarter.
For those who care to look their propaganda is blatant lies. http://www.fms.treas.gov/mts/mts.pdf
The perplexing thing to me is listening to the Fox Business channel over the last several months, which although has dogged Obama’s policies, regularly interviews conservative business investors and CEOs who’ve been talking up the surprising economic growth. The stock market is up, that means the economy is doing great! There are a few dissenters, but even they seem quite optimistic, especially since the debt ceiling cave-in was pre-determined.
It is even more perplexing since as I mentioned on this topic a couple months ago – all the vendors and customers I interface with serving the energy sectors — be it renewables, coal, gas, oils etc, are looking at sharp drop offs this year after Q2. We’re talking some of the worlds’ largest suppliers of equipment – ABB, Siemens, GE, etc.. These are companies who supply things to various market segments, and the general understanding is things are grim at best. China’s solar and wind industries utterly collapsed – that is not insignicant when it comes to products manufactured by these companies to supply that market — it’s several hundred billions, if not trillions. This scenario is playing out in a lot of countries and industries. But all I hear on the business networks is a load of crap.
The only person I hear telling the market watchers the fundamentals are extremely bad, and explaning it in ways that seem to be in step with what we are seeing in our industry and those related to ours, is Lance Roberts. Otherwise, it seems like there’s a fairy tale being sold on every major network, to what end, I don’t know.
But my gut and my brain tell me that the economy is one of those complex creatures, subject to the law of unintended consequences and a host of other things we understand only poorly, if at all, and that predictions are inherently shaky, whether by learned economists, politicians, or little old me. -NEO
so much i can comment on in that…
but you DO understand economics, even a capuchin monkey understands capitalism and practices is in some form as a social species. what, as i said before, you dont understand is the knowing of something with the will to tame, control, and wrest it to your will. they know how to wrest it, but not tame and control it, as such behavior is antithetical to life.
once a government moves to the realm of control, and manipulation in any sphere, then you have the message for public consumption, and the real reason, which is often not public. (and not to infrequently is known by the action not making sense in terms of other things, which is why everything is always looked at publicly in isolation)
so when this happens, the time base of the news changes. do they report the facts, or do they report what they want the facts to be in the future coming into the now then the past?
they are only compatible in a steady state. but when the facts are bad, and their purpose is to control not report, then the two are not going to match.
this is true of any steering system, the system has to act in the direction of where it wants to go, before the system goes that way.
so you turn the wheel on a car, to move the linkages, which then move the wheels and steer the car. a steering system is “tight”. that is, the linkages are so tight that there is no real separation to that chain of events, they are as one event. but let those linkages or the system be loose, and the system will lag. there are such systems too, and they are common. just ask the captain of the exxon valdez… or any captain of a humongous ship. it can take as long as a half hour to see the results of a move made on the bridge.
so if the news is a reporting system, which way does the lag go? it certainly doesnt report fact by guess to be first, and or to divide the population by dividing up its knowing which divides up its reality.
X people live the reality of the false message
Y people live the reality of the valid message
the two end up in opposition
now multiply that out by 100 or 200 ideas with each set of X and Y made up of a different mix of groups in the society. now how together are they?
anyway…
Progressive Democracy Herbert Croly
you can read about croly here, a leader of the progressive movement and very influential
http://en.wikipedia.org/wiki/Herbert_Croly
here is what wiki says about him
you can read the book here
http://books.google.com/books?id=QBUpAAAAYAAJ&printsec=frontcover&source=gbs_ge_summary_r&cad=0#v=onepage&q&f=false
it was written in 1914…
A long time ago, i said read what the leaders of these movements write, as the people who love this stuff, and run for office, read it, know it, discuss it, and are often inspired by it, and many other stuff.
to read this old stuff is to fall off your chair repeatedly till you read enough, then the modern stuff makes you fall off the chair for the lack of its knowledge of this past, which is its own…
I think that the reason for the surprise is that a lot of the media, politicians, and general public believe in Keynes and stimulous. It is true that government expenditures directly increase the GDP figure. Whether or not the expenditures improve the economy depends on whether the investment or expenditure is more valuable than the alternative to what the government spent the money on. The police may be a better investment than private security guards due to economies of scale.
The problem is that people, media, politicians, academics, etc. only consider one side of the equation, so people are better off when you give them food stamps and can buy good to increase aggregate, i.e. total, demand. However, they will not tell you that the government is crowding out private investment. Personal example, my father’s tool and die shop was forced into bankrupcy when the bank canceled their revolving line of credit so that the bank could meet their capital requirements instead of foreclosing on their mortgages to write down their bad loans. The bank redirected the money to government bonds since government bonds improve the banks capital requirements, so money is siphoned off the private sector and directed toward the public section. This is how the banking crisis hit main street.
Also, the a lot of government expenditures are on economic luxury items, i.e. social safety net, which has increased dramatically, i.e. unemployment, food stamp, disability for depression and carpel tunnel, earned income tax credit, SCHIP, medicaid, etc. This has a dual effect of reallocating resources and decreasing the amount of people who are contributing to all of our well being.
Politically, a lot of the negative affects of policies implemented in the prior four years were postponed until after the election, so the banking regulation, which consolidates power to the biggest banks, and ACA will now be felt.
As far as the middle class’s real income has been erroded since 1980 by inflation in medical costs, energy, taxes both local and social security etc. There are monertists who believe that inflation improves the economy since real growth improves with inflation plus growth improves. The problem is that real growth is in both equations and there is correlation not causation. Inflation does help Wall Street, the politicians and probably the media, since the media can increase prices and wages. Wall Street gets paid when prices increase whether that is because of real growth or because of inflation since they make a commission on the increase in the portfolio. Not to mention that the CPI is not entirely accurate. I just recently learned that it doesn’t include house prices. It includes rental prices, who knew.
As far as what we can do, there will be another recession because there are always new recessions. When the Fed stops printing money or maybe even slows down printing the bond market is going to drop like a rock. I think there will be pressure to keep it going till after the next election, but there might not be time, just like Bush couldn’t hold it off. However, we are likely to see an improving stock market for a while.
Finally, outside of the negative effects of the government actions against business, nobody really knows exactly why the GDP figures are going to fluctuate every three months. It is very likely that the expectations of higher taxes, the realization that ACA will be implemented, and people having less money because the economy stinks is the reason for the negative GDP. Carney is pure propaganda. The president in my opinion is boss Tweed from Tamney Hall. Oh, China is slowing down, the EU will eventually break up and is in bad shape. Japan is in recession, which is really the model for where the economy is going, big stimulous and easy money. I’m trying to stay diversified, and I know Wall Street is going to be Bullish until it thinks there will be a Bear and everyone will rush to the exits.
There will be more surprises for the media.
Hope this helps. (Just as background, I studied economics at Columbia University under a Nobel Prize winning economist and I’ve passed all the exams to be a Charter Financial Analyst.)
Robert- it helps a lot. For someone who didn’t study economics, can you explain how printing money affects the bond market?
Neo- RE Artfldgr; Entertaining discussion as always. I would have surrendered a long time ago. The incoming is like machine gun fire.
Printing money lowers the interest rates on bonds so the prices of existing bonds has gone up on existing bonds. The prices will go up until inflation pressure forces interest rates up, or the Fed raises the interest rates to fight inflation, which could end ugly like ’93 where the bond market panics. There is still deflationary pressure because of all of the bad mortgages kind of like Japan in the 90s. From what I’ve seen inflation doesn’t go up across the board. It goes up like someone squeezing a balloon where it pops out between the figures, such as gas, food, housing, gold, etc.
Probably the biggest reason the markets haven’t asserted themselves re: the Fed and its monetization activities is the continued push on the private side (both sides of the borrowing/lending relationship) to deleverage. The Keynesian model depends on two tools to keep the party going: more debt and modest inflation. When the first tool can’t work (because there’s too much) then the second inflation is ramped up to destroy the debt (and also destroy savings – the other side of the coin).
Banks can’t lend profitably because of new regulation and more importantly due to the repression (government holds short term rates below real inflation rates depressing margins between deposit and loan rates). Another important factor is the pressure to increase capital even as many major banks are under intense pressure to buy more sovereign debt even though the risks (interest rate and credit) are far beyond acceptable. They have to for political reasons – examples Greece, Italy, Spain, Portugal, France……
[i]As I see it, the situation is that we must balance our need to cut government spending and shrink the deficit with our need to stimulate growth, and because it’s a fact in recent years that a lot of our economy is dependent on government spending, these become contradictory impulses.[/i]
IMO these are contradictory impulses only within Keynesian assumptions, which most of us have absorbed – they’re embedded in all the media.
Government spending cannot substitute for private spending, because spending in and of itself does not create value/wealth. Nor does all private spending. It just has a better chance of doing so.
When there is a liquidity crisis government can play a useful role in stepping in and helping to prevent total paralysis, but more often than not politics quickly takes over and government camel refuses to leave the tent.
So there is no contradiction. The surest and quickest way to recovery would be to not interfere with prices resetting (e.g. houses, minimum wages), encouraging debt deleveraging, and to free up resources by radically cutting government spending (government employees, transfer payments) so that private patterns of value creation can – over time – re-establish themselves using those resources.
Here’s a link to a very short column contrasting Latvia, where it was done right, and Greece, where it was not:
http://www.bloomberg.com/news/2013-01-07/why-austerity-works-and-fiscal-stimulus-doesn-t.html
They also were forced by circumstances to take the hard but ultimately more successful road to recovery in Iceland:
http://www.zerohedge.com/news/2012-12-08/guest-post-icelandic-success-story
The problem is obvious. In the short run it is political suicide to implement such policies unless there is no other option.
Otiose,
I agree with everything you said.
Everyone else,
I am really sorry, Jay Carey was right it was a decrease in military spending; even though, the change in spending had nothing to do with the sequester and everything to do with the election. They moved all the sales to 3rd Quarter to make the 3rd Quarter look good, which is pretty standard practice in financial statement fraud:
http://globaleconomicanalysis.blogspot.com/2013/01/government-expenditures-plus-transfer.html
This guy stole my joke! Granted, it’s a really obvious joke to make…
Heckuva job on that Jobs Council, Mr. Obama!
by John HaywardJan 31, 2013 8:18 AM PT1
Farewell, sweet Jobs Council, we hardly knew ye. And neither did the President who formed you, because he rarely bothered to pretend he was interested in anything you had to say.
It seems like only yesterday the White House was promising that its Council on Jobs and Competitiveness would remain super important for years to come, what with all the wonderful “listening and action events” they were going to hold. Actually, it wasn’t yesterday, it was January 18.
These Obama economic contractions are really agonizing. One little quarter of negative growth, and the Jobs Council is instantly kaput. I sure hope the contractions lead to the birth of something wonderful!
Here’s a link to a short column that explains more concisely than just about anywhere else I’ve seen.
http://www.forbes.com/sites/realspin/2013/01/30/value-destroyers-like-bernanke-fancy-themselves-magician-economists/
Not understanding this key concept – the difference between wealth and ‘money’ or currency – is basically why you have Pelosi saying something like increasing unemployment payments stimulates the economy.
And if you appreciate its implications then you can understand why GDP numbers including government spending are very misleading at best.
Government spending cannot replace private sector deployment of resources to create value. And therefore when the Obama stimulus package was announced back in 09 it was an understanding of this Say’s Law that allowed people to say with certainty that it not only wouldn’t work (to stimulate the economy as in reigniting real growth) but it couldn’t work – and that’s before considering the political effects working to ensure the funds wouldn’t be deployed effectively.