< HOME  Saturday, April 29, 2006

The Economy's Great! But, The People are Starving.

Don't believe me?
The Labor Department said employment costs measuring what employers pay in wages and benefits rose at the slowest pace in seven years during the first quarter, which should temper concerns about potential wage-induced inflation.

Its Employment Cost Index rose 0.6 percent in the first quarter, down from a 0.8 percent rise in the fourth quarter and well short of the 0.9 percent gain that had been forecast.

* * *

[Nevertheless, SURPRISE - SURPRISE, the] U.S. economy grew at its fastest rate in 2-1/2 years during the first quarter on strong spending and investment, while moderate price rises reinforced hopes for a pause in U.S. interest rate rises this summer.

Gross domestic product grew at a 4.8 percent annual rate in the January-March quarter, the Commerce Department said on Friday, more than twice the fourth quarter's 1.7 percent rate.

It was the best quarterly GDP performance since a 7.2 percent spurt in the third quarter of 2003.

"This rapid growth is another sign that our economy is on the fast track," President George ["the putz"] Bush told reporters. Growth is expected to moderate as the year wears on, giving the Federal Reserve room to pause in its rate-rise campaign.

The GDP report showed a gauge of personal spending excluding food and energy -- an inflation measure favored by the Federal Reserve -- advanced at a 2 percent rate in the first quarter compared with 2.4 percent in the fourth quarter last year.
Confused? Don't be.

There are two simple explanations for this obvious - and painful - contradiction.
  1. 'Free Market,' Baby! (where the rich are 'free' to exploit the poor)
  2. Livin' large when you're bankrupt (a.k.a., deficit spending)
The first explains the loss of jobs and anemic wage growth despite gains in productivity. You see, increased productivity does not necessarily mean more jobs, at least not when industrial or technological progress inures to the benefit of shareholders in a handful of corporations.

In other words, the minute there's a technological breakthrough, or an increase in efficiency (e.g., merger) that reduces the man hours needed to get a job done, corporations immediately reduce their labor force to add that savings to their bottomline.
[For example,] Verizon Communications plans to cut 1,661 jobs in four U.S. customer call centers by June 30 as part of its plan to cut 7,000 jobs after its January purchase of MCI, a spokesman said on Friday. . . .

Verizon has about 250,000 employees. It said it expects to cut 7,000 jobs in the three years after the MCI deal as part of its effort to create more than $8 billion in savings.
But, even this does not explain the extraordinary growth in GDP this quarter. After all, the money for the increased goods has to come from somewhere, and you KNOW it ain't coming from working Americans whose wages are stagnant and whose jobs are on the chopping block.
"Consumer spending obviously was affected by higher energy prices which would eat into discretionary spending," Denison said. "Chicago PMI was probably affected by the construction slowdown" in new-homebuilding.
In other words, the increased GDP can only be explained by uncontrolled deficit spending.
First-quarter GDP performance was boosted by government spending on reconstruction after last year's devastating hurricanes on the Gulf Coast. Federal government spending shot up at a 10.8 percent rate, a sharp contrast to the 2.6 percent rate of decline in the fourth quarter. It was the strongest government spending since a 22.1 percent jump in the second quarter of 2003.

Federal Reserve Chairman Ben Bernanke told the Joint Economic Committee on Thursday that growth was likely to moderate as the year wears on, partly because of some softness in housing markets.

* * *

[Meanwhile,] Businesses robustly boosted their investment during the first quarter, with spending rising at a 14.3 percent annual rate. That was three times the 4.5 percent fourth-quarter increase and was the largest in nearly six years.

Spending on equipment and software alone increased at a 16.4 percent rate in the first quarter -- the strongest in six years -- after a 5 percent fourth-quarter rise. The strong spending implies that corporations remain optimistic about their sales prospects and are willing to make investments to expand their businesses.
Is it beginning to make sense?

Corporations pump cash (and credit) into their factories to produce the goods the government buys hand-over-fist with DEBT (while we pay billions in interest to FINANCE it).

Voila! The economy is doing great! But, the population is starving.

What a terribly cruel hoax on the American people.


At Saturday, April 29, 2006, Blogger Erosoplier said...

Since late March this year the US Fed has stopped disclosing how much money is actually being invented (the M3 money supply statistics). I don't know enough about how this shell game is actually run, but I wonder how much this (the secret creation and distribution of a huge amount of money) contributed to the strong economic statistics?

At Saturday, April 29, 2006, Blogger jomama said...

In other words, the increased GDP can only be explained by uncontrolled deficit spending.

Nice catch. Few know that GDP includes govt. spending which produces nothing and is nothing more than transfer payments from the tax producer to The Umbilically Connected. Gives me the giggles every time I think of the suckers.

What does that tell us about the "P" in GDP?

Erosoplier is right.

We're all groping in the dark now.

The shell game just got a lot bigger with M3 hidden.

At Saturday, April 29, 2006, Blogger qrswave said...

Did you notice that the Reuters report is titled "GDP growth strongest in 2-1/2 years" instead of "Wage growth lowest in 7 years"?

The MSM is part and parcel of the ruling financial elite.


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