Sunday, July 31, 2011

Spending Has Collapsed, the Economy Is Next

At this point, there are only two factors to consider: will the economy continue its paced, gradual decline, or will it fall off a cliff and collapse suddenly and violently. That's about the only factor I can't predict, along with what, exactly, the government reaction will be once total collapse is realized.

    SHTF Plan -

    We’ve been warning about it since the beginning of this crisis – that consumers are simply not interested in spending money they don’t have. In the first quarter of 2011 the government attempted to convince us that the economy was growing at a slow, but steady, rate of 1.8%. This was used as evidence the economic recovery had taken hold.

    President Obama and his administration specifically told us that a depression had been avoided:

    We can safely say that we are no longer facing the potential collapse of our financial system and we’ve avoided the depression many feared.

    President Barrack Obama – December 9, 2009

    But today’s growth domestic product revisions suggest otherwise.

    That 1.8% that convinced the average uninformed American economic activity had increased was nothing but a fabrication – a bold faced lie – and that’s official. The government revised that number to 0.4% – a significant difference. They were only off by about 75%.

    Today, the government released it’s second quarter GDP numbers, and as was predicted in many alternative media circles, it’s a clear indication that things are turning for the worse. Karl Denninger weighs in:

    Sorry guys, the clock has rung. It’s not ringing any more, it has rung and the spring-powered alarm has run out.

    There is no recovery to speak of.

    Four years into this the policies of the government and Fed have failed.

    It gets worse:

    “The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 3.2 percent in the second quarter, compared with an increase of 4.0 percent in the first Excluding food and energy prices, the price index for gross domestic purchases increased 2.6 percent in the second quarter, compared with an increase of 2.4 percent in the first.”
    (source: US Dept. of Commerce)

    Your standard of living is being shredded.

    “Real personal consumption expenditures increased 0.1 percent in the second quarter, comparedwith an increase of 2.1 percent in the first.”
    (source: US Dept. of Commerce)

    Spending has effectively collapsed.

    This puts into stark relief the reality of the government deficit spending – it is doing nothing more than covering up an economic Depression, and the so-called “exit plan” – that private consumption, investment and borrowing will “take the baton back” is not working.

Read it all.