We Are, And Have Been, In A Recession (Mogambo Guru)

[Tace]

Richard Daughty, the angriest guy in economics -- World News Trust

snip

Uh-oh!! Those of you familiar with the Mogambo Theory Of Soundtracks (MTOS) recognize the sense of foreboding doom as, suddenly, the soundtrack is filled with low, rumbling horns making screechy, horrible, dis-chords, and the penetrating sound of doomed souls wailing in economic and financial despair. Obviously, this is where it gets very interesting!

See, if the rate of inflation that you use to deflate the raw GDP number is too low (like it is now!), then the estimate of real, inflation-adjusted GDP is too high! The economy looks like it is going great, but it is, obviously, not. It's just that prices are rising!

So, if GDP is predicted to grow only 2.9 percent, with the assumption that inflation is only 3%, then the error is huuuUUUuuge when you use the 3 percent inflation to go back to get the raw GDP number, and then deflate by the actual rate of inflation (probably somewhere between 4.1 percent and 10 percent).

When you do that, you get a result that is so horrible, so terrifying to see, that, like looking at a Gorgon, my brain is literally turning to stone, and all I can do is claw at my own head and cry out in anguish, "Not only are we in recession, as real GDP growth is actually negative, but we have been in one for years and years! Gaaahhh!"

To repeat: We are, and have been, in a recession, according to the new inflation number!

more

http://www.worldnewstrust.com/index.php?option=com_content&task=view&id=183

[papau]

1. he is right - but gold in the last few months has not done well n/t

n/t

[Tace]

2. True

And the gold bugs like to say it's because governments are dumping gold. One analyst says precious metals will jump when the Fed decides to lower interest rates again. I sure don't know.

[Dogmudgeon]

3. A Recession doesn't worry me. A Depression does.

There are so many financial markets that are being run on 1920s-style hot air right now that it should give everyone the willies. This situation may have gotten started under the Clinton Administration, when there was enough economic growth to cover the bets, but in the last six years of stagnant economic growth, things have gotten "a little stretched," and it's entirely appropriate to blame The Fool On The (Capitol) Hill.

We've been lucky several times so far. The post-9-11 recession, for example, was fairly minor considering how deeply the weakness in the financial system was. And the housing bubble isn't bursting, but deflating in an "orderly" way. But, unless the economy starts to grow again -- from the creation of real wealth, not war profits -- we're in for a world of trouble.

--p!

[Tace]

4. Even The IMF Has Been Sounding Alarms

They came out with a couple of reports last week that warned of a possible world-wide economic slowdown triggered by a possible pending slowdown in the U.S. economy. They did say, however, that world-wide economic growth remains strong at this point in time -- partly because of the strength of the Chinese and Indian economies.