Janet Yellen and her band of money printers think they are driving the GDP forward toward the nirvana of full employment and the achievement of every last dime of ‘potential GDP’. What they are actually doing, instead, is inflating the Wall Street bubble to ever more dangerous heights because their monetary injections never make it to the real main street economy; they just whirl around in the canyons of Wall Street where they enable speculators to wildly inflate the price of risk assets.
Now comes another GDP report card, this one ‘disappointing’. Not only does it refute the claim of the Wall Street Keynesian chorus that the U. S. economy hit ‘escape velocity’ last spring and summer, but it is also chock-a-block full of evidence that the Fed’s machinations have nothing to do with the performance of the real economy.
As usual, the seasonally adjusted numbers on a annualized basis are full of noise – -the most significant being inventory fluctuations. The latter flattered the 5% number that so excited the headline writers last quarter, but had the opposite impact this time. The actually gain in real financial sales, therefore, was only 1.8% – -even more tepid than the headline.
But the annualized quarterly figures just don’t cut it, in any event. National defense spending in Q4 declined at a whopping 13.2% annualized rate, but unfortunately, it did not reflect the actual hard-chop to the Pentagon’s budget that is long over-due. It was just the payback for the anomalous annualized growth of 15% in Q3. The latter period tracks the fiscal year-end in September, and therefore the big figure which ballooned Q3 GDP did not reflect economic growth at all – – just the usual scramble of bureaucrats to waste money at year end before appropriations lapse.
This post was published at David Stockmans Contra Corner by David Stockman ‘ January 30, 2015.