‘Satire is a lesson, parody is a game.’ –Nabokov
The really surprising number you saw the talking heads on TV mention was the growth of consumer spending, at 4.4%. Is the US consumer back? After all, real final sales rose by 7.1%, a number not seen since 1984 and Ronald Reagan. But real income rose a paltry 1.7%. Where did the money that was spent come from?
Savings dropped a rather large 0.5% for the quarter. That was part of it. And I can’t find the link, but there was an unusual drawdown of money market and investment accounts last quarter, somewhere around 1.5%, if I remember correctly. That would just about cover it. But that is not a good thing and is certainly not sustainable.
Let’s see what good friend David Rosenberg has to say about those numbers:
Even with the Q4 bounce, real final sales have managed to eke out a barely more than 2% annual gain since the recession ended, whereas what is normal at this stage of the cycle is a trend much closer to 4%. Welcome to the new normal.
There is no doubt that there will be rejoicing in Mudville because real GDP did manage to finally hit a new all-time high in Q4. The recession losses in output have been reversed (though what that means for the 7 million jobs that have to be recouped is another matter). But, before you uncork the champagne, just consider what it has taken just to get the economy back to where it was three years ago:
· The funds rate moved down from 4.5% to zero.
· The Fed’s balance sheet expanded by more than 1.5 trillion dollars.
· The printing of M2 money supply of around 1 trillion dollars (the illusion of prosperity).
· Expansion of federal government debt of 4.8 trillion dollars.
All this heavy lifting just to take the economy back to where it was in the fourth quarter of 2007.
(…)
Thursday was the annual Tiger 21 conference, and the room held about 150 or so very-high-net-worth participants. The lunch session was Greta van Sustern interviewing Newt Gingrich. And yes, from what I heard he is going to run.
painting { Ju Myung Kim }
