“Now that we have the first estimate of Q1 GDP growth in both rate of change and absolute current dollar terms ($16,010 billion), we can finally assign the appropriate debt number, which we know on a daily basis and which was $16,771.4 billion as of March 31, to the growth number. The end result: as of March 31, 2013, the US debt/GDP was 104.8%, up from 103% as of December 31, 2012 or a debt growth rate that would make the most insolvent Eurozone nation blush. There was a time when people were concerned about this unsustainable trajectory, but then there was an infamous excel error, and now nobody cares anymore. “
Via Zero Hedge
“Less than an hour ago we speculated that “it wouldn’t be surprising for GDP to come substantially weaker than expected, only to be revised higher (or lower) subsequently.” Sure enough, we have gotten at least the first part right for now, with the advance Q1 GDP number printing a very disappointing 2.5%, on expectations of a 3.0% increase, up from 0.4% in Q4, and the biggest miss since Q3 2011. The reason for the big miss: Inventory and Fixed Investment came well below expectations, comprising 1.03% (of which autos represented 0.24%) and 0.53% of the 2.5% annualized increase GDP. Kiss the great CapEx investment story goodbye.
The only silver lining in today’s otherwise very weak report: Personal Consumption Expenditures, which were a sizable 3.2% versus the 2.8% expected, and amounted to 2.24% or virtually all of the net Q1 GDP growth. So far so good .The bad news, however, is that this number will not sustain into Q2 and look for expenditures to plunge in the coming quarter. Finally, let’s not forget that it rained like 5 days in March, so there’s that. And of course, very soon, all GDP will be revised to add intangibles, so in retrospect Q1 GDP will likely have grown by a Ministry of Truth blush-inducing 10% or so.”
Via Zero Hedge
“This isn’t exactly news, is it?
In June 2002 there was a paper from the Minneapolis Fed on this point. But more to the point, The BEA announced their intention to do this in 2009.
The problem with this sort of thing is that these expenses are already part of GDP.
That is, when I expend funds on R&D someone gets paid to perform the R&D and the goods used in performing it also show up in GDP, since they have to be purchased before they can be consumed.
Further, innovation — that is, the fruits of R&D — show up in GDP anyway in the form of increased spending by consumers on good or the increased gross profit on sales from new and better processes and procedures, which winds up in the hands of either employees or owners (e.g. shareholders) of the companies and thus gets spent (and captured in GDP.)
The argument that we need a further addition to the “I” line (Net Investment) in GDP seems to rest on a pretty thin foundation, but this is what the BEA intends to do. I believe it’s entirely unjustified as this is, in my view, already captured in the numbers (and thus this “revision” amounts to double-counting) but take a read of the source material and judge for yourself.”
Via Market Ticker
“Those who have been following the US debt to GDP ratio now that the US officially does not have a debt ceiling indefinitely, may have had the occasional panic attack seeing how this country’s leverage ratio is rapidly approaching that of a Troika case study of a PIIG in complete failure. And at 107% debt/GDP no explanations are necessary. Luckily, the official gatekeepers of America’s economic growth (with decimal point precision), the Bureau of Economic Analysis have a plan on how to make the US economy, which is now growing at an abysmal 1.5% annualized pace, or about 5 times slower than US debt growing at 7.5% annually, catch up: magically make up a number out of thin air, and add it to the total. And it literally is out of thin air: according to the FT the addition will constitute of a one-time addition of intangibles, amounting to 3% of total US GDP, or more than the size of Belgium at $500 billion, to the US economy. “
Via Zero Hedge
US economy expands at 0.4 percent rate
“The U.S. economy grew at a slightly faster but still anemic rate at the end of last year. However, there is hope that growth accelerated in early 2013 despite higher taxes and cuts in government spending.
The economy grew at an annual rate of 0.4 percent in the October-December quarter, the Commerce Department said Thursday”
“Moments ago, as we prepare to put Q1 2013 to a close with a bout of window dressing that will send the S&P to all time highs, we got the final Q4 2012 GDP revision: a number largely meaningless, although it does put closure to the economy in 2012. And as with all economic numbers in the past year, it was not pretty, coming in at 0.37%, below estimates of a 0.5% print, although modestly better than the second Q4 revision when it was 0.14%. The full breakdown by various components is shown below, with the most notable, Personal Consumption Expenditures, showing a gradual and consistent decline over the past three months as it was revised relentlessly lower, dropping from 1.52% in the first revision, to 1.47% in the second, to 1.28% in the final. Offsetting this was a jump in Fixed Investment which rose to 1.69%, the highest since Q3 2011. Supposedly this implies that capital spending is soaring, when in reality companies continue to curb CapEx plans, instead focusing on short term shareholder gains such as buybacks and dividends, which is to be expected in the absence of any actual end-demand. “
Via Zero Hedge
“Let’s lay it out there for you folks.
The Fed has a “line in the sand” beyond which they take actual capital losses on their portfolio.
If rates rise they get rammed from both front and back as the payment of interest on excess reserves will force them to pay out coupon on funds at the same time the capital value of their assets will decline in ratable proportion to the duration and size of its portfolio.
This is not prospective or speculative. It is mathematically known and factual.
It has been known since The Fed began its intervention.
You have frequently, over the last few years, seen me post about the pincer of mathematics that closes the door on your neck when you try to play with exponential functions and ignore the fact that all exponential functions eventually run away from you and blow up in your face.
The market has completely ignored this fact for the last four years, and worse Ben Bernanke has repeatedly made statements like “The Fed will not monetize the debt” (while doing exactly that) and arguing other such nonsense such as “we must normalize our finances in the medium term” (five years ago, which means that today is the “medium term”!)
The reason it hasn’t happened is that Congress has learned that it can “goose” GDP and thus the appearance of the economy’s health by spending money it doesn’t have, goading The Fed into “buying” those bonds with raw emitted credit.”
Via Market Ticker
“Responding to House Budget Chairman Paul Ryan’s warning that if the federal government continues to run annual $1 trillion deficits we will eventually face a debt crisis, liberal economist and New York Times columnist Paul Krugman said Wednesday that that is not a legitimate worry because the U.S. government can always print money and weaken the buying power of the dollar.
Weakening the dollar, Krugman said, would be a good thing.”
Via CNS News
“Ten Reasons for Declining GDP Growth
1. Changing social attitudes towards consumption and debt in all age groups
2. Demographics of an aging workforce
3. A severe lack of high-paying jobs for college graduates
4. Kids fresh out of college have delayed marriage, family formation, and home purchases
5. Many coming out of college are effectively debt slaves having no way to pay back student loans
6. Debt overhang from the housing bust
7. Boomers headed into retirement have insufficient savings
8. Shrinking middle-class plagued by declining real wages
9. Rapidly changing technology negates skills
10.Technology, especially robots, currently eliminates more jobs than it creates”
“A stunner out of the BEA which just reported a Q4 GDP of -0.1% that was leaps and bounds below the 1.1% estimate, and a plunge from Q3′s 3.1%. The factors: Private Inventories, Exports and Government Expenditures all of which contracted, by -1.27%, -0.81%, and -1.33%. The silver lining was in Personal Consumption Expenditures which added 1.52% to the negative print, most of it however driven by a surge in spending ahead of the fiscal cliff. Ironically, this was the biggest government-driven detraction from growth since Q1 2011, when GDP led to a -1.49% cut in the GDP, same in Q4 when government spending on defense fell the most since 1972. The solution is simple: print moar drones. Enter Mali. And since everything is now AMZN-ing, we can’t wait for the spin that the GDP’s margins were actually better than expected, leading to a 200 point surge in the DJIA.”
Via Zero Hedge