The Potemkin Village Called "Recovery"

Friday, October 30, 2009

So you think this spike in US economic activity in Q3 2009 is the beginning of the next upleg?
Better think twice.
Not one of the major problems like exploding deficits, unemployment, quirky wars that are now questioned by the US own top Asia specialists in a Washington Post interview, a collapsing dollar because the Fed feeds the banks with money to keep the major indices at levels that have nothing more to do with fundamental reality, has been solved.
Western "powers" keep doing what they are used to do: Come a problem, let's counter it with fresh debt.
A look at yesterday's advance estimates for US GDP growth makes me scratch my head. Adding to all problems described is the worrisome trend Obama's orgies of nationalization started. While private disposable income fell 3.4% QOQ in Q3, Federal expenditures point towards more socialization with a quarterly surge of 7.9%, only surpassed by growth in the military sector that spent 8.4% more than in the quarter before.

A 10% shrinkage of GDP is Called "Recovery"? - OK, War is Peace
A look at YOY absolute figures shows that GDP shrank more than 10% from $14.441 Trillion in 2008 to a mere $13 Trillion. Remembering home prices fell 7.8% YOY, according to this report from the Phoenix Business Journal, and seeing that the cash for clunkers initiative will cost the taxpayer $24k per car I am not at all confident that we see any fundamental turnaround but one constant: More and more GDP is created by waging wars: An F-18 crashing in Afghanistan is economically positive as it will add a billion and some change in replacement costs to the next GDP figures. This is the perversion of war: Bomb it and make money rebuilding it.
But in a time where the biggest warlord on the world, maybe a bit more eloquent than his predecessor Dubya, becomes Peace Novelist I can as well trust that all figures reported by US statistical offices are true to the 3rd digit behind the comma, can't I?
On-the-ground research offers not much hope: When did you last meet somebody discussing his next big ticket purchases as he was looking into a happy money-filled future?

Middle Class Gets Wiped Out in Europe
The middle class is getting wiped out meanwhile. One of the last surviving Slovakian car suppliers with Austrian roots told me the car market gets split into 2 segments: Ultra-compact cars and the luxury class.
But there are also glimmers of hope: By now he can undercut Chinese competitors up to a third and has the advantage of shorter transport distances. All that would be needed next is an upturn in Europe: Quiet harbors, less commercial road traffic show no such signs unfortunately.
Investmentwise I remain with my perma-preference of gold and silver as we have not yet seen the big whopper on Wall Street that will come on the same silent soles as in 1929: When nobody expects it anymore, see the most overvalued period of stocks coming to an end that is very likely to happen maybe already in November.


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