Monday, 12 November 2007

US Authorities FALSIFYING Economic Data to Produce Strong GDP Growth Figures.

Yesterday, as the dollar fell to new record lows and oil and gold prices surged to new highs, Wall Street remained fixated on wholly meaningless government data that managed to report the lowest inflation in the last half century. These bizarre numbers were integral in allowing the Commerce Department to report 3.9% annualized GDP growth in the third quarter, which was heralded by the bulls as evidence that a resilient U.S. economy had shrugged off the problems in the housing and mortgage markets. However, the government's ability to make “economic growth” magically appear is based purely on statistical finesse.

To arrive at this rate, the government had to assume that inflation during the quarter ran at an annualized rate of .8% (that's less than 1%). That is the lowest rate of inflation used to calculate U.S. GDP since the Eisenhower administration. With oil priced at almost $100 per barrel, gold futures trading over $800 per ounce, the dollar hitting record lows, and the Fed printing money like it is going out of style, the government has the nerve to claim that current inflation is the lowest it has been in half a century. Unbelievable!

It's a confidence scam alright.

The US economy is basically debt ridden, and the losses on these debts continue to play out. We are seeing it with the housing sector, which is now slowing overall consumer demand: ex-homeowners can no longer afford to buy anything. The housing boom, that had driven US growth in recent years, has gone into reverse.

And we are further likely to see problems with credit card debt in the near future- there's 900 billion in outstanding credit card debt at present.

It's all been due to low interest rates and easy money (lent by the banks) which has allowed too many people to buy stuff that they can't afford. The banks are owed money they will never get - hence their huge losses. Compounding this is the fact that the banks sold each other the loans they had from mortgages (and also credit cards) as a vehicles that would earn money for each other ! Now the banks and other financial institutions are paying for their lack of rigor in assuming the underlying loans would hold together and pay big money. Only money from the US Federal Reserve has prevented major bankruptcies.

The horror show is not over by a long shot. The solution to the crisis at the moment appears to be to hide the extent of the problem and provide a false sense of security. With the recent sell offs in the markets one might assume that less and less investors believe the spin they have been told about the resilient US economy. Money is being taken out of the US stock market as the ship starts to sink ...

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