Silent Recession

Once again Tim Ionono has some of the better economics-for-Joe-Average commentary going on anywhere, complete with lots of colorful charts. Today he talks about the today’s GDP numbers. For those of you who are perhaps a little fuzzy on GDP — Gross Domestic Product — you can learn a bit about it here, and why it’s important here. The Short version is that “it’s a summary of how the economy is doing, based on who is spending what and whether the money stays here or is spent on imported goods.”

Even though we managed to pull out a positive number for this report — 0.6% — Forbes quotes various economists as saying there were unpleasant surprises, and “There is no real positive news to cull from this report.” Even before the report came out, the Chief Economist of the National Association of Home Builders was quoted as saying we have an even chance of sliding into an economic “red zone”, with “further deterioration of labor market conditions”, “substantial reductions in home sales”, and “turmoil” in the stock markets and the credit markets. Credit markets would be shorthand for bonds, loans, and mortgages. Even the FDIC is starting to plan ahead for bank closure strike teams. Excuse me while I bite back a comment about them not getting the memo from the Bush Administration that everything is fine, as long as we mail everybody a check.

Add to this the gold markets appearing to anticipate stagflation, American households cutting spending because of rising gas costs — consumer spending is more than 2/3 of GDP — and the Dollar being near a record low against the Euro, and you can see where there might be a problem. Or in econospeak: “There are concerns going forward.”

But back to Tim Iocono. His graphs are telling, particularly the second one where it is clear that spending is off on all levels and private domestic investment tanked. Of course anyone who has been seeking a business loan could have told you that. Despite the fact that the official definition of a recession is ” A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters,” Tim ends with this sentence:

It is widely believed that the economy has already entered a recession.

Could it be that I am not the only one who thinks that GDP has been manipulated? Anybody who buys things knows that prices have gone up in ways that are not accounted for in the official inflation numbers: perhaps GDP is kept artificially high transparently through the manipulation of inflation data?

It makes you wonder.

Cross-posted at The Moderate Voice.