First Quarter GDP Was Negative: Economy Headed For Deep Recession

It may not seem like it if you have a well-paying job which covers most of your Obamacare costs and that enables  you make  your mortgage payment, pay the leases on your cars and enjoy discretionary spending, but for the 76% of the country that lives paycheck to paycheck the economy never really recovered from the Great Financial Collapse and is getting worse by the day.  See this article, for example:  CNNMoney.

I predicted late last year that the first quarter GDP might register an economic contraction. You would know it from watching just the stock market, but the first revised estimate of Q1 GDP showed a 1% decline occurred.

I wrote an article for Seeking Alpha explaining how the trend in retail sales and home sales – two key variables to the economy – are showing the strong possibility of an even bigger contraction in Q2.  You can read the full article here:   Negative Q1 GDP, Q2 Worse?

By the way, the bond market – which usually “sniffs” out trouble before the stock market sees it – is telling us that my analysis is likely on the right track.   By the  way, Obama’s war-mongering in the eastern hemisphere plus Obamacare spending saved the economy from going even more negative in Q1 (in case you wondering why Obama seems anxious to start wars with everyone)…

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One more point, before you fall for the highly-spun propaganda that the Obama Government has narrowed the spending deficit, you should know that funded Treasury debt – i.e. the amount of new Treasury debt issued and the money spent – was $250 billion in Q1 – or $1 trillion annualized.  Debt is only issued to cover deficit spending…

9 thoughts on “First Quarter GDP Was Negative: Economy Headed For Deep Recession

  1. Put a red ball on his nose in that photo, add some face paint, and you’ve got the poster clown for Barnum & Bailey’s “Most Depressing Show on Earth”.

  2. What amazes me is the ignorance of the general public regarding the fed, gov, propaganda etc. Like PCR says they are in the matrix. amazing they put up with the BS from the gov., what a bunch of sheep.

    1. I’m starting to think that a lot more people who are not benefiting from QE – so the top .5% plus Wall Street-related douchebags and real estate agents – understand the Govt is corrupt and not be believed. They may not know the specifics like the truthseekers out here but they get that something is very wrong.

      The only ones who don’t get it for the most part are ones I described in my intro.

  3. as a consequence of this crazy stock market, driven by stock buyback and banks excess reserves invested (courtesy of accommodation monetary policy), there will be a second qtr “surge” in tax revenues so watch for the touting of the improvement in the second quarter deficit. But it will not be sustainable, but will sound good for this years election.

    Then, like late 1999 (dotcom bubble) when we had a “surplus” except debt increased, after this bubble we start seeing a resumption of large debt increases.

    If you look at the Feds velocity of money, its been trending down since 1998. A blip up here and there, but its now lower than the carter years and lower than the 1960′s. I think the velocity of money is a key metric.

    by the way, if we cut back on defense spending, and say go to drones and other automation, that cuts jobs in the military which also slows the economy. The 700 billion to 1 trillion current deficit pace is around 6% of GDP. Ponder that for a moment.

  4. Hi Dave,

    The federal government operates on a fiscal year that runs from October 1 through September 30. So the 1st quarter of the current fiscal year (2014) was October 1 through December 31 of 2013. In just that first quarter the federal debt actually increased by $614 billion! Yes, that’s correct. I pulled the data from the Treasury’s web site. But you can’t “annualize” that $614 billion because the federal debt does not increase uniformly from month to month. Also, in May of last year the Treasury declared a debt issuance suspension period because it had run out of borrowing authority. That lasted for several months during which time the Treasury employed “extraordinary measures” to avoid breaching the statutory debt limit. (What they do is suspend investments to certain federal “trust funds.”) And then in mid-October 2013, the statutory debt limit was suspended, and the federal debt jumped by $328 billion from October 16th to October 17th as the Treasury reinvested the securities in the said “trust funds.”

    From October 1 through May 30, 2014 (8 months), the federal debt has increased by $779 billion. And there are still 4 months left in the fiscal year. I monitor the increase in the federal debt, and I’ve noticed that, lately, the increase has slowed.

    You are correct, however, that in the first quarter of 2014, the debt increased by $250 billion.

    1. Thanks. I hadn’t planned on looking at the FY numbers at all until like the end of July but a colleague pulled up Treasurydirect and looked at calendar Q1 numbers.

      Agree you can’t annualize but unless FNM/FRE plan on paying more big dividends, and I think all the room to mark up their unsold mortgages and create GAAP net income from dividend get paid has been used up, the Treasury will have to increase its debt issuance for the last 2 or 3 months.

  5. Just remember that when we have hit debt ceilings the govt can go several months using ” extraordinary measures”, such as deferring govt pension payments, or doing what near bankrupt companies do, just do not pay bills.

    Illinois has gotten pretty good at that. But illinois raised its income tax rate and high end folks have made fl, or tx, or nv their homes, or gone offshore altogether, and IL tax revenues have actually gone south.

    Its a matter of when not if. Reinhardt and Rogoff? Why aren’t they quoted on the 90% debt to gdp ratio in dc circles?

    Because fixing this mess is not only difficult to fix, its also a reflection on dc officials because they individually and collectively allowed this to happen for decades. Just think about the committees from 2010 and the punitive sequester that was not.

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