The U.S. Economy: “Escape Velocity” To The Downside

Well, now we know why the new Wall Street brain trust consensus for an interest rate hike has been pushed out to September.   Kick that can down the road some more.   These Wall Street idiots really like to move around in herds.  They’re like cattle, or sheep.  Perhaps they even get treated like sheep by their male overlords, or herdsman if you will…

The Bureau of Economic Analysis reported that Q1 GDP came in at a .2% annualized rate of growth.  The underlying numbers are far worse, however.  But first, here’s an example of what downside “escape velocity” looks like (source Zerohedge, edits are mine) – click to enlarge:

GDP

The economy is tanking just like I’ve been suggesting in several previous posts.  The change in real private inventories added .74% to Q1 GDP.  This means that manufactures piled up inventory.   BUT, real final sales of domestic product dropped .5% in Q1 (vs. a 2.3% gain, supposedly in Q4 2014).   This means that the .2% GDP number was boosted .74% by manufacturers producing inventory that didn’t sell.  If manufacturers produced goods at the rate those goods were selling, GDP would have been negative.

This is why we get graphs that look like this one, which shows business inventories to sales:

BusinessSalesInventories

That graph shows a big part of the reason for “downside escape velocity.”   If big manufactures had been applying “just in time” inventory management, GDP would have been negative because real final sales were negative.

Update:  Zerohedge is identifying the inventory build that I just described as “the biggest inventory build in history” (LINK).  What’s going to happen to manufacturing output when retail spending does not recover, despite the good weather?  Let’s call what will happen, “escape velocity to the downside.”

And why are real final sales negative?  This graph goes a long way toward answering that question:

wages

That graph shows the direction of wages for 80% of the population that actually have jobs. 80% of all workers have less money to spend, especially after netting out non-discretionary spending plus the increased cost of Obamacare.  That graph shows real “downside escape velocity” in wages.

Real nonresidential fixed investment dropped 3.4%.  What happened to this boom in commercial real estate?  I know for a fact that the commercial real estate vacancy rate in Denver is soaring.   I’m hearing the same thing from readers all over the country.   QE has done nothing except keep the big banks from collapsing and has created hundreds of billions of dollars of malinvestment, leading to massive overcapacity of commercial buildings and production facilities.

The reason propaganda, manipulated economic statistics and market intervention/rigging always ultimately fails is because eventually the truth about the underlying reality eventually emerges.   This is why I believe that we are on the cusp of a massive systemic collapse.

 

 

13 thoughts on “The U.S. Economy: “Escape Velocity” To The Downside

  1. Dave your insights and articles are great as usual.

    I read a couple a days ago that Jeff Bezos is a big economic contributor to the democratic party.

    He must be mad as hell now when the AMZN stock is falling after the recent artificial spike.

    I can see the following conversation to the democratic party headquarters.

    “I want payback for my contributions and the stock to rise again, get the motherf……s at the FED and the Plunge Protetction Team back at work and also get these fucking algo robots working again.

    This is probably how it works I wouldn´t be surprised.

    1. Heh heh hehhh. The CPA who contacted me pointed about a big scam going on with AMZN with the way they do
      their employee stock compensation plan. It’s something I’ve overlooked but I’m going to learn about it
      and write it up in the update to my AMZN report I’m working on.

      Bezos is one of the biggest crooks in history.

  2. I have to wonder who the idiots are ? The banks are in the business of creating debt as a form of liquidity. They are not in the business of making real assets that can also support liquidity. They do what they do. The market does what the market does. The banks are doing their job. God forbid they should come into our jurisdiction to develop and circulate asset based liquidity too.

    We now have the ability to circulate debt-free liquidity that use fiat measurments as measuring tools for bullion weight in a real-time environment. Central banks set that stage back in 1971. It’s up to the market to make bullion weight a currency and the unit of account now that the stage has been set for us.

    You cannot pour new wine into old wineskins.

  3. Chicago Cubs motto applies here:

    “wait till next year” for the interest rate increase, unless of course the market actually dictates the real interest rate for a credit risk country.

    actually if the dollar declines more like it has today, why own treasuries paying 2%?

  4. It just amazes me how on so many days like today, yesterday… the Dow … tries to shift into tanking mode right after the markets opens, but then, like magic, it reverses to the upside and closes in the green. Unbelievable. I am really not a stock market professional, I am rather a guy who follows the markets and try to understand what is going on, but I cannot remember such a long period of time devoid of any worth mentioning correction in the stock markets. No matter what the news are, stocks rise, rise,rise. It’s crazy, something seems to be quite fishy.

  5. “This is why I believe that we are on the cusp of a massive systemic collapse”

    As a long time follower Dave from your blogging days and I probably already know the answer to my question. If what you state is true ( and I already know it to be ) what are your current percentages as far as physical holdings, that being Gold, Silver and Cash.
    I ask because I’m sure there are Noobs who are preparing as well and appreciate your input.

    As always thank you for all you do.

    Bill

  6. I was driving with a friend of mine past an auto mall and I commented that the lots were packed to the brim. You can now get an 84 month car loan for less than 1%. But we’re not in a bubble and when the S#$% hits the fan we’ll be told, who could have seen it coming ? I anticipate the day when you will receive a new F-150 truck when you go to the humane society and pick up a kitten.
    ” I’ll take the Russian Blue please. Would you like a truck with that kitty sir ?

  7. That’s a lot of bullets!
    I spoke with a coworker of mine who just sold her house in Washington state. South King County. She got 5k over their asking price. And she claims that every house they look at to buy has lots of offers going over the ask price. But they are looking up in the Bellevue area. Big Tech and big money floating around there. I was suprised to hear how hot the market seems to be in this area. A big contrast to other parts of the country.

  8. ” That’s a lot of bullets “… correct. And what happens when the interest rates rise ? You can argue that they will never rise but the alternative is a glut of houses due to artificially suppressed interest rates. Then kaboom. Geez… I never saw it coming….

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload CAPTCHA.