Wednesday, June 25, 2014

Here Is The Reason For The Total Collapse In Q1 GDP/MAGIC NUMBERS

Here Is The Reason For The Total Collapse In Q1 GDP

Tyler Durden's picture
Submitted by Tyler Durden on 06/25/2014 09:23 -0400



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Remember back in April, when the first GDP estimate was released (a gargantuan by comparison 0.1% hence revised to a depression equivalent -2.9%), we wrote: "If It Wasn't For Obamacare, Q1 GDP Would Be Negative." Well, now that GDP is not only negative, but the worst it has been in five years, we are once again proven right. But not only because GDP was indeed negative, but because the real reason for today's epic collapse in GDP was, you guessed it, Obamacare.
Here is the chart we posted in April, showing the contribution of Obamacare, aka Healthcare Services spending. It was, in a word, an all time high.


Turns out this number was based on.... nothing.
Because as the next chart below shows, between the second and final revision of Q1 GDP something dramatic happened: instead of contributing $40 billion to real GDP in Q1, Obamacare magically ended up subtracting $6.4 billion from GDP. This, in turn, resulted in a collapse in Personal Consumption Expenditures as a percentage of GDP to just 0.7%, the lowest since 2009!

Don't worry thought: this is actually great news! Because the brilliant propaganda minds at the Dept of Commerce figured out something banks also realized with the stub "kitchen sink" quarter in November 2008. Namely, since Q1 is a total loss in GDP terms, let's just remove Obamacare spending as a contributor to Q1 GDP and just shove it in Q2.
Stated otherwise, some $40 billion in PCE that was supposed to boost Q1 GDP will now be added to Q2-Q4.
And now, we all await as the US department of truth says, with a straight face, that in Q2 the US GDP "grew" by over 5% (no really: you'll see).
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9 comments:

  1. MickJune 25, 2014 at 12:45 PM


    The United States GDP shrank at an annual rate of 2.9 percent in the first quarter of 2014, according to the third and final estimate from the Commerce Department. The figure comes much worse than a 1 percent contraction previously announced, as the increase in personal consumption was smaller than estimated, and the decline in exports was larger than anticipated.

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    Replies
    1. loumanJune 25, 2014 at 1:40 PM

      Don't you love it when a plan comes together?

      Once again the law of unintended consequences rears it's ugly head.

      Delete
    2. MickJune 25, 2014 at 4:53 PM

      I await the final correction with bated breath. We can always blame the weather. Please note that the stock market totally ignored this dip.

      Delete
    3. loumanJune 26, 2014 at 7:47 AM

      As long as QE remains intact, ZIRP remains intact, why would the market flinch?

      Raise interest rates and watch the rush to the exits. (After the election in Nov.)

      Delete
    4. KingstonJune 26, 2014 at 4:20 PM

      Lou
      As long as QE remains intact.
      No doubt it will remain intact; QE is the reason the US economy is still on top of the water, the massive floatation provided by QE however is destined to eventually sink the economic ship of state, not only for America but probably for the rest of the world as well. I imagine your Sec Treasury and the President of the Fed Reserve would love to revisit Nixon’s decision to end the gold standard 43 years ago. A dollar was then worth 1/32 ounce of gold. Now you need about 1500 dollars to buy an ounce of the metal. This, sure as god made little apples, is inflation in the true fiat fashion.
      Never mind friends, there is a big red dragon on this side of the world. It is buying your paper and because they have such a resource/wealth base, the Chinese can use your notes as toilet paper as they prepare to become the next reserve currency for the world.
      Cheers from Aussie

      Delete
    5. loumanJune 26, 2014 at 6:18 PM

      QE is slowly being reduced. ZIRP will remain intact until after the Nov. election as the Fed tries to remain neutral.

      SOme time in the first quarter they will begin to raise interest rates, a certain indicator of a market correction as the interest required to pay the debt increases. 4% with 17 trillion in debt is a big number to play to. Fortunately over half is internal to US bond holders, SS and the Federal Reserve.

      And yes, the Yuan will be the world currency, reducing the US to 3rd world status which our politicians seem to want to do.

      Inflation:
      1913 dollar, today requires 24.03 to buy the same thing. 2,303% inflation.

      Delete
  2. MickJune 25, 2014 at 1:08 PM

    www.tradingeconomics.com/united-states/gdp-growth

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  3. UnknownJune 25, 2014 at 7:05 PM

    The democrats know that the only chance that they have in November is if the GDP numbers turn up over the next two quarters. What better way than to low ball the Obamacare numbers as a pathetic baseline.

    Remember how the unemployment number magically went under 7% just before Obama's reelection?

    It is all so transparent, there are so many poorly educated people, I am sad for America.

    ReplyDelete
    Replies
    1. MickJune 26, 2014 at 12:06 PM

      You may be right William, time will tell. Politics in our country have become so goofy, I've quit making predictions.

      Delete

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