Economic contraction; AA double dip

The WealthCycles Staff

Earlier in February, President Barack Obama came to the podium to announce that “The economy is growing stronger…the recovery is speeding up. We’ve got to do everything in our power to keep it going.” Yesterday we profiled the recent jobless rate in a blog titled Election Year Employment Deception—a clear and present sign that administration has touted a false increase in employment—and thus, a false picture of an improving economy. Combine this with the proclamation from every official source that we are in a recovery, and not a depression, as described by WealthCycles here, using both Kondratiev long wave and confirmed below, using simple current fact.

There is no better term than depression when accurately describing the plummeting employment and the economic contraction in developed economies. Bloomberg:

“With economies cooling across the region and export orders weakening, companies have been forced to lower costs to help protect earnings. 
Employers around the globe are cutting jobs more than three times faster than in 2011.”

German factory orders recently suffered their worst three months outside of the 2008 crash itself, falling at a 28% annualized rate. European December Industrial Output declined by 1.1% led by Germany’s 2.7% drop, compared to November’s 0.3% decline.

Another measure of economic expansion or contraction is global shipping. So far this year the Baltic Dry Index has fallen 42% more than its seasonal normal.Below is the current data: 

Beyond serious manufacturing contraction, a shipping freefall as in 2008, and as a delayed effect, job loss data, there is still more evidence of an economic decline:  energy use.

The cost of oil has declined from before the crash, yet consumption has dropped as well. Breaking out petroleum products into further detail, the U.S. Energy Information Administration (EIA) also provides gasoline data.

The charts lead us to consider that these massive drops in consumption, a 27% gap down in gasoline, and are historically unprecedented, with the exception of a war or a sharp economic contraction… a depression, if you will.

So what will be done in an attempt to boost growth and make the economy appear to improve? In the February 3rd speech, Obama warned Republicans in congress not to “muck it up” (the growth) by denying the payroll tax extension. They did not disappoint. The Congressional Budget Office (CBO) estimates the cost at $160,000,000,000; this will appear in newly issued debt later this year.

Why is this an issue? As of September 30th, total U.S. debt subject to the ceiling will total $16,333,900,000,000, while the debt ceiling is $16,394,000,000,000. The U.S. Treasury will be forced to start borrowing from government retirement accounts as it did last summer, to fund daily operations, this time just two months ahead of the election. At that time, the U.S. will have a tiny $60 billion in debt capacity remaining, and a burn rate near $133 billion/month. Come election time, the U.S. will be in all-embracing debt ceiling hike madness.

History shows (75 consecutive hikes) that instead of cutting spending when we need more money, we simply print it. To see the correlation between the debt ceiling versus how many dollars it takes to buy an ounce of gold, see our February 7th chart blog titled What’s The Debt Ceiling Got To Do With It? So which one is it: economic depression, or as Mr. Obama puts it, recovery that is speeding up? We’ll let you check out the data and make your own decision. 

Mistakes are made easily especially if we believe in what politicians say. Many of them are the root of all evil.

Oops! I think you've erred by missing a few zeros there....debt ceiling is $16.394T, not B, right?? That's OK, the point is clear! But maybe you've discretely brought up a good point that we humans err and do so very easily when working with numbers... So, maybe those in power have erred in the numbers they're working with when gauging our situation? Maybe they're using M's and B's when they should be considering T's.... Scary thought....When do we start using Z's????

Thank you much for catching the typo !!

The gasoline deliveries had me mesmerized. Now that gas prices are on the rise again, we wonder how the next few data points will play out. We will be watching this data as it comes in.

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