Fall in US Q4 GDP shows US almost in recession, not in a recovery



So the growth in the US economy turned out to be a charade created for an election year after all as ArabianMoney suggested a long time ago. There is no hiding from a 0.1 per cent fall in GDP in the fourth quarter in the world’s largest economy. Another quarter of decline and the US is officially back in recession.

Agora Financial managing editor Chris Mayer, who is visiting Dubai in the middle of February, said in his last newsletter that the US economy looked a bit like 1937 when tax rises and spending cuts undermined a recovery from the Great Depression. Is the US making the same mistake in 2013 and going for a bit too much austerity, too soon?

$1 trillion deficit

You could say that but a $1 trillion federal budget deficit has to be tackled at some point. A nation cannot borrow to live beyond its means indefinitely. And indeed there is now far less need to do so with all those elections out of the way.

Was the US economic upturn of 2012 just a charade created by bending statistics and hyping spending for an election year? It is certainly very suspicious that the only consistently good figures are for employment. Why does the line for food stamps continue to grow with one-in-six people in the US now dependent on this food aid program?

People are being knocked out of the official unemployment queue and handed out food stamps instead. That’s 47 million and counting, twice the level of poverty that President Obama inherited when he first took office.

The Federal Reserve said yesterday it expects growth to pick up in 2013 and for Q4 to be a temporary setback. Yet why should that happen when taxes are rising and spending being cut back? The Q4 disaster was apparently mainly down to defense expenditure cutbacks but they are not about to be reinstated.

Falling US exports

There was also a six per cent annualized fall in US exports in the fourth quarter. How does that square with the expansion of global trade currently being claimed by the Chinese and refuted by Singapore, Taiwan and South Korea? The reality is laid bare for anybody who cares to look further than the foolish bulls on Wall Street.

If you misled by tradtional financial commentators on TV or in the newspapers then you have every right to be very annoyed. They have been spinning a recovery out of thin air and now we see just how thin that air has become.

What comes next is a correction in financial markets to reflect this new reality and to wipe away the illusion of a recovery that is quite demonstably not happening when you sum up all the statistical evidence from the world’s largest economy for the final quarter of last year.

Posted on 31 January 2013 – ArabianMoney

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