Anyone over the age of 14 knows this: If you want to look tall, stand next to a short person.
And if you want to look good, stand next to — well — Anthony Weiner.
Wall Street and its co-conspirators in the media want the US economy to look both tall and good — whether or not it is true. This misrepresentation has been going on for six years, and people who present the news still find it difficult to be honest.
When the US Bureau of Economic Analysis (BEA) reported yesterday that annualized second-quarter gross domestic product growth was 1.8 percent, CNBC’s Web site immediately called the growth “brisk.”
Brisk, my ass!
Wall Street had been expecting growth of 1 percent or less. So yesterday’s number was standing next to a short person. But there were several other things in the BEA’s news release that warrant noting quickly.
In the first sentence, for instance, the bureau said, “In the first quarter, real GDP increased 1.1 percent (revised).” There was no further explanation, but that simple sentence was packed with a lot of meaning.
What the BEA didn’t say anywhere I can find in the massive release is that the first-quarter GDP growth had originally been reported as 1.8 percent.
So the second-quarter growth may have been higher than Wall Street expected, but the economy’s expansion in the first three months of the year was much less “brisk” than originally announced.
And even at 1.8 percent, the nation’s GDP expansion in the second quarter was — in layman’s terms — crap.
Want proof? It comes right out of the BEA’s own release: “For 1929 to 2012, the average annual growth rate of real GDP was 3.3 percent.”
And, again according to the BEA, from 2009 to 2012 the GDP has been growing at an average rate of 2.4 percent.
So how, exactly, is 1.8 percent growth in the second quarter brisk? Why did the stock market rally yesterday?
Even if the 1.8 percent holds up upon further scrutiny — and it will be revised twice — the figure announced yesterday is only slightly better than half the 1929-2012 average and even well below the growth rates for more recent years, which have been horribly impacted by what has become known as the Great Recession.
Two more quickies here: First, the BEA thinks inflation is much less onerous today than the Bureau of Labor Statistics is reporting. If the BLS inflation number is used in GDP calculations, economic growth would be cut in half.
Second, the first report of any GDP is based mostly on guesses, or, as the BEA says, it is “based on source data that are incomplete.”
Let me make this simple. Our country’s economic performance this year has been dismal despite massive government spending and a Federal Reserve that treats our currency like it was Monopoly money.
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Speaking of the Fed, the Open Market Committee concluded its two-day meeting yesterday, and nothing happened. Bernanke didn’t even hold his usual press conference.
The governors, however, probably had some nice lunches.
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Back to the GDP.
The problem with pretending that the economy is “robust” when it’s nowhere near that is that the financial markets might actually believe the nonsense.
The fact that second quarter growth was a dismal 1.8 percent instead of an abysmal 1.0 percent caused interest rates to jump a lot higher yesterday.
Uncertainty over what the Fed would do at its committee meeting added to the uncertainty.
But if we really want economic trouble, all we have to do is tick off the bond market.
If interest rates go up much more, corporate profits will begin to suffer, homeowners and companies won’t be able to get loans and — ultimately — even the stock market will notice.
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Once again, I’ll say it — if the US wants to fix the economy, what it has to do is change the rules on people’s retirement plans. Let them “spend” some of their IRA/401(k) on houses, cars, computers or peanut butter and jelly sandwiches, depending on where you want economic growth.
These withdrawals will add stimulus to the economy and would be taxed at a lower rate so the US Treasury will benefit with extra tax revenue.
The housing industry has been doing better, but only because rich investment companies are buying up thousands of homes.
The rate of home ownership in America is actually at an 18-year low because regular folks can’t buy.
Look, nobody is listening to me on this. So I invite some well-known economist to steal this idea from me, and we’ll split the Nobel Prize.
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The Labor Department will announce July’s labor figures tomorrow at 8:30 a.m. and Wall Street — as always —is optimistic. It thinks 175,000 new jobs were produced last month and that the unemployment rate fell to 7.5 percent from 7.6 percent.
I think that all the Labor Department figures are nonsense.
But I will remind you that July’s numbers are boosted by only a small guesstimate on jobs that newly formed companies may, or may not, be creating.
So if I you forced me to guess, I’d say tomorrow’s number will be disappointing.