Thursday, May 25, 2006

True State of the Economy

GDP for Q1 revised up to 5.3%, but Consumer spending and Business investment are disappointing. Overall Corporate Earnings, though, average about an 8% increase Year over Year. Many Economists believe less energy use over the winter and strong Export Demand brought on the better showing in the revision. I have me doubts!

The higher Corporate Earnings can only come from denuding subDivisions of Investment capital. Poor Business investment was the natural result. The less Energy use did not deprive Utilities of Profits, what with Year over Year doubling (actually about 40%, but the Author likes Drama) of Energy Costs. The record tide of Immigration has multiplied the Household Startup purchases (about 3 times the normal High School--College Graduate wave). The later has bouyed the Consumer Spending numbers, hiding the real drop in Consumer Spending levels by Household. Labor Wages and Business investment has suffered from Inflation badly--volitile Energy and Food included. Lots of Clouds on the horizon!.

A real Problem lies in the Fed lack of awareness. The Fed seems determined to further rob Business investment and Consumer Spending by higher Credit charges, which obviously does nothing for the real sources of Inflation. Corporations continue to steal Wages and Recapitalization funds to justify Corporate Executive Bonus and Stock Options. It is going to be a rough Year, especially as Congress is determined to increase Spending, and reduce Tax revenues. lgl

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