traderdannorcini.blogspot.com / By Dan Norcini / Wednesday, January 30, 2013
Fear not ye despairing lads and lassies. Surely thou wert fearful that said supply of spirits to enliven yonder punch bowl wert in peril of being dried up. Hark – the sum of all economic activity in the realm didst verily sink a fortnight plus ago. This turn of events must surely bring forth the purveyors of joy and bliss to aid thee.
Okay – I got a bit carried away – the big news, and I do mean “BIG” news this morning that has gotten the commodity sector excited and is in the process of pushing the US Dollar lower, is the fact that 4th quarter 2012 GDP actually managed to SHRINK! Yes, you got that right – it shrank! As a matter of fact, the reading was the worst since Q2 2009! Remember that we were back in an official recession during that time frame.
Ironically, and this to me is a big deal, government spending decreased and that is perhaps one of the biggest reasons for the reduction in growth. I have mentioned previously on this site that government spending was a large factor behind recent improvements in the rate of growth in this nation and that were it subtraced from the numbers, we would be showing very little in the way of actual growth. Lo and behold, I did not expect the growth rate to actually shrink were it removed from the equation.
Here is the ironic part – the US MUST REDUCE SPENDING as it is headed down a road that will certainly lead to economic ruin. When government debt is 100% of GDP it is unsustainable. Any who doubt need merely look across the Atlantic Ocean to Greece, Spain, Italy, Portugal, etc. Heck, even one of the French officials made the slip of the tongue in admitting the obvious, namely that France was bankrupt! While the US DEbt/GDP ratio is not yet at levels seen in the PIGS, it is most surely headed in that direction.
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