7 June 2007

Shadow Government Statistics: May 2007 Edition

Shadow Government Statistics: May 2007 Edition: "The Federal Reserve has been in a long-term liquidity trap, where pumping up of the money supply generally has not stimulated normal economic growth in the post-1987 era. Excessive liquidity did help to build stock-market and housing bubbles, which helped boost economic growth from the standpoint of a perceived wealth effect and extraordinary debt expansion.

The Fed's pushing on string, however, never addressed the underlying structural collapse in economic activity, the long-term decline in inflation-adjusted household income, with a meaningful portion of the U.S. manufacturing base moving offshore. Therein lies the heart of the current economic crisis. Without a new gimmick from the Fed aimed at somehow buying more time, the economy is foundering based on negative fundamentals that cannot be turned quickly (as in decades), and certainly not with excessive money supply pumping. Without sustainable real income growth there can be no sustainable economic growth.

The Fed can hide whatever numbers it chooses, the government can massage its economic statistics as much as it wants, but the underlying reality of a deteriorating inflationary recession remains in place. What the politicians are missing is that Main Street U.S.A., which tends to vote its pocketbook, does not believe the gimmicked data and has an amazingly good sense as to what is going on. The reference there was to Main Street not Wall Street. "

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