Yesterday, the Commerce Department revised the growth rate from 2.4% down to 1.8%. Even 2.4% isn't good for an economy that is being pumped full of liquidity. Also, the new 1.8% rate is annualized, so the actual growth in the first quarter was only .45%.
By JOHN CRUDELE
Last Updated: 12:05 AM, June 27, 2013
D’ja hear the great news? The economy continues to suck.
The stock market rallied nicely yesterday after the Commerce Department changed its mind about how the economy did in the first three months of 2013.
After thinking the US economy grew at an annualized rate of 2.4 percent in the quarter, Commerce revised the number downward — saying growth had actually been only 1.8 percent.
There are several things you need to understand before I continue.
First, even 2.4 percent growth isn’t good. An economy that’s pumped up with the amount of liquidity the Federal Reserve has created should be growing at twice that rate, or more.
Second, the new 1.8 percent growth is annualized. That means the economy would have to expand by the same amount over all four quarters of the year to achieve 1.8 percent.
So the actual growth in the first quarter was 1.8 percent divided by the four quarters of the year — which comes to a teeny-tiny 0.45 percent expansion for the January-to-March period.
The last thing you need to understand is that Wall Street loved Commerce’s announcement.
Traders who’ve been trying to keep stock prices from collapsing until after this quarter ends on Friday pushed the Dow Jones industrial average up 149.83 points, or 1 percent.
Why’d they do that? Because, as I told you in several recent columns, Wall Street is hoping the economy slows so that Federal Reserve chairman Ben (the misunderstood one) Bernanke can’t follow through with his threat to cease printing money.
Bernanke last week vowed to stop his toxic quantitative easing program by the middle of next year (with a slowdown in money printing later this year) if the economy was doing all right.
I also told you last week that the economy wouldn’t be doing well enough to allow Bernanke to abandon QE, even though this money printing program is perhaps the most useless, disruptive and unfair policy ever hatched in the mind of even the most evil economist.
With the announcement of only 1.8 percent annualized first-quarter growth, Wall Street won’t even have to wait to see if my prediction of a slackening off in corporate profits and a slowdown in the economy actually comes true.
Wall Street already has the bad news it has been waiting for.
But remember this: Wall Street is trying to hold things together this week so that it can report results to clients that aren’t so bad. But if interest rates continue to rise against the Fed’s wishes, then the financial markets could turn ugly fast.
And then frightening economic news like yesterday’s won’t look so pretty.
If this sort of economics thinking — bad is good, and good is bad — continues, Wall Street should be hoping for a disappointing employment report on Friday, July 5.
And it probably won’t get what it wants.
As I’ve been saying — and will probably say again next week just in case you aren’t paying attention — the June employment report that comes out next week is goosed higher by optimistic assumptions and favorable seasonal adjustments.
So the number of jobs created in June could be stronger than expected. And Wall Street shouldn’t be able to handle that.
If the report does come in with an incredible number of new jobs, or even a substantial drop in the unemployment rate, Wall Street will start worrying that the Fed has justification to taper off its quantitative easing fiasco.
I understand that this is all very confusing. So let me simplify this into a tweet-size summary: WS wants what Americans don’t — bad eco news. And more bad eco news is coming. Just not next week.
The US is chewing out Russia, China and a few other countries over their handling of Edward Snowden, the alleged felon who disclosed American anti-terrorist tech surveillance here at home.
Whatever your point of view on what Snowden did, this much is indisputable: The weakened financial position of the US makes it difficult for us to criticize any country, even if the reason is just.
All China has to do, for instance, is stop buying US government bonds (or, worse, sell some of the many billions it already owns), and our financial markets will panic.
If Russia just threatens to reduce its oil production, energy prices will rise and this country will be imperiled.
What I want to say is this: It is time for Washington to straighten out our country’s financial position so that we can again become the international bully we deserve to be.
A reader suggested that President Obama and his family were really going to Africa for the funeral of Nelson Mandela.
So, while this reader didn’t mind me criticizing the very costly use of Air Force One for the African trip, he did suggest that the president was really trying to do something nice.
Well, I pointed out, the former president of South Africa hadn’t died yet, even though he is said to be critically ill at this writing.
Wouldn’t it be interesting if Obama couldn’t go to what seems to be the inevitable funeral because our president has already spent so much time and money traipsing around Africa?
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