Oct. 27, 2006 -- This article, on our front page today, presents some very nasty economic news. 1.6% economic growth for the last quarter is pretty damn anemic. That said, it becomes even more distressing when you perform a little surgery on it, in the interest of drilling down into what this number really means.
Note: It is doubtful you will be hearing any of this from Neil Cavuto or Lou Dobbs.
OK, so the announced number is 1.6%. Let's cut out a few things to get a more clear look at how the wider economy is doing. First, let's cast our scalpel in the direction of Defense spending. Lotta' that going on these days, all generated by the government. Some economists will place this number at 3-3.5 percent of a wartime economy.
Next, let's look at the energy sector and its constant litany of astronomical, heretofore unheard of profits. Lets excise them as well, just for the exercise.
Where does that leave us? Pretty well in the crapper, if you want to look at the broader economy. Not very broad-based, it seems like.
Now, let me leave you with the quote of a friend who has far more real expertise in the arcane and eldritch realm of the economy. Consider this lagniappe, regarding the above:
"Things are terribly bad. But the party's still raging on Wall Street. We've been in a recession at least since 9/11, if not 2000.
"Since CPI is understated by at least 3 percent, that means that GDP is overstated by at least 3 percent. That means we've been in a recession for a long time here.
"Shhhhh. Don't tell anybody. You don't want to be a party pooper, do you?
"And the stock rally? What do you expect with M3 money supply expansion over 6 percent annually? The end result? Think Hiroshima.
"In very broad terms, what we're witnessing is known as a 'distribution.' It's when securities pass from "strong hands" to "weak hands.
"Then, suddenly the party's over and the "weak hands" are left holding the paper. One thing for sure, things will be exciting going forward."
Yeah. I'll bet. Yippee.
Please note: author is not an economist, nor does he play one on TV