Use access key #2 to skip to page content.

goldminingXpert (29.37)

Downturn Moderating? More LIES!

Recs

40

June 11, 2009 – Comments (9)

I usually don't repost full Denninger posts, but this one is too good to be ignored... I quote his post in full: (if you're looking for another good read--check out this Mish post)

I'm getting VERY TIRED of the misleading presentation in the media:

June 10 (Bloomberg) -- The Federal Reserve said the U.S. downturn may be slowing in almost half of its regions, with the outlook at some companies improving while “stringent” loan conditions and a “weak” labor market persist.

Yes, but what was the headline?

Fed Says Downturn May Be Moderating Amid Weakness

No they didn't.

5 out of 12 is less half of the districts that reported a slower deterioration, while the majority reported either faster or equivalent deterioration.

There is no evidence presented that the downturn "may be moderating."

In fact, the high-frequency data says that things are getting much worse in places like California.  What high-frequency data?  Try this:

The state's revenues from personal income taxes tumbled by 39.3 percent in May from a year earlier while revenues from corporate taxes fell by 52.1 percent and revenues from sales taxes sagged by 7.6 percent, according to a report released by Chiang's office.

The bold part is the important one.

See, sales taxes are (1) almost never gamed as there is little point, (2) they're paid by consumers but collected by businesses who have little incentive to cheat, (3) the penalties for cheating are draconian and the audits frequent, and (4) they apply to nearly all goods (except food in some states.)

Therefore, if sales tax revenue is down 7.9%, you can reasonably presume that economic activity at the consumer level is down somewhere around 7.9%.

Since the consumer is 70% of the economy, it is not hard to figure out that we are approaching the 10% "top-to-bottom" decline level that defines economic depression.

Second, look at income tax receipts.  Down 40% for individuals and half for businesses.  Businesses only pay taxes on profits, while individuals only pay taxes on incomes.  Since individual taxes are typically progressive, this points to a roughly 30% aggregate decline in personal income (!) and a nearly-half cut in corporate profits (!!!)

While California is not the entire country, of course, it is the largest economic block in the nation, and those numbers are frightening.

This sort of "reporting" is absolutely outrageous and irresponsible, and it is high time that the people demand that the media start telling the truth instead of planting false hopes and playing games.

 

9 Comments – Post Your Own

#1) On June 11, 2009 at 11:23 AM, AdirondackFund (< 20) wrote:

Nice post GMX

Report this comment
#2) On June 11, 2009 at 11:37 AM, alstry (34.92) wrote:

It looks like there are a few that actually think....keep up the good work kid...you could make me a believer in techno fairies after all.

Report this comment
#3) On June 11, 2009 at 12:06 PM, binve (< 20) wrote:

GMX, Excellent article, thanks for reposting!

Report this comment
#4) On June 11, 2009 at 12:17 PM, eldemonio (98.81) wrote:

Fed Says Downturn May Be Moderating Amid Weakness

How about these alternate headlines:

Fed Says Economy is Still Going to Helll, But Not as Fast as Before

Fed Says Economic Recovery a Done Deal Once Weaknesses Abated

Fed Says Economy Will Rebound After Things Get Worse

Fed Says Economy's Downturn is Up 40%

Fed Says Things Are Still Shatty, But Hey, At Least You Don't Live in Nebraska

 

Report this comment
#5) On June 11, 2009 at 12:21 PM, binve (< 20) wrote:

eldemonio: LOL! Those were awesome!

Report this comment
#6) On June 11, 2009 at 1:08 PM, thorthedog (< 20) wrote:

On the Calif. sales tax decline - does the 7.9% decline factor in the 1% increase in sales tax the state instituted - April 1 I think?

Maybe it's even worse than they're saying.

Report this comment
#7) On June 11, 2009 at 1:30 PM, davejh23 (< 20) wrote:

Thank you for posting this.  I was thinking the exact same thing yesterday.  I read that, as Denninger put it, "5 out of 12 districts reported a slower deterioration, while the majority reported either faster or equivalent deterioration", and was wondering how they could possibly spin this as good news.  I'd say I'm a pessimist, and this is far worse than anything I expected to hear from the Fed at this point.  Reporters were citing this report as the reason for market advances, but if markets behaved rationally, I would expect the stock market to tank on this news after all the "green shoots" talk that's been going on.

Report this comment
#8) On June 11, 2009 at 1:49 PM, charlesblazer (99.07) wrote:

One can only marvel at the artistry of such spin.

Report this comment
#9) On June 11, 2009 at 3:57 PM, XMFPhila100 (89.80) wrote:

Therefore, if sales tax revenue is down 7.9%, you can reasonably presume that economic activity at the consumer level is down somewhere around 7.9%.

Sales tax is based on a percentage of dollar amount purchased, so you could argue that economic activity could be flat or up, but that consumers are simply buying more value products. Either way it's bad for state revenues, I grant you, but activity in terms of number of trips made to the store could still hold up as well as number of products purchased. 

Report this comment

Featured Broker Partners


Advertisement