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TMFEditorsDesk (< 20)

Economy Wars: Episode V - The GDP Strikes Back

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July 31, 2009 – Comments (6)

The newest GDP numbers are out and they're -- dare I say -- a bit of green shoots.

Okay... Now that I got that phrase out of my system I promise to forever banish it from my vocabulary, for the good of all blog readers.

Now, let's take a look at the numbers.

Big top line number: The GDP was only down 1% in the second quarter of the year. This compares favorably to consensus forecasts of a 1.5% decline, and to the previous quarter's preliminary report that pegged GDP decline at 5.7%. Bernanke's beard audibly purred upon hearing the figures.

So there's a lot to be happy about, though the current number is subject to revision. After looking at previous quarterly declines of 6.4% (revised first quarter) and 6.3% in the fourth quarter, the number's a breath of fresh air. One factor that's driving the gains is federal spending, which was up 11% in the quarter. So what one person sees as the government using necessary means to escape from the recession, another will see as excessive spending that will hobble the US going forward. Let the debate continue!

 

Another story that's piqued our interest is the 'Cash for Clunkers' saga. The program, which was supposed to run through November, apparently has had its allotted $1 billion depleted in a few short days. White House officials and Congressional leaders are meeting to decide whether to continue with the program or not.

But I mean, come on, how many people in this country driving around clunkers really need new cars right now? To qualify for the program your car had to get less than 18 miles per gallon already (certain exemptions apply) and you'd only receive value for the scrapping of your car. So if a car was worth $5,000 or more on the secondary market, the program doesn't make any sense. 

So let me prattle through who this program applies to: People driving cars with less than 18 mpg which are worth less than $5K and are willing to buy a NEW car right now?

I don't know... Seems to me we're enticing a lot of buyers who probably shouldn't be buying expensive autos right now to do just that.

Here's a Fool.com article that was written on the topic a couple days ago.

 

And finally, what's a blog post without more Jon & Kate news? Shockingly, despite being split up, the couple plans on continuing with their reality TV show. Ladies and gentlemen, START YOUR DVR'S.

 

-- Eric (TMFRhino)

 

6 Comments – Post Your Own

#1) On July 31, 2009 at 11:13 AM, davejh23 (< 20) wrote:

"One factor that's driving the gains is federal spending, which was up 11% in the quarter."

This makes it sound like things are actually getting much worse.  Gov't cannot keep up this kind of spending.  Are we just delaying a -20% GDP report?

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#2) On July 31, 2009 at 11:19 AM, TMFEditorsDesk (< 20) wrote:

The real big story of the day is that Eminem released a song about Mariah Carey after she released a song about him being obsessed. Clash, boom, hiss. I think that's more important than Jon & Kate...and Jon's new bff, Lindsay Lohan's father.

- Katrina (TMF Toast)

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#3) On July 31, 2009 at 11:38 AM, SWOOPINGLOTUS (< 20) wrote:

No Dave -20% GDP will never happen. The government will just keep spending. The FED will slide some cash under the table to the bond brokers to buy the government debt offerings, so that problem is covered. The second stimulus package should give us all about $1000 bucks in our pockets to keep the American population happy, so that problem is covered no rioting in the streets. The dollar slowly decaying will cause the market to go up, so that problem is covered. It looks like a pretty rosy picture to me. At least for the next couple of years and maybe just maybe if the federal government can beg china to just keep quiet and float some of our debt every now and then It could last a bit longer

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#4) On July 31, 2009 at 11:55 AM, leohaas (34.93) wrote:

About green shoots: "Okay... Now that I got that phrase out of my system I promise to forever banish it from my vocabulary, for the good of all blog readers"

Please, don't. Banishing it is only for the good of the vocal doom-is-near bloggers. Keep on using it for the silent majority, if only so we can read more rants about it!

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#5) On July 31, 2009 at 12:24 PM, davejh23 (< 20) wrote:

swoopinglotus,

That makes me feel better.  However, what if the decay of the dollar doesn't happen slowly?  China's openly taking measures to limit exposure to the USD, and overall investment in the US.  We're pushing China to encourage domestic consumption, and effectively, increase wages and the strength of their currency.  What happens when we can no longer afford Chinese exports?  What happens when everyone realizes that the ONLY significant buyer of treasuries is the FED?  What happens when the USD loses reserve currency status, and oil is no longer traded in dollars, and we suddenly see gas prices in the US triple?  We're starting to see hundreds of thousands falling off the unemployment rolls without employment.  I'm not completely pessimistic, but I wouldn't be suprised to see riots, or at least a significant increase in property crime. 

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#6) On July 31, 2009 at 1:58 PM, TMFEditorsDesk (< 20) wrote:

Update for the "Cash for Clunkers" story.. House approved, Senate's up next: http://www.fool.com/news/associated-press/2009/07/31/us-house-approves-2b-car-purchase-program.aspx

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