Good report!
Additional notations below:

Karim writes:
U.S. GDP growth in Q4 a bit weaker than expected at 2.8%

Perhaps the FOMC had word of this, explaining the unexpected dovishness?

1.9% of that growth accounted for by inventories. Other contributions: (consumer spending 2%, fixed investment 0.4%, government spending -0.9%, net exports -0.1%).

Rebuilding post earthquake supply lines probably now complete.
Govt spending continues weak, as revenues increase some and the federal deficit falls some.
Imports rise quickly with any increase in consumer spending.

In growth terms: (consumer spending 2%, fixed investment 3.3%, government spending -4.6%, exports 4.7% and imports 4.4%).

So stripping away inventories, growth was below trend. Plus savings rate fell back to 3.7% from 3.9%.

Domestic savings down with spending up indicates increasing consumer debt.
The question is whether this is ‘wanted’ as per increased desires to buy on credit,
or because the decline in govt deficit spending ‘forced’ more consumer debt for ‘essentials’

And, core PCE slowed from 2.1% to 1.1%.

Also explains FOMC dovishness as they see risk as asymmetrical, fearing deflation more than inflation.

In sum, will keep QE3 talk very much alive

And somewhat moot, even as Q1 GDP forecasts are being revised down some, as most don’t think QE matters much for the real economy.

What’s becoming understood is that while there is ‘more the Fed can do’
for all practical purposes there is nothing they can do to further support the real economy.

Euro money and lending data shockingly weak in December.

Might partially explain how some banks apparently got the balance sheet room to buy more national govt debt?

In particular, record single month decline in lending to the non-bank private sector (74bn). Of that, 37bn decline in lending to non-financial corporates and 8bn drop in lending to households.

This should be very supportive of additional ECB rate cuts over the next few months.

7 Responses

  1. Warren, there are first signs that the tide may eventually turn in Europe. This is very little, not a full Job Guarantee and there can be very strong opponents of any intervention on the “free market” of human misery. The proponents of Prussian-style austerity may still block the effort “because there is no money”. However some political and business leaders have finally discovered that if they screw up the whole generation of young people, the capitalists may make much lower profits in the future and the social stability may be affected.

    You may feel vindicated but I am not sure whether you’ll be credited.

    “At Monday’s EU summit in Brussels – likely to be dominated by attempts to safeguard the euro’s future and to control spending by eurozone members – EU leaders, including David Cameron, will discuss a plan to guarantee all young people either work, training or further education within four months of leaving school.

    A draft conclusion of the summit, likely to be agreed by all 27 heads of state and government, states: “The objective should be that within four months of leaving school young people receive a good quality offer of employment, continued education, an apprenticeship or a traineeship.”

    EU sources said €22bn of as yet unspent money in the EU’s social fund could be provided. The commission would work with member states to draw up “country specific” programmes on how to address the problems and use the funds. While the plans would not be legally binding, as the EU has no power to enforce such schemes, a unanimous agreement would place countries under strong peer pressure to deliver results.”

  2. @Save America,

    Was Marx right with the tendency of the profit rate to fall?

    But anyway the Masters of the Universe will not allow for a new revolution. Capitalists make money by exploiting workers not by pushing more people into unemployment. They need some people to be poor to act as scarecrows to break the back of the trade unions but they do not need 50% of the young generation to be unemployed (as in Spain).

    The austerity will be quietly rolled back I think or the social disorder will rule.

  3. Adam, censored again! Where is the post you replied too? What did it say? I have been censored more at this site than just about anywhere else, why does warren and his people have a problem with free speech? I come into warren’s bowling alley to share ideas with other people while he is talking about “score” and some moderators slaps my mouth off πŸ™ Obviously talking about “score” is being trumped by having to control the memes of fellow earthlings πŸ™

    I thought the charts posted painted a pretty good picture of how pathetic this jobless recovery has been. Adam Right now in oakland there are thousands of homeless and poor, and empty buildings and housing all over the place, people have had enough! Captitalism has failed a lot of these people locally. They are just moving into the buildings and putting down a towel or sleeping bag, would the founding fathers would be proud of this organized resistance? A lot of these people are old, or sick, or shot out from drug use/abuse. On average, even if you give them a “stargate atlantis” city, I don’t see how they do anything but wreck it over the long term, but those kinds of memes start taking you quickly down the grandma millie path of EVIL. I am asking the business leaders here why they aren’t importing more vibrant youth from china and africa who will “occupy” these buildings and houses without being old, sick, or drug abusers and will help build stargate atlantis cities. Where do we send the non productive citizens? There was a patrick mcgoohan series – “The Prisoner”, or we could send them to australia like england of old, but my vote is to send them down there to the Virgin Islands and Carribean with all the other drunken pirates and scalawags! πŸ˜‰ Warren thinks he got a problem with the oil jobs going away, wait till we send some of these occupy USVI people his way!

    1. @Save America,

      You did not read my post thoroughly enough because I agreed with your observations. I may reach different conclusions, am I allowed to do so?

      I lived in a country where official unemployment rate was 20%. Did the unemployed try to fight back? Very few. People have been brainwashed enough in America, too. They won’t revolt because their minds have been dissolved in Facebook (market valuation $100bln), their attention span is 5 seconds and if things are really bad, the Big Brother can run a script which will do all the required data mining and instantly discover any potential leaders.

      Do you want me to give you the name one of the many guys who writes software for analysing data from the social networks? He is an old professor of IT and I met him a few months ago. It is obviously all “for advertising purposes”. The way this stuff works is very simple – they look at the topology of the links between people. Similar to the “back rub” Google algorithm. Then you can look at what these people have searched for and which sites they have visited. Combine this with the tracking info. All for the “advertising purposes” and nothing violates the Data Protection Act or whatever.

      If these people in the US really revolt they will be either imprisoned or shot. But the ruling class will not allow for that to happen, they will intervene when they see that too many people have been pushed to the edge. This is my bet. The process of rolling back the austerity has already started in Europe.

      But it all very confusing as there are several processes going in the opposite directions which may net out to near zero. A decade or two of stagnation and degeneration is my bet and your country may slowly evolve into a kind of enlarged Mexico but the GDP may keep growing at a slow pace. Or they will “fix it” with another war.

      There is nothing to save I am afraid if you don’t like the country just leave it like I did.

    2. @Save America,

      The frosts have just started but already seven people froze to death in Poland. If less than a hundred homeless die, it will be a lucky winter. You say people have had enough in Oakland. I disagree, the new “normalcy” is what you have in Poland.,114883,11052617,Kolejna_mrozna_noc___Nie_przechodzcie_obojetnie_obok.html&usg=ALkJrhhSt3SsA9nzxxxcRtqoe6yKRPbM7w

      1. the problem is the entire world has no effective response to unemployment.
        in fact, they all think budget deficits are too large when ironically they are too small.
        i’ve called it a deadly innocent fraud

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