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 Forecasting America's Destiny ... and the World's


Generational Dynamics Web Log for 31-Jul-2010
31-Jul-10 News -- GDP figures show economy is slowing

Web Log - July, 2010

31-Jul-10 News -- GDP figures show economy is slowing

Israel bombs Hamas sites in Gaza

Disappointing GDP figures show that economy is slowing

On Friday, I actually heard someone on the BBC say, "America's fiscal engine might be running out of puff!" Those crazy Brits!

However, financial analysts and pundits, one after another, had exactly the same message. Thus, the Associated Press said, "The recovery lost momentum in the spring as growth slowed to a 2.4 percent pace, its most sluggish showing in nearly a year and too weak to drive down unemployment."

Two months ago, I wrote a report about an apparent worldwide decline in economies around the world, and that we appeared to be headed once again to a worldwide freeze in trade and transportation, just as happened at the end of 2008. (See "7-Jun-10 News -- Globally, May was a month of ominous events.")

Friday's GDP report confirms this trend. The May and June figures translated into an economy that was slower in Q2 than it was in Q1.

According to the Consumer Metrics Institute,

"The 2.4% figure will garner all of the headlines, but the more important "real final sales of domestic product" continues to be weak, growing at a reported 1.3% annualized rate. The real cause for concern is that the reported inventory adjustments dropped from a 2.64% component in the revised 1st quarter to a 1.05% component during the 2nd quarter. If factories have begun to realize that end user demand remains anemic, the inventory adjustments could well go negative soon, pulling the reported total GDP down with it."

In other words, the reason that the Q1 GDP figures were as high as they were was because manufacturers and distributors believed the Pollyannaish claims in Washington and on Wall Street, and they built up their inventories of new products, expecting a surge in consumer demand by Q2 or Q3.

But in Q2, "real final sales of domestic product" continued to be weak, with the result that growth of reported inventory adjustments continued to fall. This is all consistent with the overall trend that trade and transportation are falling.

Additional links

Israel's Air Force bombed several sites in Gaza on Saturday morning, targeting Hamas-linked sites. Jerusalem Post

Moody's Investors Services warns that the U.S. needs a credible plan to address its soaring debt, in order to maintain its AAA credit rating. Reuters

Harvard Professor Niall Ferguson agrees. Alarm bells should be ringing very loudly in Washington, as the US contemplaces a 2010 deficit of more than $1.47 trillion. There comes a moment when a complex system (like the American economy) "goes critical". A very small trigger can set off a phase transition from a benign equilibrium to a crisis. Australian

A subtle but significant shift is occurring within the Federal Reserve, as members become increasingly concerned that the US economy is heading for a deflationary spiral. This is what I've been predicting for several years, so I guess it's nice that even the Fed is starting to see it. NY Times

Credit card issuers have dreamed up new ways to trip up consumers and charge excessive fees and interest rates to pay for their million dollar bonuses. How to protect yourself. WSJ (Access)

Global AIDS activists are pining for former president George W. Bush, who was much more supportive than Obama in the fight against AIDS. The mood of activists is a "combination of rage and panic." The rage is particularly directed at President Obama, for reneging on commtments to support global AIDS spending. Washington Post

Once again, there are fears of a new civil war in Lebanon. Hizbollah leader Hassan Nasrallah is threatening violence because a new U.N. report is expected to implicate Hizbollah members in the killing of former prime minister Rafik Hariri in 2005. However, as I've written many times, a civil war in Lebanon at this time is impossible, since Lebanon is in a generational Awakening era. The National

In Pakistan, hundreds have been killed and hundreds of thousands have been driven from their homes by torrential rains and subsequent floods. Daily Times

In Kashmir, with hundreds of protesters filling the streets, four people were killed when police opened fire on protesters. Indian Express

China's dangerous arrogance is threatening freedom of the seas in the Pacific, especially the South China Sea. The Diplomat

China says that it held large scale military exercises in the South China sea, that coincided with the joint exercises in the Sea of Japan by the U.S. and S. Korea. VOA

A spike in Army suicides is being blamed on a "permissive" environment with inconsistent discipline. CNN

A furious Defense Secretary Robert M Gates announced that the FBI will assisting in finding the source of the Wikileaks documents. NY Times

The major ethnic clashes in Kygyzstan in March have not completely ended, as Uzbeks are still the targets of violence by ethnic Kyrgyz. As a result, tens of thousands of Uzbeks are emigrating to Russia. Global Post

300 camps for Roma people, also known as "Gypsies" or "travelling people," are going to be dismantled, and the residents deported back to their country of origin, usually Romania or Bulgaria. The policy was announced by French president Nicolas Sarkozy, and activists are calling it "racist." France24

Jackie Cobell, a 56 year old woman, took 28 hours and 4 minutes to swim the English channel, allowing her to set a world's record -- for the longest known time to complete the achievement. Telegraph

(Comments: For reader comments, questions and discussion, see the 31-Jul-10 News -- GDP figures show economy is slowing thread of the Generational Dynamics forum. Comments may be posted anonymously.) (31-Jul-2010) Permanent Link
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