Just as a New York Times columnist attempted to spew propaganda last week by blaming the ‘dumbing down’ of the American people for the reason behind the lack of trust in their newspaper and mainstream media as a whole, those in the business media quite often do the same by vilifying economists and analysts who do not toe the line in saying that the economy is good, or that the Fed is all-knowing and all-powerful in determining what is needed to keep the financial systems functioning.
But like the dawn of awakening that is occurring in nearly every facet of society by the Joe Six Pack’s of the world, the rhetoric meant to protect those in power from the folly of their bad decisions is quickly coming to an end. And for the Fed and media’s long running theme of ‘economy recovery’, this means that like in 2008, when it comes crashing down it will destroy the last shred of their credibility forever.
The primary leg that has held up America’s economic chair over the past 20 years has been the consumer, and their willingness to spend in both good times and in bad, and even to incur debt at levels that would put themselves at risk of bankruptcy. But according to well respected economic analyst Albert Edwards on Sept. 2, this is about to end, and end very badly for the U.S. economy.
The American economy may soon plunge into recession, as consumer strength is showing signs of weakening, says Societe Generale strategist Albert Edwards. Consumption makes up 70 percent of the US gross domestic product.
However, this support is “about to be kicked away,” the analyst said.
“The only thing keeping the US out of recession is the US consumer. It is difficult to say consumption is driving the economy forward; rather it is like a wood, worm-ridden crutch creaking under the strain of holding up a dead weight economy. This recovery, the fourth longest in history, is surely nearing its end,” Edwards wrote, quoted by Business Insider.
According him, the current trend resembles 2007, when robust consumption tempered economic contraction in the first quarter, but by November the economy fell into recession.
Growing inflation and higher prices will make consumers more cautious about their purchases, Edwards said.
“One key and imminent risk for the consumer is a rapid pick-up in headline CPI inflation as the weak oil price of H2 last year starts to drop out of the yoy calculations. Headline CPI inflation is set to rise rapidly from the one percent where it has hovered for the past six months and to converge with core CPI, standing at 2.25 percent. That will sap some 1.25 percent from real personal disposable income growth, which will decelerate rapidly, removing the key prop for recent moderate robust consumption growth,” he said. – Russia Today
Rents, price inflation, skyrocketing health care costs which don’t yet include the expected hikes in premiums coming in a few months from Obamacare, and education are just a few of the areas that the economy desperately relies upon consumers to keep spending on, no matter how high their prices rise thanks to years of ZIRP and increases to the money supply. And as reported in direct main street sales for products and services like dining out and auto sales, severe declines in each since March not only signal that the economy has slowed, but also that the consumer is pretty much tapped out.
The Federal Reserve loves to shout from the rafters that they are not a political entity, but the sad fact is that they are quite often more political than even the government itself. And as they often lie, manipulate, use un-discernible language when speaking to both Congress and the public about their policies and the true state of the economy, similar to today’s mainstream media, they and their lackeys in the arena of business news will not report the truth until it is already too late, and where they are left with having to create a crisis that will end with them demanding that the taxpayer or consumer bail them out once again from their failures.
Kenneth Schortgen Jr is a writer for Secretsofthefed.com, Examiner.com,Roguemoney.net, and To the Death Media, and hosts the popular web blog, The Daily Economist. Ken can also be heard Wednesday afternoons giving an weekly economic report on the Angel Clark radio show.