Uh-oh, the Economic Crap Hits the Fan

You may wonder about that saying, but it should be obvious what happens when the shit hits the fan–it sprays all over everyone.  And today’s economic news certainly fits that description.  Reported economic growth was far lower than anticipated, only 1.6% versus 2.5% average expectations.  Even worse, the deflator number–a measure of inflation, was much higher than expected, indicating that stagflation is here or certainly on its way.  The markets, which are grotesquely overvalued, reacted as you might expect–down about 650 points, and US debt yields are up.  No rate cuts are likely no matter what the economy looks like as long as inflation remains high.  And I repeat for the 100th time, the Federal Reserve no longer controls yields on US debt–supply and demand factors do, and the supply is overwhelming demand.  You can find all the economic news at www.bea.gov.

Finally, we also got a report on productivity today and it also wasn’t pretty.  Productivity is the key to real economic growth, we have to get more output for every unit of input.  But for most industry segments, productivity declined in 2023.  (BEA Report)    From a selfish political perspective, this is playing out both as I thought it might and as will most hurt the whackos currently running our federal government.  It looks like inflation and rates will stay high and the economy weak just as we are hitting the summer and fall.  Since the whackos have caused the mess, it is quite just that they have to live with the consequences.  But I feel for the American public, particularly low income persons, as they by far bear the brunt of this economic mismanagement and have endured a decline in living standards.