The true US GDP is 30% lower than official figures


- Excerpt GEAB N°47 (September 16, 2010) -



The United States’ entry into the austerity phase actually started at least two years ago. In fact, the crisis and its consequences in terms of a collapse in earnings and capital, as well as the drastic restriction of consumer credit, are only one step in the process of the impoverishment of the US middle classes which started nearly thirty years ago. Throughout the whole of this period, the frenzy of easy credit had the aim of hiding this impoverishment by compensating for a shortage of income with unlimited debt. The crisis having brought an abrupt end to this process, Washington (Government, Congress and the Fed together) has tried to make up for its disappearance by gigantic public debt. But, as we see on a daily basis, looking at the country’s economic and social development, this attempt has failed for the reasons discussed earlier in this issue of the GEAB. However, this attempt has a direct impact on US GDP that most economists and experts refuse to acknowledge because they would be a shock of such violence for global economic and financial stability that the so-called « Greek crisis » would look like a simple training exercise. If the Greek authorities’ lie over the amount of the country’s debt and thus the debt/ GDP ratio was able to generate worldwide panic, imagine for one second the discovery that the GDP of the United States is actually 30% lower than the official figures and, therefore, the ratio of public debt/ US GDP in 2009 was 113% and not 83% (1) will cause (because for our team it is a reality that will become obvious during 2011). The difference is simply due to the fact that between 2007 and 2009, the United States took on board more than 4 trillion USD of extra debt for an increase of only just over 200 billion USD in three years (2).

Net purchases of debt and US GSE securities and GSE (2007 - 2009) - Source: US Federal Reserve / Criseusa, 08/2010
Net purchases of debt and US GSE securities and GSE (2007 - 2009) - Source: US Federal Reserve / Criseusa, 08/2010
But make no mistake! This huge additional public debt is only an attempt to substitute to a « missing » GDP due to the crisis and the end of consumer debt. One could also defend the idea that that this 30% has been nothing more than a fiction of GDP for at least one or two decades. But our problem is not what happened twenty years ago, but what will happen in the future. And the entry into the austerity phase of the systemic crisis introduces a fundamentally new factor, which is that it creates a general context which favours the unveiling of this reality: that US GDP is nothing more than a shadow of its former self (3) and the figure used in economic and financial statistics is highly overvalued. With such an overvaluation, then almost all indicators are, to a large extent, false. The rate of the country's indebtedness, its share of the global economy, monetary ratios, the value of the Dollar (which is based on the size of the US economy) ... all these figures are largely incorrect. This may also explain (as for the « inflation / deflation » debate) why the economic and monetary policies implemented in the United States failed so miserably. Without any grassroots knowledge, no strategy can lead to success and, in this case, the view given by the map (indicators) is increasingly distorted (4).

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Notes:

(1) In this context, it is not surprising that the global demand for gold continues to grow very rapidly, i.e. 36% in the second half of 2010. Source: MarketWatch, 08/25/2010

(2) Source: US Government spendings

(3) Another telling example: transactions in commercial real estate have plummeted 90% between 2007 and 2009 from 522 to 52 billion USD. Source: MyBudget360, 08/02/2010

(4) To get an idea of what the famous "double-dip" in progress may look like, it is interesting to read this article by Douglas McIntye in 24/7WallSt of 08/13/2010

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GEAB N°90 - Contents

- Published on December 15, 2014 -

Global systemic crisis 2015 – Oil, currencies, finance, societies, the Middle East : Massive storm in the Western port!

. « Global systemic crisis: the end of the West we have known since 1945 »
. The oil crisis is systemic because it is linked to the end of the all-oil era
. The US in one hell of a state
. Europe post-Ukraine: lots of questions
. Three missions for the new Europe: resolve the Ukrainian crisis, put Euro-Russian relations back on the right path, avoid a European QE
. Middle East: traditional alliances’ big waltz
. Saudi Arabia, Iran: the allies change sides
. And Western « values » in all this
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2015 – new phase of the crisis: the oil systemic crisis

. The impact of speculation
. Price War
. Systemic oil crisis and finance
. Systemic oil crisis and geopolitics
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Investments, trends and recommendations

. Oil: beware!
. Energy intensive industries like airline companies
. Renewable energy: the good and the bad
. 2015: Euro & Yen rebound
. Gold: still safe
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Evaluation of our anticipations for 2014
(from GEAB N° 81 in January 2014): a 69% success rate
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