Dr. Paul Craig Roberts: Hiding Economic Depression With Spin!

• Hiding Economic Depression With Spin! 
  by Paul Craig Roberts, http://www.paulcraigroberts.org/ 
  Time is running out for the US economy and the American people.  The financial press and economic commentators, with few exceptions, do a good job of keeping this fact from the public.
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  Consider for example the spin put on the “advance estimate” of the real GDP growth rate for the second quarter announced on July 31. The annual rate of 1.7 percent real GDP growth for the second quarter of 2013 was presented optimistically as an acceleration in real GDP from the first quarter’s 1.1 percent growth rate.  However, the reason for the “acceleration” in growth is that the first quarter’s estimate was revised down from 1.8 percent to 1.1 percent. The second quarter GDP growth rate is also subject to revised estimates.  Most likely, the final number will be lower.
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  Consider also that the reason that real GDP is positive is that nominal GDP is deflated with an understated measure of inflation. The measure of inflation has been manipulated in order to deny Social Security recipients cost of living adjustments. Statistician John Williams (shadowstats.com) reports that if deflated by previous official methodology, GDP growth has been negative since the downturn in 2007.  In other words, the “recovery” is just another government hoax.
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  Another failure of the financial press and economic commentators is the interpretation of the Federal Reserve’s policy of Quantitative Easing. The Fed is said to be keeping interest rates low in order to stimulate business investment and the housing market.  This explanation is nothing but cover for the real purpose of QE, which is to drive up and keep high the debt related derivatives on the books of the banks too big too fail. Low interest rates pull up the prices of all debt instruments, and the higher prices raise the values on the banks’ balance sheets, making the banks look more solvent or less insolvent.
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  The Fed has continued QE for years, despite the policy’s failure to revive the economy, in order to hold the banks’ collapse at bay in the hopes that the banks would succeed in boosting their earnings sufficiently to get out of trouble.
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  The Fed’s QE policy has been costly for important areas of the economy.  Retirees have been denied interest income.  This has reduced consumer expenditures and, thereby, GDP growth, and it has forced retirees to draw down their savings in order to pay their bills.
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  The Fed’s QE policy has also jeopardized the US dollar because of the several-fold increase in the number of dollars over the last few years.  In order to support bond prices, the Fed has created 1,000 billion new dollars annually over the last several years. The supply of dollars has out grown the demand for dollars, putting the dollar’s exchange value under pressure.  To protect the dollar from QE, the Fed and its dependent bullion banks have engaged in ruthless shorting of gold in order to suppress the price of gold.  The rapidly rising gold price indicated falling confidence in the dollar, and the Fed feared that this lack of confidence would spread into the currency markets.
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  By printing dollars to support the banks, the Fed has created a bond market bubble, a stock market bubble, and a dollar bubble. If the Fed stops printing money, not only will the banks’ balance sheets take a hit, but so will the bond, stock, and real estate markets.  Wealth would be wiped out. No one could any longer pretend that there is an economic recovery.
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