Thursday, December 23, 2010
By Michael Pento
The Commerce Department reported today that the U.S. savings rate dropped to 5.3% as incomes did not keep pace with spending. Personal income increased $42.3 billion, or 0.3%, while personal consumption expenditures increased $43.3 billion, or 0.4%.
Orders for durable goods fell 1.3% in November and are a sign that the so called economic “recovery” is not only anemic but completely derived by artificial means. More borrowing, increased debt and massive money printing isn’t getting the job done at all. Instead, the repercussions of not recognizing and addressing the real fundamental problems of the economy only guarantee that the situation is getting much worse.
However, the good folks at the Labor Department are doing their best to make things look better than they actually are. Initial jobless claims fell by three thousand to 420k. But that 420k number was exactly the same number they reported last week. Therefore, the Labor Department can “claim” initial claims are down by consistently revising up the prior week. This game is getting way too old and we are all over it! Layoffs are slowly decreasing so there isn’t any need for the BLS to always under report claims. But the important point here is that hiring is absent and the unemployment rate is rising.
The economy is limping along and that is before the excrement hits the fan. Once interest rates rise the real crisis begins. We are starting to see the evidence of that from yesterday’s Mortgage Applications. Applications fell 20%, which were the most in all of 2010. And that was just from a relatively small increase in rates. Just imagine what a normalized rate of 7% on a ten year note would do to not only the real estate market but the borrowing costs of the government. It's game over then. Vigilant Grandpa Link to Jobless Claims
Michael Pento, Senior Economist at Euro Pacific Capital is a well-established specialist in the “Austrian School” of economics. He is a regular guest on CNBC, Bloomberg, Fox Business, and other national media outlets and his market analysis can be read in most major financial publications, including the Wall Street Journal. Prior to joining Euro Pacific, Michael worked for a boutique investment advisory firm to create ETFs and UITs that were sold throughout Wall Street. Earlier in his career, he worked on the floor of the NYSE.