Wednesday, May 2, 2012
More On The Ongoing Depression
Last summer I argued on Seeking Alpha that, after 4.5 quarters of tepid growth during the period Q2 2009 - Q2 2010, the economy plunged back into recession in Q3 2010 and remained there. As part of my argument, I pointed out that, if inflation were calculated the way it used to be (with food and energy prices included in the formula), the GDP deflator would be greater than GDP growth for most "post-recession" quarters, as defined by the National Bureau of Economic Research.
Consulting economist Walter J. "John" Williams of Shadow Government Statistics takes this concept one step further. Adding back food and energy prices to the GDP deflator from 2000-present, Mr. Williams concludes that the U.S. has been in near-continuous recession since the early 2000's tech crash. Using Mr. Williams's methodology, even nominal GDP gains during the "boom times" of 2002-2006 were nullified by rising food and energy costs.
So, if we've been in a near-continuous recession for more than a decade (i.e. a depression), why did the economy appear healthy during most of the Bush years? And why does there appear to be a small post-crisis recovery taking place?
The $7 trillion illusion of prosperity of 2002-2006 was put on the mortgage and the personal credit card...
... and the illusion of the post-crisis recovery has been made possible, in large part, by adding $5 trillion to the national debt.