The above link is a Reuters report on the advance reading (the first pass) of Gross Domestic Product (GDP) for the first quarter of 2008. But GDP is a lousy gauge of how well the economy’s doing because it doesn’t take into account inflation or population growth. A much better measure is per capita chained GDP – which is GDP adjusted for both inflation and population growth. As I reported in January, fourh quarter 2007 data for per capita chained GDP already placed us into recession:
If you can believe the Commerce Department’s report (which I believe is highly suspect), GDP held at the same rate as the fourth quarter, as did the rate of inflation. (That is difficult to believe, isn’t it? Watch for downward revisions in the coming weeks.) With inflation running at an annual rate of 2.6% (supposedly) and population growth running at 1% per year (thanks to immigration), this 0.6% increase in GDP means that each American’s share of the economy has declined by another 3.0%.
Folks, this is not a normal business cycle recession. It’s not a temporary blip caused by the economy accelerating ahead of itself, waiting for other factors to catch up. This is the culmination of decades of economic policy that consisted of nothing more than creating new rugs under which the filth of our exploding trade deficit could be swept. The government is running out of yarn for weaving new rugs. The mortgage meltdown has exposed the mess to the world and relegated America’s credit rating to junk status. Our foreign creditors have cut us off and left us to face the truth – we’re bankrupt. We’ve sold off a significant fraction of our national net worth to finance the trade deficit and, with the shrinking dollar eroding what’s left even faster, we’re rapidly approaching the day when there will be nothing left – when foreigners own us lock, stock and barrel. There’ll be nothing left to finance the trade deficit and, when that day comes, watch out! The recession will explode into a full-blown depression. Will it come to that? Maybe not – at least not right away. The government and the Fed has their spinning wheels running full tilt in a desperate effort to produce more yarn for another shabby rug.