Based on the Non-Massaged Data, the US is Back in Recession

Beneath all of the bogus economic data, the US economy is tanking again.

One of the biggest games played by the bean counters in Washington in the US is the overstatement of GDP growth by understating inflation.

Consider this simple example. Let’s say that the US GDP grew by 10% last year. Now let’s say that inflation also grew by 10%. In this scenario, real inflation adjusted GDP growth was ZERO. However, announcing ZERO GDP growth is a major problem politically.

So what do the Feds do? They claim that inflation was just 8%, and BOOM you’ve got 2% GDP growth announced for a year in which real GDP growth was actually zero.

This game is played all the time via a metric called the GDP “deflator.” Technically what this is meant to do is remove the effects of inflation from the GDP growth numbers to show what real growth was.

However, what it actually ends up being is an accounting gimmick that allows the numbers to overstate GDP growth.

For this reason, when I look at the US economy’s growth I prefer to use its nominal GDP numbers. These numbers do not include a deflator metric. As such they’re much closer to showing the actual growth as opposed to the gimmicked “real GDP” numbers.

With that in mind, take a look at the chart below:

As you can see, the US economy is once again slowing down rapidly with a sub-4 reading. I’ve circled all of the other times the US economy has registered a reading like this in the last 40 years.

ALL of them were periods that were later identified as recessions.

So the Fed is once again facing a recession… at a time when it has already cut interest rates to zero and engaged in just about every monetary loosening imaginable. To top it off, inflation is already appearing due to the Fed’s previous actions.

There is a term for slow growth and high inflation: it’s stagflation. Sure it doesn’t show up in the official data. But then again, when was the last time reality did show up there?

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Best Regards

Phoenix Capital Research