By John Galt
May 26, 2011
All you need to know why this report from the Bureau of Economic Analysis is indicating the economy is at stalling speed:
- 2nd revision was the same as the advanced report at 1.8% despite a consensus of 2.2% and some estimates it would be revised as high as 2.5% or more.
- Core PCE was 1.4% revised down from 1.5% indicating fading demand in the face of inflation for consumer necessities.
- Current-production cash flow (net cash flow with inventory valuation adjustment) decreased $11 billion in Q1 after the second revision indicating not just a decline in internal funds available for corporations to invest but that the Producer Price Index increases indicated over the last seven months has diminished corporate margins significantly.
- Financial companies are finally starting to see the QE fade as the hide the turd under in the shell game is running out and losses are finally impacting cash flow. Profits at financial corporations were down $70.6 billion in Q1 versus Q4 after the revision.
This could become a seriously ugly situation if the Fed elects to fight inflation while the consumer economy and financial system is at risk, thus making the June 22nd meeting one of the most important in recent history. The graph comparing nominal GDP in current dollars versus 1962 and 1982-84 dollars is fascinating as you can really begin to see the impact of the fiat currency inflation on the dollar when converted to the older dollar valuations: