By Graham Summers, MBA
Great news… the economy recovered in Q3!
According to the Bureau of Economic Analysis (BEA), the U.S. economy grew at an annual rate of 2.6% in 3Q22. So all of our concerns about a recession were misguided! The economy is back on track!
There’s only one problem with this narrative: the BEA “massaged” the data to make things look better than reality.
As Bill King notes in the King Report, the BEA used an inflation rate of 4.1% to manufacture the GDP growth of 2.6%.
Yes, you read that correctly. The BEA claims inflation was 4.1% in 3Q22.
It’s an odd claim, given that the BEA used an inflation rate of over 9% during 2Q22. So the BEA is claiming that inflation was cut in half between June and October?
Good luck with that!
It’s not like we don’t have other data to compare to. Heck, even the Consumer Price Index (CPI), which most people know understates inflation, had inflation around 8% for most of 3Q22.
Why would the BEA claim inflation was so much lower than reality?
Because UNDER-stating inflation allowed them to OVER-state growth.
Let’s say that GDP grows by 10% in a given quarter. On the surface that sounds pretty fantastic. But what if inflation was at 10% during that same quarter? Well then in real terms, there was ZERO growth: all of the “growth” was in fact the product of prices rising courtesy of inflation.
Put another way, by using the ridiculously low inflation rate of 4.1%, the BEA was able to manufacture GDP growth 2.6% for 3Q22. Had the BEA used a more realistic measure of inflation, GDP growth would have been ZERO if not negative.
And we can’t have that a mere two weeks before the mid-terms can we?
The reality is that the economy is already in recession. I know it. You know it. Heck, the bond market just told all of us when the yield curve inverted… just as it did in 2007, late 2019 and today.
By the time the official numbers admit this, stocks will have already collapsed to new lows. In the meantime, those investors who are buying into the BEA’s ridiculous growth claims are being lead like sheep to the slaughter.
Meanwhile, smart investors are taking advantage of this to prepare for the coming crash.
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