Economy Contracting At 8% Then 10% And Then It All Goes To Hell

The US economy is contracting at 8% a year if you believe the estimates from Goldman Sachs and Dr John Williams at Shadow Stats. Goldman estimated the US economy is grew at 1% in the last quarter of 2012 but Williams said the real inflation rate was 9.6%. That puts the real GDP shrinking at 8.6% after you subtract out inflation. I truncated that to 8% and freely admit the real contraction rate could only be 6%.

J P Morgan has already evaluated the tax increases from the Fiscal Cliff deal made on New Years Day. It will depress the GDP by an additional 1%. Mario Monti, former Goldman Sachs VP, was appointed Prime Minister of Italy and levied an additional tax on property. He managed to cut Italian Christmas retail sales 12% from last year’s already depressed levels. Taxes on the wealthy in the US are going up but withholding taxes will go up 2% a week for those who still have jobs. That raises the rate of our contracting economy to 9% but we still have to discuss Obamacare.

Michael Snyder estimated that Obamacare will put a trillion dollar drag on the economy. Millions of workers will be working fewer hours so their employers can avoid paying for health insurance. Others have already been fired because the additional cost would have bankrupted their former places of work. I estimate that Obamacare that this will contract the economy by another 1% by March for a total of 10% before taxes are due on April 15th.

This might be a good time to discuss the Gross Domestic Product, inflation and other government definitions. The government inflation and unemployment rates are about a third of the real numbers we would arrive at if we used the definitions Ronald Reagan inherited from Jimmy Carter in 1980. In 1980 if someone was cut from 40 to 25 hours at work, he would be considered unemployed but not today. Also wages are lower now than in 1980 so the word job does not mean the same thing that it did then. 1 in 4 workers in America works at or below the adult minimum wage in Great Britain. The minimum wage today is $7.25 an hour here and was $1.25 when Kennedy was President. But those quarters were 90% silver. $1.25 in silver quarters weighs one ounce which would be worth $30 if you sold it online.

I heard a chemist say that he bought a blender 40 years ago which broke and he replaced two years ago. It lasted two years and had to be replaced recently. His comment was that the old blender was a darn sight cheaper than anything available today because of planned obsolescence. Another criticism is illustrated by an American who was injured while in Switzerland and paid less than $200 to a doctor at a clinic there which he said would have cost ten times that back in America. What would happen to America’s GDP if we devalued what America spends on healthcare by what it would really be worth if we had access to medicine in Europe or Asia where treatments are far cheaper? In the last 10 years U.S. spending on healthcare doubled from $1.3 trillion to $2.7 trillion a year. It is expected to reach $4.6 trillion in 2020, at which point per-capita spending on healthcare will exceed $13,000 a year. US GDP is running about 15 trillion dollars but is it fair to compare that to what happens in other countries? Under Obamacare insurance premiums are slated to go up 20% in 2013. Millions of people will be forced to  buy health insurance. Does that mean our real GDP is actually increasing?

So how do we quantify this change in GDP due to the new health insurance laws? People will be spending 20% more on health insurance at a time when their after tax incomes are declining. A lot of businesses will have to close their doors in 2013 because their customers just do not have any money to spend. Yet the politicians will be back in February and March trying to figure out how to cut our benefits and raise our taxes. They never did bother to pass that bill to give relief to Hurricane Sandy victims. They did avoid cuts to military spending and those mandatory cuts will have to be dodged again when we have another vote to raise the US Treasury debt limit of 16.394 trillion dollars. Secretary Geithner says some of those bonds are not subject to the debt ceiling limit so the Congress has a little time to delay in its decision making. This might be a good time to repeat my prediction that the US Treasury deficit for calendar year 2013 will pass 2 trillion dollars.

As I said my best guess is that the US economy will be contracting 10% a year in March when the Congress has to vote again on more tax increases but that will be two months after our take home pay was cut. The voters are going to be really angry next time. These are the same Americans who bought ten million rifles in the ten days after Obama called for a gun ban in the wake of the Newtown shooting. This is the country whose citizens own 700,000 slide fire stocks that permit them to fire more than 700 bullets a minute from their AR-15s and AK-47s. This is not Spain where the police last year beat women in the face with clubs at Occupy Wall Street rallies  and this year chased peaceful protesters into the subways of Madrid so they could beat them. That European level of tax increases and Austerity cuts combined with police brutality will not happen in America. Americans are not as well behaved as Europeans and we have 300 million guns. The Second Amendment is there so we can say No.

The decline in revenues will force state and local governments to lay off civil service workers and raise taxes again in 2013. They already laid off 500,000 civil servants in the last round of cuts after the 2008 financial crisis. Another round of state and local cuts will be coming our way this summer. I have predicted that more than 1,000 cities, counties, school districts and other local agencies will be defaulting on their bonds this year. Though most of these will be due to several severe natural disasters I have been predicting. This will crash the bond market.

I have often quoted Dr Steve Keen who has said we have the greatest level of debt in 500 years so we will have  the greatest Depression in 500 years if we do not cancel the Unpayable Debts. I have also been predicting Hyperinflation and the crash of the dollar in 2013. There will be a cascade of nations dumping dollars as they see America rapidly deteriorate. Most US dollars are overseas so when they are repatriated prices will double overnight which when combined with higher taxes and health care costs will set 280 million Americans at or near the poverty line.

And that will be when hell is released on earth.

Notes: Want a good reason to cut defense spending? Read this.

Barbara Honegger And  The Pentagon Attack Papers in 2 Minutes

Want to explain to friends why Austerity never worked in Europe? Read this.

The Mathematics Of Austerity: Proving Austerity Never Was Even Intended To Work

This next  article explains why fractional reserve banking must be abolished.

IMF Economists: ‘We Were Wrong.’ Will Someone Please Tell The Press And The Politicians.

I think the following is the most feasible means of seizing the tens of trillions of dollars stolen from us by the bankers:

Memo To Pentagon: Compare The Invasion Of Lichtenstein And The Cayman Islands To War With Iran And Syria

About horse237

I have decided to share two of the visions I had as a child. When I was eight, I had a vision of a future war that killed 99.5% of the world's population. When I was 16 and living in the projects, I had a vision of my future. I was to live in complete obscurity until it came time to stop WW III. When I was about ten, I had read a bio of Nikita Khrushchev which said he survived Stalin by playing the bumbling fool an old Russian peasant trick. I decided to do the same as I had already learned that we did not live in a democracy. The other vision I had when I was in third grade was of the Mind of God and how it interacted in the creation of the world we see. I believe you and I were born at this time precisely so we would have an opportunity to stop this war. As for my personal info, I grew up on military bases and in housing projects. My legs atrophied from starvation as a child. My second step-father died in prison. I used to have to rub my skin to simulate human contact. They did not feed me when I was a child. I do not fight in their wars as an adult.
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9 Responses to Economy Contracting At 8% Then 10% And Then It All Goes To Hell

  1. Just in T says:

    A political impasse has been reached on the second amendment issue. The people, no longer trust their government and many believe that the government will become openly hostile to them. The gun buying spree is recognition by the American people that Sandy Hook was a false flag/corrupt media event which is being used to take guns away and abrogate the second amendment. The government, for its part, is deciding to weigh taking guns away from the American people and abrogating the second amendment, principally because there is now such huge fear in Washington, on Wall Street and at the upper levels of the business community (corporations) about the impending economic collapse and the finger pointing (at them) which will inevitably occur once the SHTF.
    Thus, the analysis must start with the death spiral which is occurring politically as the government and Wall Street/corporations have been caught in increasing historical criminality and are now absolutely petrified that justice will be meted out to them as the economy collapses. So they try to front run their peril by trying to abrogate the second amendment. Bloomberg, himself an alleged Wall Street and 911 coverup criminal, among others, is the front man for this approach. The people, in response, act in conformity with the view that it is their government and its criminality that they are to fear and thus, must make a stand to bear arms in self-defense against this economic death spiral and an increasingly aggressive government committing unlawful acts- in many instances in complete contravention of the plain reading of the constitution and/or the bill of rights.
    There is no political answer for this as this pot increasingly boils, inasmuch as the government gets increasingly aggressive out of fear for its own survival and the people get increasingly fearful (and potentially aggressive) of their government which acts increasingly irrationally. Thus, we have created politically, a combination of a Mexican standoff where each side views any action taken by the other side as exacerbating an existential crisis for them.
    The government might act out of decency and common sense by simply leaving people alone, but their inherently flawed instinct is to continue to stir the pot when precisely the opposite would work much more appropriately.
    Energy absorbs on each side potentially awaiting a violent exotherm.
    Stepping back is the only way forward without the release of historical levels of entropy, but then that would mean serious prosecutions for people who wish not to give up power.
    One suggests we all take a deep breath.
    Truth commissions and serious prosecutions/clawback of assets is one way forward.

  2. usurykills says:

    In April 2009 the national debt was about $11 trillion. By April 2012 it was nearly $16 trillion.

    That’s a rate of about 12% increase per year and the rate appears to be increasing. The question is,”How much national debt is too much?” Are we there yet? I think $27 trillion, I don’t know why.

    I made a little spreadsheet. We have until the end of Obama’s term at 12%. The fiscal cliff “deal” purportedly adds another $4 trillion over ten years. That’s more like a 17% rate.: Oct ’15.

    The next debt ceiling number should be about $18 trillion this April (and growing.) Where does it end? The rate is accelerating…

  3. Anon says:

    The Central Banker orchestrated economic collapse currently unfolding, is the reason why the Obama Administration is ramping up it’s push for “gun control”. They know they’ll have to disarm the public, in order to bring about the radical impoverishment, and enslavement, they’ve already planned for the American people.

  4. Anon says:


    An Open Letter to Members of Congress…


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  8. Pingback: The Contracting Economy

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