Magic Growth Numbers From
By Paul Craig Roberts
December 28, 2014 "ICH"
- Everyone wants good news, so the
government makes it up. The latest fiction
is that US real GDP grew 4.6% in the second
quarter and 5% in the third.
Where did this growth come
Not from rising real
Not from rising consumer
Not from rising real
Not from the housing
Not from a trade surplus.
The growth came from a
Bureau of Economic Analysis survey of
consumer spending on services. The BEA found
that spending on Obamacare drove the US real
GDP growth to 5% in the third quarter.
In America, unlike in
other countries, a huge chunk of medical
spending goes to insurance company profits,
not to health care. Another big chunk goes
to paperwork, which has a variety of
purposes such as collecting personal
information on patients and combating fraud
(probably the paperwork costs more than
fraud). Another chunk goes for tests and
procedures in order to justify further
procedures. For example, if a doctor thinks
a patientís diagnosis requires a MRI, he
must often first order an x-ray to establish
that a cheaper procedure does not suffice.
If a cancerous skin growth needs to come
off, first a biopsy must be done to
establish that it is a cancer so that a
needless removal is not performed. And, of
course, medical practicians must order
unnecessary tests in order to protect
themselves from the liability of relying on
their medical judgment.
To regard any of these
expenses as economic growth is farfetched.
There are sampling and
other problems with the survey of personal
consumption, and apparently Obamacare
spending was all dumped into the third
quarter. Why the third quarter?
The answer is that the
illusion of economic recovery must be kept
Real GDP growth of 5% in
the third quarter is inconsistent with the
sharp fall in key industrial commodity
prices. It is not only oil (down 47%) but
iron ore prices (down 49%), natural gas
(down 30%), copper (down 15%). Pam and Russ
Martens show that the fall in the producer
price index for industrial commodities in
2014 is sharper than in 2008, the year of
With 30% of 30-year old Americans and almost
50% of 25-year olds living with parents,
with debt-based derivative instruments
impacted by falling oil and industrial
commodity prices, with the likelihood that
the US and EU economic attack on Russia will
fail and perhaps produce retaliatory
measures that could bring down the European
banking system, look for 2015 to be the year
that Washington will cease to get away with
its economic lies.
The financial media and
Wall Street economists by refusing to ask
obvious questions have left the American
people unprepared for another drop in their
living standards and ability to cope.
Dr. Paul Craig Roberts was
Assistant Secretary of the Treasury for
Economic Policy and associate editor of the
Wall Street Journal. He was columnist for
Business Week, Scripps Howard News Service,
and Creators Syndicate. He has had many
university appointments. His internet
columns have attracted a worldwide
following. Roberts' latest books are
The Failure of Laissez Faire Capitalism and
Economic Dissolution of the West and
How America Was Lost.