The Contracting Economy

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.

Micheal 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…

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