70% Of The Q3 GDP Growth Was Cash For Clunkers

[girl gone mad]

70% Of The Q3 GDP Growth Was Cash For Clunkers
http://www.businessinsider.com/70-of-the-gdp-growth-was-cash-for-clunkers-2009-12">The Business Insider

Today's downward revision is far worse than it first appears. While third quarter GDP was revised down by a 0.6% (2.2% vs. 2.8% previously), the contribution from motor vehicle output (which was massively stimulated by Cash for Clunkers in a one-off fashion) remains enormous.

BEA GDP Release: Motor vehicle output added 1.45 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change.

What this means is that Cash for Clunkers was an even larger factor than previously understood. As it stands, by a basic calculation without motor vehicle output, third quarter GDP would have been only 0.75%. That's barely growing.



Now obviously there might have been some degree of GDP contribution from motor vehicle output even if Cash for Clunkers hadn't happened. Yet it would have been far less than 1.45%, look at Q2's contribution noted above, it was only 0.2%.

Also, the contribution could have actually been negative (subtracting from GDP growth) if motor vehicle output had contracted without stimulus. (Which isn't a wild scenario given the state of things for U.S. autos). And actually, in Q3 of 2008, the same year-ago period, motor vehicle output subtracted 0.15% from GDP growth according to the BEA. This means we could even be underestimating the boost from Cash for Clunkers here...

[ixion]

1. we have been on economic life support since 2008

that's the only thing that is holding us in "the normal" range.

Once life support is removed, watch the patient flat line.

[dixiegrrrrl]

7. There are those who believe we have been in trouble since 2000.

That the dot.com bubble was replaced by the housing bubble, and essentially without those bubbles, the
broken economy would have been obvious long ago.
Keeping in mind that most of the housing bubble was based on buyers having little money invested and then using their homes at ATM machines to maintain income levels.

[ixion]

8. yeah, I think there's a valid argument there

and in fact, I think you could say we've been in peril since the junk-bond days of the 80's. That's when the market started rising out-of-sync with what was going on in the economy.

[dixiegrrrrl]

9. I agree.

[Craftsman]

2. I bought a ford ranger on C4C

But I would've bought anyway, my old Heep (spelling intentional)Cherokee died.

[Gman]

3. CFC put a lot of money into a lot of working people's pockets

and from there into the economy. CFC was a very good, and quick thing when something was direly needed.

[CoffeeCat]

5. i agree that CFC was a good program...

...and that it helped the economy.

The question is...what fuels growth now?

What holds up this house of cards, now?

Without artificial stimulation, it appears that our economy is now growing and doing well. CFC may be
able to prop up the numbers for a while--but it seems likely that (barring other significant stimulus)
we're going to see the economy really take a dive.

[girl gone mad]

6. Yes, it was good while in effect..

but there are two main concerns with this type of program. First, it pulls demand forward, meaning we're robbing sales from future months and years for a short term economic boost. Second, if the program doesn't have a lasting positive impact on private sector spending, the economy becomes unstable once the government stimulus is removed, and we could dip back into recession.

[Gman]

11. Yes, CFC pulled demand forward

but I don't see where it matters as demand is demand where ever it occurs. And demand was artificially stimulated when there was nothing apparent behind CFC to keep the demand going hence the potential for economic backsliding. But, OTOH, it still pumped money into the economy and should create demand for other things as people had more money/where assured of having future cash flow (i.e. a job) for a while longer. So I think it was more or less a situation of "six of one, half dozen of the other" type situation for pulling the demand forward. Am I wrong?

The only real thing that is going to keep demand going is for banks to start lending again. Not at the madness pace they did previously, but they have to lower their standards from needing a 1,000,000+ credit score to get anything to more of a level that will allow money to start flowing into and through the economy again

[TheWatcher]

12. It accomplished what it was supposed to.

It kept the House Of Cards afloat for another quarter, and it pacified the Public into thinking something was being done.

It won't have a long lasting effect on private sector spending, and TPTB could care less.

As long as their boat does not sink, they don't care.

They merely have to keep the Rabble pacified, to prevent a revolt or uprising, and do what it takes to protect their own assets and interests.

And yes, I'm a "kook", it doesn't exist, it's all a conspiracy theory, and the TV tells the Truth, I understand.

But it's the way things are.

Until WE decide we have had enough, that's the way they will stay.

And Round 2 of The Recession is coming.

Or should I say the continuation of Round 1, since there is no Recovery to begin with, only the illusion of one built on gimmicks, programs, propaganda, Monetization, and Bubble re-flation.

Whether anyone wants to open their eyes and admit that the Criminals that CAUSED this are still in control of the system, and NOTHING is being done to actually change things does not matter.

The Shell game continues, and the Joke is on us.

[CoffeeCat]

4. It won't be long now...

...before this entire thing collapses.

Without propping up, our economy is just going to slide downhill again.

Cash for clunkers is long gone. I suppose the holiday season is propping things up, to
some degree.

I am guessing that fairly soon--the truth about the rotting foundation of this economy
will be impossible to hide and impossible to cover up with "look a green shoot!" bullshit.

Hold on to your hats...

[Indenturedebtor]

10. Without a fundamental restructuring our Economy will crash and hard

and there will be no restructuring without a hard crash.

Too much money for too long has been siphoned from the people who actually do the work in this country.

My only hope is that we will also have a political "re-boot" when the crash comes.