Salient to Investors:

David Stockman writes:

The global economy is in deflation and the US economy is stalling and within months will be in recession and the market in panic. The Fed cannot prevent the US economy from sliding into the global slump. Since 2000, the Fed has twice before pushed on a string with the economy while inflating the Wall Street casino, with bad results.

The Commerce Department’s GDP deflator showing 0.9% inflation during the last 12 months understates true inflation.

Nominal GDP is the single most important macro variable in a debt-driven economy. Nominal GDP growth is down to 2.9% and headed towards zero – it has been decelerating since Q2 2012 – which last occurred in the 1930s.  During the 1990s recovery, nominal GDP grew at a 5.6% annual rate, during the Greenspan housing/credit boom after 2001 it grew at 5.3%, and since the pre-crisis peak it has gown at only 3.0%, even less since June 2009. Despite this, the Federal budget assumes 5.2% per year growth for the next 10 years.

If the GDP growth trend continues, federal tax collections will drop far below current projections and cause budget deficits and the national debt to soar.

Q3 2015 business plant and equipment spending rose just 0.6% from a year ago, while Q3 goods exports are down 7.8% from a year ago, due to the ending of China’s infrastructure building spree, and Q3 services exports have slowed to a 3.9% annual rate. Global deflation inherently means a strong dollar so service exports will start falling soon.

Nominal Federal consumption and investment spending is down to near Q2 2009 levels, removing another prop under the post recession recovery.

Business sales are rolling over, while the inventory correction has just started – the inventory to sales ratio is at October 2008 highs.  Auto sales have peaked due to the exhaustion of subprime customers.

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