April 01, 2013 at 11:02 AM EDT
U.S. GDP to Suddenly Turn Negative in First Quarter of 2013?

U.S. gross domestic product (GDP) increased by only 0.4% in the fourth quarter of 2012, according to the Bureau of Economic Analysis (BEA). While the mainstream may rejoice in this news, sadly, the increase in GDP was nowhere near the 2012 third-quarter GDP growth—it increased by 3.1% during that quarter. Recent GDP numbers show the U.S. economy is struggling.

The devil resides in the details:

• U.S. government spending and investment decreased by 14.8% in the fourth quarter, compared to an increase of 9.5% in the third quarter of 2012—it held the GDP of the U.S. economy higher in the third quarter.

• Businesses in the U.S. aren’t selling—they’re just piling up their inventories. In the fourth quarter of 2012, private sector inventories caused GDP to decline. Businesses added inventories of $13.3 billion in the fourth quarter.

• In the fourth quarter of 2012, real purchases of goods and services by U.S. residents (no matter where they were produced) were unchanged. In the third quarter, they increased by 2.6% in the U.S. economy. The latest statistics show consumers simply aren’t buying.

• Exports from the U.S. economy decreased by 2.8% in the fourth quarter, compared to an increase of 1.8% in the third quarter. If consumers in the U.S. economy aren’t buying, and businesses aren’t selling to other countries because the eurozone is so depressed, what happens to the profitability of U.S. companies?

In addition to all this, the BEA also stated that in the fourth quarter, the U.S. economy’s GDP increased to a 12-month following total of $15.86 trillion. When I look at this number, the only thing I can think of is the current state of our national debt—which stands above $16.75 trillion and will most likely hit the $17.0-trillion mark soon. Our debt is 107% of our GDP!

Our nation is in deep trouble. This slight increase in GDP in the fourth quarter of 2012 doesn’t impress me at all. When I look at the health of the U.S. from a broader view, it’s not a great sight. U.S. GDP shrank over the third and fourth quarters of 2012—and it won’t surprise me to see it turn negative in the first quarter of 2013.

What He Said:

“Investors have been put into an unfair corner. Those that invested in stocks because they got caught in the tech boom (1999) have seen their investments gone. Now, those that have leveraged heavily to play the real estate game, because it is the place to be (2005), could see the same fate as the stock market investors. Thanks again, Mr. Greenspan.” Michael Lombardi in Profit Confidential, May 27, 2005. Michael started warning about the crisis coming in the U.S. real estate market right at the peak of the boom, now widely believed to be 2005.

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