A WEEKEND AT BERNANKE'S
by Rob Kirby
KirbyAnalytics.com
November 29, 2006

Way back on Oct. 27, 2006 – when the Commerce Department released their first GUESS as to what Q3 / 06 GDP might be – their initial estimate was published at +1.6 %. For those of you with short memories, let me give you a little “Bloomberg” refresher:

“Last quarter's annualized 26 percent increase in motor vehicle production shocked Joe Carson, now director of economic research at AllianceBernstein LP in New York. Without the gain, the economy would have grown at an annual rate of 0.9 percent, not the 1.6 percent the Commerce Department reported today.”

That’s right folks, when advance GDP was published – a former Commerce Department economist [Joe Carson] quickly realized that the methodology was WRONG, and the correct number should have been more in line with, oh, say 0.9 % growth.

I wonder if one would be accused as a “conspiracy theorist” if they were to point out that way back in Oct. 06 – a weaker than anticipated GDP report would have given the Federal Reserve the “cover” they so desired to leave interest rates unchanged – even amid growing inflationary pressure in the economy.

Getting From There To Here

So the economy is sickly weak, no?

The housing market is a debacle, yes?

Le auto industry is in shambles, perhaps?

So, call me silly – but - all of this gets me wondering why Preliminary GDP would have been “expected” to be revised “up” to + 1.8 % on Nov. 29.

As you can all see, Actual Q3 GDP “beat the street” and was reported as + 2.2 % on Nov. 29. Now I’ve got to admit, with the U.S. Dollar now “on the ropes” over the past 4 trading sessions – I’m really scratching my head:

If GDP had been reported “down” or lower than expected – the U.S. Dollar surely would have crapped out again.

But that did not happen, did it?

Amazingly, the dollar and the beloved DOW [the two have been joined at the hip lately] perform yet another Houdini-esque escape from the jaws of death – another Hollywood ending!!!!

Is it just me or does anyone else think the U.S. economy resembles a micro-managed, terminal cardiac patient intermittently being “paddled” back to life with a few jolts of juice?

© 2006 Rob Kirby
Editorial Archive

CONTACT INFORMATION
Rob Kirby
Kirby Analytics
Toronto, Ontario, Canada
Email

The opinions of FSU contributors do not necessarily reflect those of Financial Sense.