Economy Grows Despite Housing Woes

The economy grew at its strongest pace in more than a year during the spring as solid improvements in international trade and business investment helped offset weakness in housing.

The gross domestic product, the broadest measure of economic health, expanded at an annual rate of 4 percent in the April-June quarter, significantly higher than the 3.4 percent rate the government had initially estimated a month ago, the Commerce Department reported Thursday.

But the growth spurt could be short-lived. There are concerns that the recent turmoil in financial markets, a result of a spreading credit crisis, could seriously dampen economic activity in the second half of this year.

GDP growth may have slowed to just above 2 percent in the current quarter and many analysts believe growth will slow even further in the final three months of this year as the full impact of the recent market turmoil is felt.

The worry is that the roller coaster ride in stocks and spreading credit problems will shake consumer and business confidence and cause cutbacks in spending and hiring plans.

However, analysts believe the Federal Reserve will act to avert a full-blown recession. If financial turmoil persists, they think the Fed will wield its major policy tool, cutting its target for the federal funds rate, the interest that banks charge each other. That rate has been at 5.25 percent for more than a year, but investors are starting to hope that the Fed will begin reducing it in quarter-point moves starting at their next meeting on Sept. 18.

The Fed on Aug. 17 cut a less economically significant rate, its discount rate, and has injected billions of dollars into the banking system in an effort to keep credit markets operating in the face of the turmoil. Federal Reserve Chairman Ben Bernanke may offer hints about the Fed's next policy moves when he delivers remarks at a Fed conference on Friday.

In other economic news, the Labor Department reported that the number of newly laid-off workers filing for unemployment benefits rose to 334,000 last week, an increase of 9,000 from the previous week. That gain caught analysts by surprise. They had been expecting a decline of around 2,000.

By Martin Crutsinger

[sharncedar]

If I borrow $500 from the Fed and loan it to you, then you create a derivative product worth $1000 from my note of loan, and sell it back to me, then I use that as collateral to loan you $5000, gee the economy seems to be doing very well. We all seem to be very rich.

But guess what we are not actually rich. We are each in debt, and as soon as the debt is called in, all of our wealth evaporates. This is the "credit crisis". One way to fix it is for our friend Fred the Fed to give us each $10000 more in loans, or even better yet to buy our bad loans from us at a profit for us. But guess what, we are still not really rich, nor is our little economy really doing well, because we haven''t increased our productivity at all, we''ve been employed selling and reselling the same houses or stocks or other financial instruments instead of doing anything useful. The people doing something useful will eventually get all of our little pieces of paper, because our paper becomes worthless once they understand it is not backed by anything valuable. Of course, until the Chinese, I mean, the people doing something useful figure that out we can go a GOOD TEN YEARS fooling them by giving them more and more pieces of paper. Escalating the scale of the mayhem. Producing "growth" without growing.

That''s the Bush economy in a nutshell.

[sharncedar]

lars008 says: "The greatest economic boom ever
Just how red-hot is the current worldwide expansion? "This is far and away the strongest global economy I''''ve seen in my business lifetime," U.S. Treasury Secretary Hank Paulson declared "

Gee Lars008, i hope they are measuring the growth in the median wage and purchasing power, and not accidentally including asset bubbles in their measurements. Because if people who work for banks measure the "economy", and whoops they include hedge funds and financial derivatives and complex financial instruments of the new, unregulated sort (those nasty regulations are dead at last), then they would see unprecedented growth. Unprecedented growth in the total amount of capital in the world''s money supply, gee that means nothing at all to most people, who are simply seeing higher prices at fixed wages. But Hank Paulson, the beast of Goldman Sachs, wouldn''t do that, would he? He wouldn''t measure fake wealth created by liars and scammers and call it real wealth? He wouldn''t he is SUCH AN HONEST MAN, no, no he wouldn''t.

This is far and away the biggest insane expansion of meaningless financial transactions in any of our lifetimes. It is the most unprecedented bubble ever, created by the stupidest and most selfish leaders we have ever had.

[mcv57]

As of today: 08/30/2007

The National Debt is at $8.9 Trillion. Records show it has only been raising (TreasuryDirect.com). Please don''t help the Bushwacker to pervert the truth CBS.

[mcv57]

Lars008 (Lairs008):

Is a hard core GOP fantic - hosts propaganda that bankers (the new CEO billionaire croonies) and Bushwacker offer.

[lars008-2009]

viva capitalism...

U.S. Economy: Expansion Was Faster Than Estimated
http://www.bloomberg.com/apps/news?pid=20601087&sid=aP3CFLmKC2CQ&refer=worldwide
Deficit Falls to $205 Billion
http://www.breitbart.com/article.php?id=D8QAD5LG1&show_article=1
Good Thing We Cut Taxes
http://ezraklein.typepad.com/blog/2006/09/good_thing_we_c.html
Don''t Just Cut Taxes - Cut Spending
http://www.heritage.org/Press/Commentary/ed021802.cfm?RenderforPrint=1
The greatest economic boom ever
Just how red-hot is the current worldwide expansion? "This is far and away the strongest global economy I''ve seen in my business lifetime," U.S. Treasury Secretary Hank Paulson declared on a recent visit to Fortune''s offices.
http://money.cnn.com/magazines/fortune/fortune_archive/2007/07/23/100134937/index.htm?section=money_latest

[feelfree1]

A "smoke-n-mirror", death/misery-based economy, simply cannot be sustained, period.

[mcv57]

This guy sounds like the White House "Wag the Dog Commitee - Thatch..). When you die, your judgment shall present to your lies and sin.

Sounds crazy, no more insane than this economy and the U.S. politicians who host the illusions.

[thatchmo62]

You can always find an analyst that can turn good new into bad and vice versa. Bottom line is that the ecomomy is doing ok no matter how you try to spin it. It did ok during the Clinton administration and it''s doing ok now. I''m tired of the partisans letting their blind hatred for this administration cloud the facts by looking for that one example in 10,000 that supports their view that the economy is ***. Enjoy the good life while it lasts. You know the economic cycles could care less who is president or who controls congress, unless they do something totally stupid, like raising taxes.

[madumpty]

....oh yea Gods, do people still believe this dreck, much less speak it like some brainless GOP drone? I only wish life were so black and white honey.

"Wow Democrats and Libs, I guess those Bush tax cuts are just not working. Better go back to the tax and spend policies and all those social welfare programs the Democrats love.
Posted by nexgen99 at 12:56 PM : Aug 30, 2007"

[lochlan-2009]

The media love to slant the news in favor of a good economy when truthfully it''s just one hicough away from a depression. The Fed has already bailed out the stock market once this month and inflation is rising. The housing market is going to fall on top of inflation and then be flat for a coule of years (which means your house will be devaluing at the rate of inflation). The stock market with its previous high of 14,000 is a net loss on the global market over the past seven years(it would have to be between 16,000 and 19,000 depending on currency). These articles are with no doubt for the ignorant republican base who have no idea how they fudge the numbers for their desired results.

99% of parents say they would prefer to see their children dimembered.**

**(When asked which they''d prefer for their children; to be blown up in great ball of flames or dismembered)

See you can shape anything when you ommit certain information.