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“America and Germany are already in recession”

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“America and Germany are already in recession”

For years in the West we have criticized China for spreading false economic statistics. But are we sure that ours are more reliable? Or to be more precise, that the political authorities interpret them objectively? Maurizio Novelli, manager of the Lemanik Global Strategy Fund, collected a series of official data (underline the detail: official) and noted that the American and German authorities draw the conclusion that the recession is not upon us, while (according to by Novelli) from those same numbers we can deduce the opposite, i.e. that the USA is already in a recession and Germany as well, or at most it is experiencing zero growth.

“The United States and Germany recently released their growth data for the fourth quarter of 2022 – observes Novelli -. Oddly enough, despite all the calamities, the world economy seems to show anomalous resistance to recession. However, many doubts about the veracity of these data remain”.

First, real US GDP growth at 2.9% in the fourth quarter was calculated by applying an inflation rate of 3.5%, while known inflation is 6.8%. “If we were to subtract – says Novelli – from the real GDP (nominal GDP minus the inflation rate) the 3.3% increase in inflation, the fourth quarter GDP would be negative by 0.4%. The exact same thing was done with the calculation of GDP for the third quarter, which came out with inflation recorded at 4% while it was at 7%. Even in that case, real GDP would have been negative”.

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Same thing in Germany. “Despite the biggest energy crisis in the country’s history, the blockage of automotive production and the collapse of exports, the German economy avoids a recession and closes 2022 with zero growth. Going to read the reasons for this anomaly, the German government’s statistics office underlines the strong performance of domestic consumption which, after Covid, would have been decidedly tonic. Strange, given that the monthly survey of retail sales data published by the same office shows an annual trend of -6%”.

The numbers cannot be disputed, on the other hand the discussion is open on the interpretations. Novelli’s opinion is clear: “We have entered the last phase of defending a failed economic system that invents data that risk compromising the credibility of institutions. All to continue to defend to the bitter end a system based on past choices, made up of economic and monetary policies that have never been sustainable, and which are now highlighting the structural damage caused. We are thus entering a new virtual world where inflation is always ‘transient’, the recession is always ‘technical’ and the profits of listed companies may be negative but ‘always beat the estimates’. If we need a soft landing we will have it, at least in numbers, if we need 2% inflation we will have it, if the profits of listed companies contract, they will beat estimates. But the reality is that the system is already in recession now, profits will continue to contract and consumption will too”.

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