According to Bert Dohmen, editor of the Wellington Letter and founder of Dohmen Capital Research Institute, the 0.1 percent contraction in U.S. gross domestic product (GDP) in the fourth quarter is more than a blip on the economy’s recovery path. It proves the economy isn’t even in recovery mode, he said.
“We are already in a recession,” he told Newsmax TV in an exclusive interview. “We got into a recession last year. If you factor in the actual rate of inflation instead of the phony CPI [consumer price index] or GDP deflator that the government uses, the economy has been in a recession overall.”
The CPI rose 1.7 percent in 2012. The GDP price deflator gained 1.3 percent in the fourth quarter.
“If you calculate the CPI now as it was calculated in 1980, then inflation is actually around 9 percent,” Dohmen said.
“What happens is that when inflation starts rising, they change the measure of inflation. They change the basket. So the published inflation rate currently has nothing to do with reality.”
The best measure of the economy is employment, he explains. The number of unemployed stood at a record 12.3 million in January. “That really tells you what the economy is doing.”
The stock market’s rally to five-year highs is “phony,” driven primarily by support from the Federal Reserve, Dohmen said, noting that the Fed has the authority to intervene in the stock market to preserve orderly markets.
“In my opinion, that interpretation has changed, and now it is to move the market up,” he suggested.
“When you watch the market during the day, there’s a lot of hidden pressure. But if the Federal Reserve wants the stock market to go up to preserve the illusion of strength, that’s what we’re going to have.” (Sources: Dan Weil, Kathleen Walter, MoneyNews.com, Thur. 02/07/2013)