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From John Williams: This Flash Update touches upon the economic news of the last week or so, in advance of the December newsletter, which I anticipate posting before the rapidly approaching New Year. The government’s financial statements included some unexpected obfuscation, through which I am working. Separately, I have been happily distracted by my grandchildren, family and friends, while at the same time watching the raw beauty of a Winter storm churning the Atlantic off the Outer Banks of North Carolina. Unfortunately, what continues to churn in the markets and the economy will not be a thing of raw beauty in 2008.
– We extend to you our best wishes for a most healthy, happy and prosperous New Year, John
The general outlook remains unchanged. As the markets twist in anticipation of year-end financial reporting, the central banks have expanded their games, with U.S. commercial paper outstanding again in a tailspin, and with troubled-bank borrowing from the Fed’s discount window soaring anew. To the extent the central banks have been boosting the U.S. dollar’s value and dampening the price of gold, underlying fundamentals appear to be regaining an upper hand as this update goes to press.
Although the pace of broad money supply growth may slow slightly in December, such remains at a level that historically has been followed by debilitating inflation. Despite games the Fed is playing with day-to-day open-market operations, it is not sterilizing the still-heavy influx of foreign-held dollars into U.S. Treasuries, which is the same thing for the Fed as pumping liquidity into the system. This issue will be explored in the forthcoming newsletter.
On the economic front, the news has been consistently to the downside, except for the "final" revision estimate of third-quarter GDP, which left annualized real (inflation-adjusted) growth at a booming 4.9%. Of some interest, the Gross Domestic Income (GDI) for the third quarter showed annualized real growth of just 1.5%. The GDP and GDI are theoretical equals, with the GDP based on consumption and inventory change and GDI based on income and net saving. Thanks to a fortuitous and highly unusual swing in the "statistical discrepancy" between the two series, from a negative $40.8 billion in the second quarter to a positive $74.8 billion in the third, the GDP was able to show growth that challenges credibility.
In times of honest reporting (not the current condition), the plunge in November help-wanted advertising and surging new claims for unemployment insurance would foreshadow a decline the upcoming December payroll employment and a surge in the unemployment rate, due next Friday (January 4th). The Conference Board’s November help-wanted advertising dropped to 21 from a revised 22 (previously 23) in October. The reading was the lowest since the series was started at the end of President Harry Truman’s term in office. Part of the historical decline is due to the loss of newspaper advertising to the Internet, but such impact has been relatively small over the last year. November’s reading was down 27.6% from the year before, indicative of a severe deepening in the ongoing recession,
In other reporting, continued annual decline in real (inflation-adjusted) new orders for durable goods suggested ongoing recession. Recession indications were seen also in ongoing miserable housing data, anecdotal evidence of an unusually weak holiday shopping season, and the continued collapse of consumer confidence on a year-to-year basis.
Further details follow in the December SGS newsletter.

The target for posting of the December SGS is for before the New Year. An e-mail advice will be made of its and any intervening Flash Update/Alert postings.