Home > General Comment > Was there really a deal between Boeing and Saudi Arabia?

Was there really a deal between Boeing and Saudi Arabia?

Interesting piece of information, but we are unclear on its actual impact:

Gross Domestic Product in the third quarter may be positive solely because of a lucrative defense contract between Boeing and Saudi Arabia.

According to Karl Denninger at Market Ticker, durable goods showed uncharacteristic signs of life solely based on defense related activities:

… the real stunner was the insane ramp in both defense and non-defense aircraft and parts.  Absent that this report have been an abject disaster – and, in point of fact, it was.

Indeed, absent this segment of the economy, durable goods orders actually contracted in the third quarter, per Economic Populist writer Robert Oak:

Durable Goods New Orders Up 3.3% for September 2010

New Orders in Durable Goods increased 3.3% for September 2010. New orders has declined 2 of the past 4 months, with July showing a slight 0.7% increase. New orders in non-defense capital goods increased 8.6%. Core capital goods new orders fell -0.6%. August Durable Goods new orders was also revised up, to -1.0% with August core capital goods new orders revised up to 4.8% from 4.1%.

 

Durable Goods

Aircraft & parts, non-defense, new orders ballooned up +105.0% and defense airplanes also jumped 30.0%. While other analysis seems to blow off aircraft, that’s a $6.6 billion increase in one month of non-defense aircraft & parts new orders. Transportation new orders alone increased +15.7% in September. [our emphasis]  Autos (vehicles & parts) new orders down -0.4%. In the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories, and Orders:

Excluding transportation, new orders decreased 0.8%. Excluding defense, new orders increased 2.9%.

Core capital goods are a leading indicator of future economic growth. It’s all of the stuff used to make other stuff, kind of an future investment in the business meter. Core capital goods excludes defense and all aircraft. New orders are down -0.6%. Shipments are up 0.4%. Two things to note, core capital goods has not recovered to 2007 levels but this month are some not so great numbers, masked by the incredible news on air-o-planes. [our emphasis]

What is odd about the Boeing-Saudi deal is not simply that it drags an important part of the economy across the zero line at a time when all other indicators show it is cratering. As a defense contractor Boeing would probably fall under a little known section of the Securities Exchange Act of 1934 that authorizes the President to direct companies of significance to national security to falsify their books, records and accounts in the interest of national security:

Section 13(b)(3)(A) of the Securities Exchange Act of 1934 provides that “with respect to matters concerning the national security of the United States,” the President or the head of an Executive Branch agency may exempt companies from certain critical legal obligations. These obligations include keeping accurate “books, records, and accounts” and maintaining “a system of internal accounting controls sufficient” to ensure the propriety of financial transactions and the preparation of financial statements in compliance with “generally accepted accounting principles.”

From the Wiki entry, it seems possible that the president could not only prevent Boeing from reporting accurately what it is doing, but could compel Boeing to report things it is not doing, such as producing $60 billion worth of output for a vassal state of the empire.

Simply stated, there is no way to know if GDP as reported in the third quarter — which will be announced just before the mid-terms — will be even close to what is actually taking place in the economy.

Call us paranoid, if you like.

Then read the entry we previously posted by Yves Smith at Naked Capitalism.

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