Gross domestic Product is a not an economic indicator.

Discussion in 'Economy' started by Neubarth, Jan 12, 2010.

  1. Neubarth
    Offline

    Neubarth At the Ballpark July 30th

    Joined:
    Nov 8, 2008
    Messages:
    3,751
    Thanks Received:
    199
    Trophy Points:
    48
    Location:
    South Pacific
    Ratings:
    +199
    Don't be hoodwinked. Gross Domestic Product is not a valid Economic Indicator.

    I repeatedly warn people that we are not in an economic recovery, and post all of the numbers for the last several years for Retail Sales, Industrial Production, Factory Orders and so on, but a lot of fools send me emails to tell me that none of that matters because Gross Domestic Product is increasing and That is the only valid indicator of the economy.

    Let's look at GDP and see if it is valid.

    GDP = private consumption + gross investment + government spending + (exports − imports)


    Do you see that government spending in there?

    That is right, one of the major ingredients of GDP is government spending. GDP supposedly went up in the fourth quarter, but during that time almost NINE MILLION PEOPLE filed for Unemployment, and all the other indicators showed no real improvement.

    The end reality is that Government spending is steady state and GDP goes up, you have economic improvement.

    When Government spending has increased by thirty percent and GDP Goes up two percent like in the fourth quarter, the actual economy (jobs, manufacturing ...) has, in reality, gone down by 28 percent.

    GDP is being used by the Obama administration to trick people into believing that things are improving while all the time the real economy has been collapsing. That is the reason why all of these people keep on filing for unemployment. The actual jobs are going away by the millions every month.
     
  2. The Rabbi
    Offline

    The Rabbi Diamond Member

    Joined:
    Sep 16, 2009
    Messages:
    67,620
    Thanks Received:
    7,821
    Trophy Points:
    1,840
    Location:
    Nashville
    Ratings:
    +18,215
    Well, it is a half truth.
    The defintion of a recession is two consecutive quarters of decline (maybe its three, I dont remember) in GDP. It is true that GDP is made up of those things you mention. It is true that GDP increased last quarter. So it is true the recession is over.
    But only in a technical sense, as you mention. The only reason for GDP growth was increased gov't spending. I'd be curious to see how the other parts did.
    I really suspect the next shoe to drop will be states and municipalities filing bankruptcy.
     
  3. Neubarth
    Offline

    Neubarth At the Ballpark July 30th

    Joined:
    Nov 8, 2008
    Messages:
    3,751
    Thanks Received:
    199
    Trophy Points:
    48
    Location:
    South Pacific
    Ratings:
    +199
    For those people who sent me email telling me to just go out and create my own job,

    I DON'T NEED A JOB. I RETIRED TEN YEARS AGO IN 2000 AND HAVE BEEN WRITING BOOKS FOR THE FUN OF IT.

    There are 33 million people in the United States who need full time employment. Talk to them if you want about how lazy they are and how worthless you think they are. Many have four years of college and many have skills that are phenominal, but they DO NOT HAVE JOBS.


    THIS ADMINISTRATION IS INDIFFERENT TO THEM AND NO EFFORT HAS BEEN MADE TO CREATE JOBS IN THE ECONOMY. ALL THAT HAS HAPPENED UNDER OBAMA IS THAT MONEY HAS BEEN DISTRIBUTED TO THE FAT CATS.
     
  4. Toro
    Offline

    Toro Diamond Member

    Joined:
    Sep 29, 2005
    Messages:
    50,786
    Thanks Received:
    11,059
    Trophy Points:
    2,030
    Location:
    The Big Bend via Riderville
    Ratings:
    +25,123
    Of course GDP is an economic indicator. It is the most basic economic indicator. It measures the sum total of economic output and income in the country.
     
  5. Toro
    Offline

    Toro Diamond Member

    Joined:
    Sep 29, 2005
    Messages:
    50,786
    Thanks Received:
    11,059
    Trophy Points:
    2,030
    Location:
    The Big Bend via Riderville
    Ratings:
    +25,123
    This is a commonly misunderstood definition of a recession. Instead, a recession is defined as follows.

    The NBER’s Recession Dating Procedure
     
  6. The Rabbi
    Offline

    The Rabbi Diamond Member

    Joined:
    Sep 16, 2009
    Messages:
    67,620
    Thanks Received:
    7,821
    Trophy Points:
    1,840
    Location:
    Nashville
    Ratings:
    +18,215
    Obviously that isn't universally agreed on. From The Economist:
     
  7. Kevin_Kennedy
    Offline

    Kevin_Kennedy Defend Liberty

    Joined:
    Aug 27, 2008
    Messages:
    17,592
    Thanks Received:
    1,582
    Trophy Points:
    205
    Location:
    Ohio
    Ratings:
    +2,028
    GDP would be more accurate as an economic indicator if government spending were subtracted from GDP, since government spending is a negative for the economy.
     
  8. The Rabbi
    Offline

    The Rabbi Diamond Member

    Joined:
    Sep 16, 2009
    Messages:
    67,620
    Thanks Received:
    7,821
    Trophy Points:
    1,840
    Location:
    Nashville
    Ratings:
    +18,215
    Gov't spending isn't a negative to the economy.
    Gov't taxation and borrowing, which is the mirror image of spending, is a negative.
     
  9. Kevin_Kennedy
    Offline

    Kevin_Kennedy Defend Liberty

    Joined:
    Aug 27, 2008
    Messages:
    17,592
    Thanks Received:
    1,582
    Trophy Points:
    205
    Location:
    Ohio
    Ratings:
    +2,028
    Well you can't have government spending without the taxation, borrowing, and I'll add printing as well.
     
  10. Toro
    Offline

    Toro Diamond Member

    Joined:
    Sep 29, 2005
    Messages:
    50,786
    Thanks Received:
    11,059
    Trophy Points:
    2,030
    Location:
    The Big Bend via Riderville
    Ratings:
    +25,123
    I've never thought of spending on education, which is an investment in human capital, nor infrastructure, which is necessary for goods to arrive from one point to another, as a negative for the economy. Few economists do as well.
     

Share This Page