Spending burrowed money is not legimate GDP increase?

[Norman]

Ok here is a other economic question...

The argument is; US is just spending burrowed money and thus growing their GDP. So the growth isn't legitimate. Obviously I am talking about real GDP, nominal GDP doesn't tell a thing.

Obviously GDP is going to give you a completely wrong kind of numbers if there is some type of bubble / overvalued currency going on. But I don't really understand this burrowing argument very well, because if you burrow money overseas it doesn't count as GDP right?

Anyway discuss about GDP.

 

[loosecannon]

"burrowed" money was very clever. Freud is smiling.

Bubbles create some real GDP volume which contracts when the bubble contracts, a net neutral effect long term, quite deceptive short term.

Right now we are in the short end of that deceptive cycle. A lot of our economic weakness is just an adjustment to collapsed bubble(s). So our economy today is actually healthier than it seems. While 4-6 years ago our economy was a whole lot more anemic than it seemed.

 

[MajinLink]

Practically every nation has a national debt, so borrowing money to hire or give to places and companies can increase jobs thus helping out the economy. The thing is if we don't stop reckless spending, we won't have that money to borrow anymore. Taxes will go up and spending will go down. Everyone's fucked

 

[loosecannon]

the moral to the story is that everybody is fucked.

In some circles that is a good thing!

 

[Norman]

"burrowed" money was very clever. Freud is smiling.

Bubbles create some real GDP volume which contracts when the bubble contracts, a net neutral effect long term, quite deceptive short term.

Right now we are in the short end of that deceptive cycle. A lot of our economic weakness is just an adjustment to collapsed bubble(s). So our economy today is actually healthier than it seems. While 4-6 years ago our economy was a whole lot more anemic than it seemed.

I don't agree with this at all. US still took massive amount of debt and is screwed no matter what. Also the currency is at least IMO a bubble, so the GDP will fall too.

The GDP will also fall because a lot of the capital has been "consumed". Which of course shows as GDP of today at expense of GDP of tomorrow...

Anyway I do like to understand that argument a little better as I have seen it couple of times, maybe someone knows what I am talking about here...

It's not nice to say we are all fucked though =(.

BTW I am not talking about bubbles here, but the act of burrowing money... Bubbles of course increase GDP because they are inflationary and make you spend, while also making your currency attractive.

For example I saw this on youtube the other day (2:50---->):

[ame]http://www.youtube.com/watch?v=sEQ2EdQFSHA[/ame]


Anyway I just heard of some other guy who said something akin to some debt not being calculated in the GDP or something like that. Maybe someone is familiar with this...

 

[uscitizen]

Aside from the gambling in the market which is not real growth, most all of our "growth" for a decade or so has been the direct result of govt overspending.

 

[william the wie]

Aside from the gambling in the market which is not real growth, most all of our "growth" for a decade or so has been the direct result of govt overspending.

Not possible, virtually all government services are loss prevention services like police, fire and so on. The few attempts at positive services like education and social security have generally been less than successful. Politicians understand loss prevention and do reasonably well in that area. CYA and the rest of the bureaucratic BS tends to be highly effective in loss prevention but not in production of positive goods and services, it's the nature of the beast.

 

[uscitizen]

Aside from the gambling in the market which is not real growth, most all of our "growth" for a decade or so has been the direct result of govt overspending.

Not possible, virtually all government services are loss prevention services like police, fire and so on. The few attempts at positive services like education and social security have generally been less than successful. Politicians understand loss prevention and do reasonably well in that area. CYA and the rest of the bureaucratic BS tends to be highly effective in loss prevention but not in production of positive goods and services, it's the nature of the beast.

Not at all, the more money given out to the people the more goods that are bought.
And you forget the MIC, the war goods produced? The govt purchased billions of dollars in digital TV converter boxes alone.
Every dime of the unemployment money spent has rolled right back into the economy.
The military hardware refurbishing business in my area were booming.
They refurbish helos and tanks and more stuff. All contractors.

and the military was buying so much ammo that the price for non military use at least doubled.

 

[loosecannon]

Aside from the gambling in the market which is not real growth, most all of our "growth" for a decade or so has been the direct result of govt overspending.

absolutely correct.

 

[loosecannon]

"burrowed" money was very clever. Freud is smiling.

Bubbles create some real GDP volume which contracts when the bubble contracts, a net neutral effect long term, quite deceptive short term.

Right now we are in the short end of that deceptive cycle. A lot of our economic weakness is just an adjustment to collapsed bubble(s). So our economy today is actually healthier than it seems. While 4-6 years ago our economy was a whole lot more anemic than it seemed.

I don't agree with this at all. US still took massive amount of debt and is screwed no matter what. Also the currency is at least IMO a bubble, so the GDP will fall too.

The GDP will also fall because a lot of the capital has been "consumed". Which of course shows as GDP of today at expense of GDP of tomorrow...

Anyway I do like to understand that argument a little better as I have seen it couple of times, maybe someone knows what I am talking about here...

It's not nice to say we are all fucked though =(.

BTW I am not talking about bubbles here, but the act of burrowing money... Bubbles of course increase GDP because they are inflationary and make you spend, while also making your currency attractive.

For example I saw this on youtube the other day (2:50---->):



Anyway I just heard of some other guy who said something akin to some debt not being calculated in the GDP or something like that. Maybe someone is familiar with this...

I would respond but your post was either gibberish or I can't keep up.

 

[Norman]

"burrowed" money was very clever. Freud is smiling.

Bubbles create some real GDP volume which contracts when the bubble contracts, a net neutral effect long term, quite deceptive short term.

Right now we are in the short end of that deceptive cycle. A lot of our economic weakness is just an adjustment to collapsed bubble(s). So our economy today is actually healthier than it seems. While 4-6 years ago our economy was a whole lot more anemic than it seemed.

I don't agree with this at all. US still took massive amount of debt and is screwed no matter what. Also the currency is at least IMO a bubble, so the GDP will fall too.

The GDP will also fall because a lot of the capital has been "consumed". Which of course shows as GDP of today at expense of GDP of tomorrow...

Anyway I do like to understand that argument a little better as I have seen it couple of times, maybe someone knows what I am talking about here...

It's not nice to say we are all fucked though =(.

BTW I am not talking about bubbles here, but the act of burrowing money... Bubbles of course increase GDP because they are inflationary and make you spend, while also making your currency attractive.

For example I saw this on youtube the other day (2:50---->):



Anyway I just heard of some other guy who said something akin to some debt not being calculated in the GDP or something like that. Maybe someone is familiar with this...

I would respond but your post was either gibberish or I can't keep up.

In that case I must be the next keynes


What I meant is that US GDP is indeed growing, but the currency and debt bubble is still there, so in fact US economy in my opinion is worse off now than in 2008.

Anyway let's just stick with the GDP argument

 

[loosecannon]

I think that once you account for the bubbles the US economy is as well off as it was in 2008. Or nearly as well off. We are still adjusting to nearly $10 trillion in bubble asset destruction.

In 2008 we were still reaping the false benefits of $10 trillion in asset bubbles.

 

[uscitizen]

I think that once you account for the bubbles the US economy is as well off as it was in 2008. Or nearly as well off. We are still adjusting to nearly $10 trillion in bubble asset destruction.

In 2008 we were still reaping the false benefits of $10 trillion in asset bubbles.

the future is bleaker though as a result of offshoring so many jobs.
Our furutre is bleak and kas been ever since we became a consumer spending based economy. In a global economy we will decrease further or at the very best hold where we are for the next decade.
We are not doing what we need to do to hold what we have though.

It has been all downhill since we became a debtor nation under Reagan.

 

[loosecannon]

I think that once you account for the bubbles the US economy is as well off as it was in 2008. Or nearly as well off. We are still adjusting to nearly $10 trillion in bubble asset destruction.

In 2008 we were still reaping the false benefits of $10 trillion in asset bubbles.

the future is bleaker though as a result of offshoring so many jobs.
Our furutre is bleak and kas been ever since we became a consumer spending based economy. In a global economy we will decrease further or at the very best hold where we are for the next decade.
We are not doing what we need to do to hold what we have though.

It has been all downhill since we became a debtor nation under Reagan.

While I agree with all of that our future was bleaker as well between 1995 and 2008. But we didn't realize it because we had two massive bubbles adding $15 trillion in artificial wealth to our balance sheets.

Our basic economy may have deteriorated a little since 2008, but most of the contraction was the result of correction, not further decline.

 

[loosecannon]

It has been all downhill since we became a debtor nation under Reagan.

it has been all downhill since we dropped the gold standard. The economy was in the toilet when Reagan accelerated deficit spending.

 

[Norman]

No one has info how spending burrowed money makes GDP look overvalued?

Again watch the video maybe you get better idea from there...

 

[loosecannon]

What Peter Schiff is saying is true. Since deficit spending is part of GDP, about 9% of our GDP is coming from deficits.

If that money wasn't included in GDP then GDP growth would be around -6%.

BUT we are also in the midst of a bubble correction wherein we lost almost 70% of one years GDP from our within 6 months. It will take a few years to iron out that loss. If that loss wasn't rippling thru the economy our GDP growth might be 5-6% even without deficit spending.

 

[william the wie]

5-6% would only be transitional unless

a) our non-intelligence garrisons are brought home.

b) our TBTF banks are subjected to court review as to compliance with Basle III