Gross domestic Product is a not an economic indicator.

[Neubarth]

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.

 

[The Rabbi]

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.

 

[Neubarth]

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.

 

[Toro]

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.

 

[Toro]

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.

This is a commonly misunderstood definition of a recession. Instead, a recession is defined as follows.

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.

The NBER’s Recession Dating Procedure

 

[The Rabbi]

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.

This is a commonly misunderstood definition of a recession. Instead, a recession is defined as follows.

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough. Between trough and peak, the economy is in an expansion. Expansion is the normal state of the economy; most recessions are brief and they have been rare in recent decades.

The NBER’s Recession Dating Procedure

Obviously that isn't universally agreed on. From The Economist:

Recession

Broadly speaking, a period of slow or negative economic GROWTH, usually accompanied by rising UNEMPLOYMENT. Economists have two more precise definitions of a recession. The first, which can be hard to prove, is when an economy is growing at less than its long-term trend rate of growth and has spare CAPACITY. The second is two consecutive quarters of falling GDP.

 

[Kevin_Kennedy]

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.

 

[The Rabbi]

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.

 

[Kevin_Kennedy]

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.

Well you can't have government spending without the taxation, borrowing, and I'll add printing as well.

 

[Toro]

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.

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.

 

[The Rabbi]

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.

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.

Well, $150M of that GDP figure went here:
» John Murtha Airport: The Airport To Nowhere Foolocracy: Government by fools, silliness and unintelligent people
Please explain how this "infrastructure spending" by the gov't has benefitted anyone other than John Murtha.

 

[Kevin_Kennedy]

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.

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.

And yet we can see how inefficient the government has been in managing both of those "investments."

 

[rdean]

Many times, you can get a better indicator of what is actually happening in the economy with some of the publications that actually deal with the economy.

U.S. Trade Deficit Widens In November

WASHINGTON (AP) -- The U.S. trade deficit jumped to the highest level in 10 months as an improving U.S. economy pushed up demand for imports. However, exports rose as well, boosted by a weaker dollar, supporting the view that American manufacturers will be helped by a rebounding global economy.
--
However, they also contend that the fortunes of American manufacturers will be lifted by a continued rise in demand for U.S. exports as America's major overseas markets mount a recovery as well. The fall in the dollar against most major currencies since the U.S. currency hit a 2009 high last March is also expected to boost export sales.

Economists are looking for strong gains in exports to help manufacturers and the overall economy in 2010.

For November, the 0.9 percent rise in exports pushed them to $138.24 billion, the highest level for exports in a year.

Shipments of farm products were up $1.28 billion led by a big gain in sales of soybeans. Exports of capital products including semiconductors, industrial machinery and computers rose by $360 million while sales of U.S.-made autos and auto parts rose by $714 million.

The 2.6 percent rise in imports of goods and services pushed them to $174.64 billion, the highest level since December 2008. The increase was led by a 7.3 percent increase in petroleum imports which rose to $24.43 billion. The volume of crude oil imports fell to the lowest level since February 1999 but the price rose to an average of $72.54 per barrel, the highest level since October 2008.

Imports of computers, telecommunications equipment and industrial machinery were all up but imports of autos and auto parts fell by $54 million.

 

[Toro]

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.

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.

Well, $150M of that GDP figure went here:
» John Murtha Airport: The Airport To Nowhere Foolocracy: Government by fools, silliness and unintelligent people
Please explain how this "infrastructure spending" by the gov't has benefitted anyone other than John Murtha.

It doesn't but you are referencing anecdotes.

I have no doubt that government can be wasteful. It is a monopoly, and all monopolies are wasteful, private and public. But the roads you drive on and much of the transportation infrastructure are built, funded and/or run by the government.

There is a reason why every single developed nation in the world finances education and infrastructure primarily through government expenditure, and it is because the market does not sufficiently fulfill the role to produce an optimum outcome.

 

[Toro]

Many times, you can get a better indicator of what is actually happening in the economy with some of the publications that actually deal with the economy.

U.S. Trade Deficit Widens In November

WASHINGTON (AP) -- The U.S. trade deficit jumped to the highest level in 10 months as an improving U.S. economy pushed up demand for imports. However, exports rose as well, boosted by a weaker dollar, supporting the view that American manufacturers will be helped by a rebounding global economy.
--
However, they also contend that the fortunes of American manufacturers will be lifted by a continued rise in demand for U.S. exports as America's major overseas markets mount a recovery as well. The fall in the dollar against most major currencies since the U.S. currency hit a 2009 high last March is also expected to boost export sales.

Economists are looking for strong gains in exports to help manufacturers and the overall economy in 2010.

For November, the 0.9 percent rise in exports pushed them to $138.24 billion, the highest level for exports in a year.

Shipments of farm products were up $1.28 billion led by a big gain in sales of soybeans. Exports of capital products including semiconductors, industrial machinery and computers rose by $360 million while sales of U.S.-made autos and auto parts rose by $714 million.

The 2.6 percent rise in imports of goods and services pushed them to $174.64 billion, the highest level since December 2008. The increase was led by a 7.3 percent increase in petroleum imports which rose to $24.43 billion. The volume of crude oil imports fell to the lowest level since February 1999 but the price rose to an average of $72.54 per barrel, the highest level since October 2008.

Imports of computers, telecommunications equipment and industrial machinery were all up but imports of autos and auto parts fell by $54 million.

The trade deficit widening in this case is a good thing because it means that Americans are buying more.

 

[The Rabbi]

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.

Well, $150M of that GDP figure went here:
» John Murtha Airport: The Airport To Nowhere Foolocracy: Government by fools, silliness and unintelligent people
Please explain how this "infrastructure spending" by the gov't has benefitted anyone other than John Murtha.

It doesn't but you are referencing anecdotes.

I have no doubt that government can be wasteful. It is a monopoly, and all monopolies are wasteful, private and public. But the roads you drive on and much of the transportation infrastructure are built, funded and/or run by the government.

There is a reason why every single developed nation in the world finances education and infrastructure primarily through government expenditure, and it is because the market does not sufficiently fulfill the role to produce an optimum outcome.

That isn't an anecdote. That is verified.
When you look at infrastructure that actually adds value you have named it when you name the highway system, completed under Eisenhower 50 years ago (OK, maybe not completed. But it has been substantially completed for a long time). A lot of infrastructure is funded by state and local governments, not the Feds.
I wonder how much "infrastructure spending"is actually of the Bridge To Nowhere type and how much actualy adds economic value.
Governments fund it largely because it provides opportunities to buy votes from unions and hometown voters.

 

[Neubarth]

"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales." Real GDP has to be something other than the phony GDP that we have been presented with for the Fourth Quarter. I like the fact that the definition uses commas and the conjunction "and."

With that in mind real income, employment, industrial production and wholesale-retail sales are the real indicators of a recession or depression. At present we are in a Depression and there is a sheet load of people out of work.

 

[Mike Mitrosky]

Many times, you can get a better indicator of what is actually happening in the economy with some of the publications that actually deal with the economy.

U.S. Trade Deficit Widens In November

WASHINGTON (AP) -- The U.S. trade deficit jumped to the highest level in 10 months as an improving U.S. economy pushed up demand for imports. However, exports rose as well, boosted by a weaker dollar, supporting the view that American manufacturers will be helped by a rebounding global economy.
--
However, they also contend that the fortunes of American manufacturers will be lifted by a continued rise in demand for U.S. exports as America's major overseas markets mount a recovery as well. The fall in the dollar against most major currencies since the U.S. currency hit a 2009 high last March is also expected to boost export sales.

Economists are looking for strong gains in exports to help manufacturers and the overall economy in 2010.

For November, the 0.9 percent rise in exports pushed them to $138.24 billion, the highest level for exports in a year.

Shipments of farm products were up $1.28 billion led by a big gain in sales of soybeans. Exports of capital products including semiconductors, industrial machinery and computers rose by $360 million while sales of U.S.-made autos and auto parts rose by $714 million.

The 2.6 percent rise in imports of goods and services pushed them to $174.64 billion, the highest level since December 2008. The increase was led by a 7.3 percent increase in petroleum imports which rose to $24.43 billion. The volume of crude oil imports fell to the lowest level since February 1999 but the price rose to an average of $72.54 per barrel, the highest level since October 2008.

Imports of computers, telecommunications equipment and industrial machinery were all up but imports of autos and auto parts fell by $54 million.

The trade deficit widening in this case is a good thing because it means that Americans are buying more.

A widening trade deficit is never a good thing.. A trade deficit is not a good thing.. We need to start having trade surpluses... anybody telling you a deficit is good is just spinning a story.