Its a flawed metric, and doesn't differentiates between good spending, nor bad.
It does if you are using it incorrectly. There are ways it can be used effectively, and then there are other ways in which GDP seems like a bogus metric.
Individuals do.
Sound like some of that Austrian economics nonsense.
It would to you. More spending and debt seems to be the only trick up your sleeves. Colour me unsurprised when we discover that it's ineffective for the... However many times it's been tried already.
You have messed up your quotes, I didn't make the first statement that you attribute to me.
At this point I think you are just trying to be difficult. GDP is not flawed but like any metric it has limits. There is no reason to know the history of it any more than you need to know the history of a scale in order to know when to use it and its limitations.
More spending equals more production which translates to more income and round and round we go. It doesn't have to equal more debt.
Please feel free to enlighten us with your solutions to our economic woes.
GDP is not flawed? Are you serious?
Let's count the ways
Let's look at imputations. GDP counts home value as "rent" that homeowners don't have to pay, and calculates the amount of "rent" they think the home would be worth. They then count that as part of the GDP. Was there a transaction taking place? Absolutely not. They're made up transactions using made up government numbers. Another example is your checking account. Free checking accounts get a value assigned by the government even though they're free, because if they weren't free, you'd have to pay for it. The government adds a value to this service even though there's no exchange of money actually taking place and even though it's actually free. Between homes and checking accounts, these numbers alone added over 1 trillion to the GDP in 2003. That's nearly 10% of the 11 trillion we had as GDP in 2003. Not to mention, look at the housing bubble. It did amazing things for GDP. What happened when the bubble burst? We had between 2-3 million empty homes. That's all wasted capital who's only function then becomes bankrupting people who can't pay for the homes.
Do you know what hedonic adjustments are? They're "guesses" made by the government in which cash never actually exchanges hands. For instance a computer that cost $500 actually contributes more to GDP than $500 because the government assigns it a higher value than $500 under the idea that since we have better technology now than before, it must be contributing to economic output more. Just because something is twice as powerful doesn't mean that it has twice as much utility. Did more than $500 actually exchange hands? No, it's a fictitious number and made up money. Hedonic adjustments are BS and overstate the value of products, and thus also inflate GDP. For instance in 2003, hedonic adjustments made up 35% of the GDP. Meaning that 35% of the GDP in 2003 was simply made up. The government inflated the value, and the exchange of money never took place. Another reason the gov uses hedonics is to make inflation appear lower to pad their CPI numbers. And by keeping inflation low, you make the real GDP number artificially higher.
Another important aspect to look at is the fact that the GDP only adds. So for instance if we look at natural resources, the extraction and then selling of natural resources increases GDP. Except that natural resources are actually an asset. As we continue to take the resources, it harms future generations because the resources will be depleted. Because it's a national asset, we should also be accounting for the depletion as well as the economic exchanges taking place for the resources.
I could go on and on about the inaccuracies of GDP, but there's a few for you. Sure more spending in theory results in more production. But when you're simply making up spent money as the government does in the case of housing and in the case of hedonics, there's not actually spending taking place or transactions taking place. It's made up money. Just in the two examples above we've accounted for nearly 45% of the GDP being made up by the government. Yet you wish to tell me that GDP isn't inaccurate? Yeah okay buddy. And we haven't even begun to talk about how ridiculous it is to try and use GDP as a barometer of the overall economy. Do you need a lesson on that too?
the debt hole deeper and deeper.
