Be careful: Fake rise in GDP could manipulate people to spend more.
By Daniel at 25 October, 2009, 9:46 pm
Of course the economy will bounce back thanks to the hard working entrepreneurs and corporations along with the discretionary consumers. Credits that Obama won’t address & only credits his stimulus bill. which had nothing to do with the rise in GDP (naysayers, tell me one part of Obama’s stimulus bill that promoted growth). Be careful of this head fake optimism. Obama may use the rise in GDP for more spending & justify that America can afford govt option in the health care reform (more like deconstruction),cap & trade (smoke stack tax), & other new liberty destroying & expensive program.
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Give me an example of what you mean, I’m getting confused. So GDP grows by 5%, inflation is reported as 4% therefore we have a 2% growth rate and the president, politicians and media can say the economy is rolling along just fine. But if the inflation number is actually 6% then we have a contraction (negative growth) of -1% and that means recession. Then all those politicians look bad. The media always looks fine because nobody remembers what they say anyway.
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Take a look at Shadow Stats free part for things calculated the way we always did before we started trying to make things look better than reality.
http://www.shadowstats.com/alternate_data
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We all know about fuel and we know about smaller packaging for many food items and we know about rising health costs and probably several other things. But, let’s assume that Shadow Stats is still 2% too high. That would mean we still will be flat even with a 3% growth. GDP is not a good measure because of manipulation of data used to calculate the number we are given.
How about national income? 61% of national income is spent by government.
Look at that figure this way, as described in the article in that link
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Americans this year had to toil until August 12 to pay for federal, state, and local governments, according to the annual Cost of Government Day (COGD) report by the Americans for Tax Reform Foundation and Center for Fiscal Accountability (CFA).
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Of course, Jobs are definitely a good way to see whether we are actually growing or not but, that makes things look too negative for our government.
But, let’s stay with GDP as long as it is being computed the same now. 3% growth based on a $1.4 trillion deficit (and more that is hidden) means 10% debt to get 3% growth at the same time more jobs are being lost. So, should we get excited with 3% growth because it is bigger than - 6%?
NO! It is more of the “less bad” game the government is playing. We are still going negative, just at a slower rate. Add that we still have all the problems facing us next year.
1. More credit card defaults
2. More mortgage defaults on homes
3. More commercial loan defaults
4. More cities and state cutting jobs and spending that creates private sector jobs
5. More $1.5 trillion deficits
6. More problems getting loans for the deficits
7. Possibly, a weaker dollar hurting consumers, esp. in fuel and health care
8. More government programs to come from reduced tax revenues
9. Higher local and state taxes even if we don’t get higher Federal taxes
10. More jobs going overseas
Add your own to the list.
In a depression, there are periods of hope and apparent recovery. Industry anticipates the recovery and builds inventory creating temporary growth and then when the sales don’t equal the increase in inventory, the cycle repeats. Due to consumer debt and corporate and city and state and federal debt being 370% or higher to GDP, deleveraging will be with us for years and that will impact the spending of consumers, corporations, cities and states.
That is why a “credit expansion collapse depression” is so much worse than an “inventory recession” (you can have “inventory recessions” within the credit collapse as they rebuild inventory and then the hopes are dashed again by lack of spending). We are in between “subprime” loan defaults and the Alt-A, ARM’s and commercial loan defaults. In other words we are in an “eye” of this storm. We also have cities and states just beginning to make cuts in employment and spending and more of that will add to the burden we face in 2010.
http://www.businessinsider.com/chart-of-the-day-gdp-vs-government-spending-2009-7
That chart will show you what impact government spending has on GDP. This following link shows the government site that breaks down some of the spending in GDP
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
-JP
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