Is this credible?Per U.S. Department of Commerce Bureau of Economic Analysis. GDP covers the goods and services produced by labor and property located in the United States. As long as the labor and property are located in the United States, the suppliers(that is, the workers and, for property, the owners) may be either U.S. residents or residents of the rest of the world. End of 2008, official GDP was -6.4%. (see http://useconomy.about.com/od/economicindicators/a/GDP-statistics.htm)Q3 2009: +3.5% presupposes a swing of 10% in nine months. Recent unemployment numbers have penetrated 10.2% (see http://businessmirror.com.ph/home/world/18270-soaring-us-unemployment-threatens-economic-recovery.html)
Disposition of personal incomeCurrent-dollar personal income decreased $15.5 billion (0.5 percent) in the third quarter, incontrast to an increase of $19.1 billion (0.6 percent) in the second. (see http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm)Consumer credit decreased at an annual rate of 6 percent in the third quarter of 2009. (see http://www.federalreserve.gov/releases/g19/Current/)"Total industrial production was 6.1% below its level of a year earlier."(see The INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION: SUMMARY exhibit - http://www.federalreserve.gov/releases/g17/Current/default.htm
Yet, stunningly GDP allegedly grows by 10% in nine months notwithstanding the above and restated below:i. unemployment expands to exceed 10%;ii. personal income post a year to date increase of 0.1%; iii. consumer credit decreased at annual rate of 6%;iv. total industrial production was 6.1% below its level of 9/30/08What is the source of this alleged growth and why is it not reflected in any of the above related metrics?
What is Up with GDP? Frank Shostak
Mises Daily 2001 (lol)This may help as well..
THE FISCAL BURDENS OF GOVERNMENT (p253 - America's Great Depression)In the pleasant but illusory world of “national product statistics,”government expenditures on goods and services constitute an additionto the nation’s product. Actually, since government’s revenue, incontrast to all other institutions, is coerced from the taxpayers ratherthan paid voluntarily, it is far more realistic to regard all governmentexpenditures as a depredation upon, rather than an addition to, thenational product. In fact, either government expenditures orreceipts, whichever is the higher, may be regarded as the burden onprivate national product, and subtraction of the former figure fromGross Private Product (GPP) will yield an estimate of the privateproduct left in private hands. The ratio of government depredation(government expenditures or receipts, whichever is the higher) overGross Private Product yields the approximate percentage of governmentdepredation of the private product of the economy. 21In a depression, it is particularly important that the government’sfiscal burden on the economy be reduced. In the first place,it is especially important at such a time to free the economy fromthe heavy load of government’s acquiring resources, and second, alowering of the burden will tend to shift total spending so as toincrease investment and lower consumption, thus providing a doubleimpetus toward curing a depression.
21Generally, government expenditures are compared with Gross NationalProduct (GNP) in weighing the fiscal extent of government activity in the economy.But since government expenditure is more depredation than production, itis first necessary to deduct “product originating in government and in governmententerprises” from GNP to arrive at Gross Private Product. It might bethought that total government expenditures should not be deducted from GPP,because this involves double counting of government expenditures on bureaucrats’salaries (“product originating in government”). But this is not doublecounting, for the great bulk of money spent on bureaucratic salaries is gatheredby means of taxation of the private sector, and, therefore, it too involves depredationupon the private economy. Our method involves a slight amount of overcountingof depredation, however, insofar as funds for government spendingcome from taxation of the bureaucrats themselves, and are therefore not deductedfrom private product. This amount, particularly in the 1929–1932 period, maysafely be ignored, however, as there is no accurate way of estimating it and no betterway of estimating government depredation on the private sector.If government expenditures and receipts are just balanced, then obviouslyeach is a measure of depredation, as funds are acquired by taxation and channelledinto expenditures. If expenditures are larger, then the deficit is either financed byissuing new money or by borrowing private savings. In either case, the deficitconstitutes a drain of resources from the private sector. If there is a surplus ofreceipts over expenditures then the surplus taxes are drains on the private sector.For a more extended discussion, and a tabulation of estimates of these figures forthe 1929–1932 period, see the Appendix.
I have predicted that next year GDP all around the world will show considerable increases in face of growing unemployment and shrinking industrial production (China and perhaps India will be the only notable exceptions). But it seems I was wrong after all: it's happening sooner than I expected.
The causes are what Austrians and Libertarians around the world have already highlighted: massive government spending, various "incentives" programs (particularly regarding cars) and all the money pumped into the system last year finally trickling down to create yet another bubble. Last year somebody likened this to trying to revive a comatose heroine addict by injecting him with more of his poison: either he will overdose and die right away or will be back on his feet but will become even more addicted to drugs. Hats down to whoever came up with this definition,
I have also already highlighted what is the main problem behind this. Even the dumbest government-sanctioned economist knows that to have true and lasting recovery we need to cut taxation and roll back regulation. There's no way out of this. Yet the present economy has become so dependent on government spending and downright "handouts" that cutting taxation has become politically and economically hazardous. No politician wants to take the downfall when he/she'll have to cut welfare spending or handouts to businesses to allow for tax cuts. The only way out would be running massive deficits but, again, this is very risky business (Japan anyone?). German chancellor Angela Merkel was recently re-elected precisely because she promised sizable tax cuts to both individuals and businesses but now she fully realized the magnitude of her task. Big German companies want both tax rebates and generous government subsides; German taxpayers want both tax cuts and keep their nice government pensions and health care schemes. Running large deficits and/or resorting to inflation are not options: German electors are very opposed to both. So either she has to be brave and take the short-term (political) pain to allow for long term recovery and growth or try to find new means of financing the whole scheme. Keep your eyes on Germany...
Hair of the Dog by Peter Schiff
'Men do not change, they unmask themselves' - Germaine de Stael
With 10% inflation by pre-clinton CPI standards, I'd say we're not out of the red yet