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A Little Perspective on Those GDP Numbers February 29, 2012

Posted by geoff in News.
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The BEA released its estimate of the GDP for the 4th quarter of 2011, showing a 3% annual increase. This has been played up as good news by the press, but I’d like to point out a little problem with the GDP reports of late.

They’re cheating.

You see, it’s easy to have economic activity if you borrow money. The more you borrow, the more activity you have, so everything seems peachy until the bills come due.

So what if we, in a very simplistic way, just adjusted the GDP values by subtracting off the federal deficit? That would give us an estimate of the GDP that is actually currently supported by our economy. And here’s what that looks like:

You can see that while the reported GDP is at its highest value ever, the corrected GDP shows that we haven’t quite made it back to 2007/2008. Pretty dismal.

I’m sure the President will be touting the 3% number later today. Just remember that with deficit spending from 2009 – 2011 alone, his vanity GDP cost your children $4 trillion.

Comments»

1. red sweater - February 29, 2012

What’s the annual increase of the adjusted figure? It looks pretty similar in the graph.

2. Michael - February 29, 2012

the corrected GDP shows that we haven’t quite made it back to 2007/2008. Pretty dismal.

Encouraging, in my opinion. If you take into consideration the artificial housing bubble, the transient internet boom in productivity that has now been absorbed, and the depredations by the Obama administration, the U.S. economy is showing some amazing resilience.

We are still not Argentina. The death spiral can be stopped.

3. geoff - February 29, 2012

What’s the annual increase of the adjusted figure? It looks pretty similar in the graph.

Since the deficits have all been in the $1.2 – 1.4 trillion range, the slopes of the two sets of bars are about the same.

4. geoff - February 29, 2012

Encouraging, in my opinion.

Dismal in the sense that after spending money that we’ll never, ever be able to pay back, we still barely managed to reach the 2007/2008 GDP level. It’s one thing to have a lost 5 years in the economy, quite another to lose the 5 years and run up a debt that even the best-case scenarios can’t pay back for 40 years.

5. geoff - March 1, 2012

But as far as encouraging signs go, I’ve got to say that I’m already seeing a lot of stores closing this year, and hearing about more layoffs. So while the national numbers have improved a bit, I’m afraid their resurgence may be short-lived.

6. lauraw - March 1, 2012

Ugh, geoff.

It’s hard for me to even talk about what the last few years have been like, businesswise. I’m a bit emotionally screwed up. It has been terrifying.

7. geoff - March 1, 2012

We just lost a Target in January and are now losing a Kmart (no great loss, but still). A local video game store also closed last week.

They’re eminent domaining a bunch of businesses along one major road in anticipation of widening it. You’d think that would create a demand for commercial real estate to replace those lost sites. Not so much – most of the places are just folding.

8. lauraw - March 1, 2012

Sounds like 2008-09 in my neighborhood.

We can’t do another big dip. We just can’t manage it. It will be curtains.
I know I should be training for my next career right now, but when?

Need to look into night school around here.

9. daveintexas - March 1, 2012

I know somebody who could run the most awesome nursery business ever I bet.

10. geoff - March 1, 2012

…or a victory garden business.

11. Michael - March 2, 2012

. . . there’s gotta be a market for hunchback porn.


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