Oh yeah, and Alan Keyes is in the running for president
posted by Matt Friedeman at
12:37 PM
Thursday, December 13, 2007
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18 Comments:
matt,
sorry for this being off-topic, but in the past you made comments about the economy doing well and how GDP, real income, et al was up. here's an 'adjusted' look at the economy (using M2 since M3 is no longer published).
REAL GDP GROWTH HAS BEEN NEGLIGIBLE SINCE 1990
fskrealityguide.blogspot.com - blog entry for 12/6/07
The commonly published GDP statistics say that GDP is increasing, after adjusting for inflation.
Adjusting for inflation using the CPI is wrong. The CPI understates the true inflation rate. In a previous post, I showed the median household income is DECREASING if you correct for inflation using money supply expansion instead of the CPI.
What about GDP? Does that share the same defect? I use the Federal Reserve's official M2 report, along with this source for GDP unadjusted for inflation. I also looked at the official US government GDP statistics, but the former site looked better and the numbers were close anyway.
I am using the "GDP not adjusted for inflation" statistic.
The GDP was $12433.9 billion in 2005 and $13194.7 in 2006, for a growth rate of 6.119%. M2 was $6408.4 trillion (sp?) in January 2005 and $6705.8 trillion (sp?) in January 2006, for a growth in M2 of 4.64%. However, the number of households increased from 113,343 thousand to 114,384 thousand from 2004 to 2005, for a gain of 0.92%. (The housing stats table doesn't have an entry for 2006, so I used 2004-2005 instead of 2005-2006.) This leads to a growth in GDP of about 1.48% in absolute terms, only 0.56% in real terms. This is much lower than the official GDP growth rates.
I correct for the number of households, because with 0.92% more households, you would expect the GDP to increase by 0.92% if every new worker has the same level of efficiency.
If you use M3 instead of M2 as your index of inflation, you would find that real GDP actually was decreasing! The rate of growth in M3 is 10% more than M2, so if you use M3, the US economy is shrinking at a rate of 10% per year!
Let's look at a longer time period. GDP was $5484.4 billion in 1990 and $13194.7 in 2006, for a GDP growth rate of 140.6%. M2 was $3176.6 trillion in January 1990 and $6705.8 trillion in January 2006, for a growth in M2 of 111.1%. In other words, the actual GDP growth rate from 1990 to 2006 was only 29.5%, an annualized rate of 1%. This is a far cry short of the official government statistics.
I still haven't corrected for the increase in the number of households. In 1989, there were 93,347 thousand households, and there were 114,384 thousand households in 2005. That is a gain of 22.5%. If you subtract 22.5% from 29.5%, you get 7%. (The housing stats table doesn't have an entry for 2006, so I used 1989-2005 instead of 1990-2006.)
Contrary to official reports, GDP has only increased by 7% per household from 1990 to 2006. That is an annualized real GDP growth rate of only 0.27%.
If you use M3 instead of M2, you would find that GDP has decreased substantially since 1990. Luckily, the Federal Reserve ceased publishing M3!
I used GDP in this post. If you repeat the calculation with GNP, you probably would find nearly the same result. I'll only perform that calculation if someone asks.
If you calculate inflation-adjusted GDP growth using M2 money supply expansion instead of the CPI, and correct for the increase in the number of households, you find that per-househould GDP has barely increased since 1990. If you use M3 instead of M2, you would find that GDP has substantially decreased!
david,
That is one of the longest posts I have ever scanned (did not actually read it all) and I must say, Wow, you have a lot of time on your hands. I am thinking this is good info, but really, what does this all mean in layman's terms? And what does it mean to me and my family?
larry,
i didn't write it starting with the title down. i can't get links to post correctly so I not only copied the link but the blog entry also.
In layman's terms, the economy ain't as good as the politicians say and much of the wealth created in 90's and beyond is illusory (booms and busts due to monetary expansion). The inflation (monetary expansion) part is significant for you and your family since it is the primary reason that prices increase, including the cost of crude oil as of late.
david,
thank you for the clarification. As far as the economy is concerned, with the exception of high fuel prices and the way that affects just about every other purchased item, it seems to be doing just fine. Every time I hear someone state how bad things are with the economy, I look at the unemployment rate, the job listings in the paper, and a few other little things and think that people need to get over it. I can go out tomorrow and get another job if I want or need to. The cost of things is higher, but that is life. Americans are spoiled and think they have to have all things, the best of all things, and all things now. If money gets tight, let go of some of the earthly treasures and enjoy what we have. I think one of the Marines' sayings is appropriate, "adapt and overcome."
David, I am not lecturing you or anybody in particular. There are (close)members of my family that complain about how hard things are now while watching cable tv, eating fast food, and sucking up the air conditioning while sending one of many unlimited text messages. WE are spoiled.
Larry,
You must not have read the entry since you state that you "look at the unemployment rate.." et al yet it's the 'official' statistics that are called into question (yes I know the unemployment rate wasn't specifically mentioned). So your post begs the question from the outset. Nevertheless, just because there may be a job available tells me nothing about the standard of living.
You then retort with get over it? Please...
The reason that high prices occur are primarily due to *monetary expansion*, a consequence of our fiat currency. It's basic economics that when the supply increases, the value per unit (or demand) decreases. This is a hidden 'inflation' tax. It's a foregone conclusion that prices typically *fall* in a capitalistic society (or at least real incomes increase).
If you think that it's ok for politicians and the fed to print paper money in order to cover the shortfall that results from their overspending, then you need to re-evaluate yourself.
This monetary expansion (to cover budget shortfalls) hurts the poor (or whoever receives the new money last, people on fixed incomes, etc) for the benefit of those who receive it first (since prices don't rise uniformly due to monetary expansion). Those who receive it first are the 'rent-seekers', those who are close to the government in Washington. That, my friend, is what being spoiled is all about.
What it amounts to is theft, and no, Larry, life is not about theft.
And you know, Larry, a major part of the problem is a populace who is ignorant of economic reality, while excusing the actions of politicians (i.e., the causes) with sanctomonious excuses, such as 'toughen up' or 'we're just spoiled'.
david,
all that you state about deficit spending is true. What is your suggestion to stop this? Oh yeah, you are correct about our standard of living. Americans have it so rough in their climate controlled housing, telephonic connectivity, cable, etc. If you do not have a realistic suggestion as to how to make the govt stop outlandish deficit spending, then you need to toughen up and realize you are spoiled.
Well Larry, the obvious alternatives are to:
1. Abolish the Federal Reserve (over time, while not manipulating interest rates in the meantime)
2. Circulate gold and silver coins (to be used as money)
3. Attempt to calculate M3 (money supply) and divide the available weight of gold by M3, which would define the dollar as a weight of gold. In effect this would be a gold standard.
Re: Standard of living:
Larry, whether we have those things or not, it does not logically follow that it's ok to steal. That's akin to me saying that I'm coming to your house and going to steal your car, but then excusing it by asserting that you have another one, a cell phone, and other goods so you need to toughen up.
Also, it does not logically follow that if I don't have a suggestion, then I can't criticize outlandish govt spending. I'd love to see that syllogism.
Regards
I agree with #1 and somewhat with #2 but do not really understand point 3. Not into economics THAT greatly. But, once again, how can we, private citizens, make this happen? Most of the populace is unaware of how much our govt spends much less where they spend it.
We cannot keep the govt from stealing from us, so unless one has a realistic solution, complaining usually ends up sounding like whining. That is what I am trying to state. I have NO problem with people stating their opinion about govt. I think most of what they do stinks. I just think that if one is going to complain, one must offer some type of solution or they sound childish.
While I am not big on our govt, I am very big on this country. I was born into a poor (by U.S. standards) family and through work and dedication I have made it up to the middle class. When I hear or see people stating about how unfair this country is, I cannot help but think about the lifestyles of the Cubans a mere 90 miles off our shores. We have it made. Could things be better? Oh most certainly. If U. Sam would quit spending more than it has then things would improve in a very short order.
Upon further review of point #3, I think it would be a grand idea to go back to the gold standard. I just do not know how we could go about doing it.
Larry,
Short of me becoming a dictator, private citizens can employ the usual means available in a repulic: voting or principled nonvoting, education, et al. If you have objections to these, then Matt may as well cancel his show.
Also, if you have a few thousand dollars laying around, you ought to buy a few kruggerands and some silver coins. On #2 above, I left off that they should be *privately minted*. On #3, I just told you how we could do go back on the gold standard.
All of these, including the ones I mentioned earlier, are realistic and obtainable, though perhaps not immediately. As a matter of fact, there's only one politician right now who even brings these issues to the forefront.
But you still remind me of the bully who tells his victim that unless he can do something about the bullying, then he should stop his whining.
Regards
Uuuhhh...so what do you guys think of Alan Keys??
Kevin said, "Uuuhhh...so what do you guys think of Alan Keys??"
He has at least $500,000 (this is verifiable) in debt from his previous failed attempts at presidential runs who needs to pay off his bills with donations from his supporters. He has been known to spend campaign funds on personal expenses. Other than that, he's never been elected to anything and sounds like a cheap TBN televangelist.
If them thar Republikans tells us that things is alright then things is Alright!
Larry is the one who sounds spoiled to me. He should go out into the real world where people have to work 2 and 3 jobs just to survive. I just finished up a 65 hour week working 12-13 hour days/nights. I can't afford cable T.V. and my computer is made out of spare parts.
I think David is right. This is more about thieves stealing the future than about anything else.
We are all spoiled. You can go online and post with your spare-part pc while most people in the world do not have running water or decent septic facilities. Yeah, I am very spoiled. I am in the real world and I have to work for what I have, but only by the grace of God am I able to do that. I guess I should ask the government to help babysit me and pay my bills because life has been so unfair. Please grow up and fend for yourselves.
hey larry,
if things don't change soon with our monetary policy, you won't be having running water either. How do you think the depression was caused? the fed reserve was established in 1913 or so.
Larry,
What you've presented is a nonsequitor. You need to fill in the missing premise or construct a decent syllogism.
Premise 1: I have a pc, running water, et al
Premise 2: Missing
Conclusion: Therefore, I am spoiled.
It doesn't follow that one is spoiled simply because he has things that others don't.
What exactly is your definition of spoiled? If any able-bodied person in the USA does not consider themselves spoiled, when compared to the rest of the world, then they have not seen much of the rest of the world and are not nearly as intelligent or well-informed as their name would suggest.
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