Wednesday, February 26, 2014

GDP: More Manipulation Than Production...L&C

Gross Domestic Product(GDP)is an output number reflecting the health of a economy. The problem is not only the present state of the measures to which it contains, but the additions of fluff that is used to add to the distorted picture. There is very little concrete in this building, no steel and built on muck. Jean-Baptiste Say, the famous French economist had GDP covered with his "Say Law," when he stated, "supply(production) creates its own demand." You produce something. You have wealth and your options multiply with it.
The final determination of GDP is tied to an adjustment for inflation. This final figure is based on the equally manipulated Consumer Price Index(CPI)whose core does not include food and energy, the only two components that society needs on a daily basis. This so-called "core" is also adjusted every few years to add or subtract elements that are trending up or down. Guess which trend they use? Can you say, chain-index?
GDP started out as Gross National Product(GNP)during WWII, when it measured wartime production capacity. It was never intended to be used as a measure of the countries' economic well-being. It takes center-fold today because its purpose is to bestow confidence in the public that your government knows what it is doing. If things are not going well, we will fix it. This innuendo confers that the government is aware. This adds comfort to all who buy bonds which is the real purpose of GDP manipulation. The increases in GDP demonstrate that the government policies work and your invested money in bonds is safe.
Rule Writing
definitions of GDP is the sum total of the monetary value of all final goods and services bought and sold within US borders in a given year. One important distinction between GDP & GNP is this: present rules include foreign ownership of factories like a Honda plant in Ohio or a BMW plant in North Carolina as part of the US GDP, while GNP would not include foreign companies, but only US firms whether here or aboard. If we keep out-sourcing, I can see the day where GNP could be higher than GDP and then, bye-bye GDP and hello, GNP.
One of the ugly parts of the present make-up of GDP is that it makes no effort to distinguish between transactions that benefit the nation's health and those that subtract from it like NAFTA. Ross Perot was right, that "sucking sound" is jobs leaving the country. Under this trade pack for example, the main parts of a refrigerator are made in Mexico, while only assembled in the US. We lose the factories. We eat crumbs! Don't believe that? We lost 40,000 factories since NAFTA began. Like I stated in my unpublished book, "...we got the SHAFTA!" By the way Obama wants a new trade pack called, TPP which includes Vietnam who has wages at .28 cents an hour and he says he is for jobs, but not where they will be located!
Gets Worse
Another negative aspect is every transaction that takes place anywhere is classified as progress. Hurricane Sandy added to GDP despite the tragic losses because rebuilding, repair of infrastructure, medical costs,, were needed. No one argues that these unexpected expenses subtract from GDP or does anyone consider that those expenses could have been used for other necessary projects like bridge repair, water safety or any other public need to which have been delayed  unless the bridge collapses.
The monetary aspect gets worse because it ignores everything that doesn't take place under the confines of monetary trade. A housewife performs duties of caring for the home, maybe children, maybe relatives, but no value gets assigned. However, if someone is hired to do this work, then it counts.
GDP never reflects income gaps. It only counts totals even if one person controlled everything!
Toxic spills like in the Gulf not only adds to GDP, it does it in many ways. They count the depletion of resources, the accident and then, the cleanup.
The US includes money borrowed, but does not put aside the liability of this debt to be repaid later.
Many of the features of GDP are arbitrary like a free checking account because it adds value. They then use this concept of value to manipulate like Upton Sinclair once stated about these bureaucrats," It is difficult to get a man to understand something when his salary depends upon his not understanding it."
Don't believe that? Try this! The government says the total of all computer sales for the year was $100b , however these new computers are 10x the speed of existing computers, so that means the value added is $1 trillion.(10 times 100) Last year GDP included all entertainment costs even though these companies may try five new TV pilots with only one making it to broadcast and it could be a flop!
This is so fake, so deceptive, it is criminal! Get Real!
Real wealth-producing components of GDP(manufacturing, mining, been shrinking in their percentages for fifty years. Our economy is like a Blues Brothers "Wish Sandwich," you have two pieces of bread and you wish you had something to put in it.
For those of you that say this is wrong because GDP grew 265% from 1980 to 2000, reflecting a higher standard of living. Well, my friend, this rise in living is in the stock market only which has also grown over 1000% during the same span. Consider this: would you value something that is 4x expensive than what everything is worth? Before you answer, the market is even higher today. GDP only grew with all the government stimulus I might add, 2.8% in 2012 and 1.9% in 2013 with both being over projected but not achieved and the market shot up 28% in 2013. Are you still buying? Can you spell, bubble?
Liars and Crooks:goes to the Texas Railroad Commission who regulate the oil and gas industry within the state. There were 300 complaints. The commission found 164 violations, and get this, only 2 fines levied. Get out of town!