Thursday, August 1, 2013

Putting our GDP Growth in Perspective. In the last 12 months, GDP grew $473 billion. Our debt grew $882 billion!

People have this misconception that our GDP is the economy.  No, it's a proxy for the economy that measures how much we spend every year.  If someone without any sort of job or means of support rings up $100,000 in credit card bills, that is counted as $100,000 in added GDP despite the fact that no sane person would consider that $100,000 expenditure to be a good thing and a sign we are doing well or getting wealthier.  With that in mind, let's take a look at the latest GDP figures and compare it to the latest debt figures.  Over the last 4 quarters, nominal GDP has grown by $473 billion, which even by itself isn't really very much.  When you take inflation into account our GDP has only grown by 1.4% in the last year, which the rate of growth we were at in early 2008, right before the economy crumbled.  What is even worse is the fact that during the same period debt grew from $15.9 Trillion to $16.7 Trillion, a whopping $882 billion difference in just 1 year.  In other words, the only reason GDP is positive is because we are using our credit card, not because the economy is actually doing well at all.  Our expansionist fiscal and monetary policies have not helped us recover at all, they just rang up our debts.

No comments:

Post a Comment