What should one make of America's GDP growth? - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 3 February 2014
What should one make of America's GDP growth? A  A  A

Baltimore, Maryland

"Products are paid for with products," said Jean-Baptiste Say.

He meant, that if you want to get something you better have something you can trade for it.

What then, would he make of America's latest GDP report?

Last week brought two important bits of information: one deceptive; the other fraudulent. The deceptive news was that the Fed, in its last Ben Bernanke moment, said it would stay the course. The course in question is the 12-step 'Counterfeiters Anonymous' program popularly known as 'tapering off.' The Fed says it will stay on it. Thus were investors deceived into believing that the either the central bank's Ph.Ds were steadfast in their commitment to get rid of QE ...or that the economy was healthy enough that it didn't need it. Neither of those things is true.

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Meanwhile, the US economy grew at a 3.2% annual pace in the last quarter of 2013, still the weakest 'recovery' ever recorded. But since 1950 the composition of the US economy has changed so substantially that GDP "growth" no longer means what it used to mean.

"Disappointing numbers on jobs and housing also raise concerns about whether the economy is accelerating," reports the WSJ.

Wait. Jobs and housing are fairly important. If the news from those quarters is disappointing, what's really up with the economy? Then, the explanation:

"A big driver of growth in the fourth quarter was consumer spending, which grew 3.3%."

The WSJ then quotes Bill Simon, Walmart's USA CEO: "I never cease to be amazed at the American consumers. They figure out way to make it work..."

We are not so much amazed as appalled. And we are not so much reassured at this 'recovery,' however weak, as we are alarmed by it. Where did consumers get the money? They didn't earn it...so they had to 'run down their balance sheets,' either by spending their savings, or borrowing. That makes this a new kind of growth; the more you get the poorer you are.

The economy used to grow by making people wealthier. Now, consumers go further into debt, while their incomes are stagnant or falling.

In 1980, a $7 trillion economy included $2 trillion of what Tim Morgan calls 'globally marketable output' (GMO) - real wealth, the kind of stuff you can sell to pay your bills. But then, the economy underwent plastic surgery...at the hands of quack policy-makers. Now, it's almost unrecognizable.

Today, we have a $16 trillion economy. But how much of that is GMO? Well, about $13 trillion is consumer spending. And various statistical adjustments. Only $3 trillion is what Mr. Morgan calls GMO.

That's the real growth of the US economy since 1980 - a piddly, pathetic $33 billion a year. Barely enough to keep up with population increases.

Growth? Forget it.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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1 Responses to "What should one make of America's GDP growth?"

harjeet singh kalra

Feb 3, 2014

What is the real support for the high debt of the American Economy. In. Innovation Innovation Innovation. The world that buys Treasury Bills of US, knows that there will be no default.Why ? Innovative technologies Shale gas extraction, 3D Manufacturing---- shall spur growth

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