No, I do not ignore statistics. And, yes, I do understand that this site is all about statistics. I believe that you've explained that point very well several times.
My comments were meant to be additions to the information that you provided.
Trade deficits do adversely effect economic growth, which GDP numbers fail to include. My comments were meant to express points which show that GDP numbers alone, do not fairly represent the overall economic picture.
I was only adding to what you had presented. I'm in agreement with your take on the situation.
Yes, correct, GDP is domestic. No, I'm not confused.
At a time of economic crisis such as we're experiencing now, GDP numbers are nothing more than fodder for Wall Street. While they do indicate output, they indicate little else.
Examples :
(1) If GDP output increased by 2.0% in one month, what would it tell us about the overall state of the economy?
(2) If GDP output decreased for 3 out of 6 months, what would it tell us about the overall state of the economy?
(3) If GDP output increased for 3 consecutive months, but no other economic indicators moved, what would it tell us about the direction the economy was moving towards?
(4) If GDP output increased for 12 months, yet, unemployment remained high, trade deficits increased, and consumer spending remained weak, what would it tell us about the economic conditions on Main Street?
In order for GDP output to indicate economic strength or weakness, it must be accompanied by supporting data such as employment, trade deficits or surpluses, consumer buying habits, commercial investment, and domestic demand for domestic products and services.
You will find overviews on all sorts of economic reports and data. This report has some personal income in it, but it's the aggregate, not the median. I like to break it up to focus on just GDP breakdowns. The Labor Economics link has the unemployment report overviews where I dig around to locate the missing and not counted from the BLS data.
I just wrote State of the Spinon as quite the slam on Obama and his corporate lobbyist talking points. Even Krugman noticed the stir, repeat on the same lobbyist lines claiming bad trade deals create jobs. They said the same thing about NAFTA, yet it only by reading these trade deals can one see the details and see how they will be more offshore outsourcing, job loss.
In the Saturday reads, Public Citizens job losses on the Korea FTA by State.
If there is anything in this report that really should wake people up, is how much the trade deficit affects domestic economic growth.
But the numbers are what the numbers are, and I'm not sure what all these comments are about, do you wish to ignore the statistics? This site is all about statistics, including GDP.
Firstly, I think you are confusing GDP. GDP is domestic production. On employment, there is something called multipliers. GDP has a correlation to employment, called Okun's law. That said, it has been diverging and I believe that's due to offshore outsourcing, increases in productivity (which is a combo of elements).
For example, on Stimulus myself and other economic bloggers railed on it due to the refusal to add buy American and hire America requirements for funding and much of the Stimulus was not "Stimulative". There's an example where taking GDP multipliers isn't going to work for increased employment because they are busy not keeping temporary stimulus within the U.S. borders. There are also different multipliers for different things, case in point tax cuts are not very stimulative.
The breakdown of how much is exports is right in this post. The percentage point spread was 0.22 or not a lot. It was the deceleration of imports that made the difference.
GDP is one economic indicator of economy activity. Here is the last post on Okun's law and it looks like I need to update a new one on the correlation of GDP to jobs.
President Obama talked about doubling exports in the State of the Union Address last night as a strategy to create jobs. It's a great sound bite, but woefully incomplete economics. While exports support American jobs, imports displace them; when imports grow faster than exports, our trade deficit expands and American jobs are lost. Between 2001 and 2007 (both business cycle peaks), we lost 3.4 million U.S. manufacturing jobs, and the fact that the trade deficit as a share of GDP rose by roughly one-third is a key reason why. Lately, when the president has talked about jobs and trade, he mentions the jobs associated with exports but ignores those lost due to growing imports. It's like watching baseball, but only counting runs scored by the home team—lots of fun, but it won't tell you anything about who is ahead.
GDP numbers do not reflect a host of economic data that reveals the true picture of our problems. GDP does show increases/decreases in production, and should be reported along with supporting data on employment, domestic consumption, the ratio between GDP and imports, and the reason(s) for any increase or decrease.
Inventories, seasonal demand, cost of living ( energy, food, etc. ), spendable income in the pockets of consumers, interest rates, technology and innovation, new products and services, the availability of capital on balance sheets, etc., all influence GDP numbers.
GDP numbers do reflect demand for products and services, but are incomplete without supporting economic data.
Yes, you're correct, the economy does matter to Main Street. And yes, increases in GDP does mean that our workforce is not idle.
But.............
First, the GDP is not an indicator of our economic well-being, nor is it an indicator of our dependency on cheap foreign imports. Secondly, Wall Street reacts to the GDP numbers, but rarely do those surviving off of government assistance programs and unemployment checks. And thirdly, the GDP numbers do not mean that we're producing more of what we use and consume.
Technology and innovation has enabled us to produce more with less manpower. During peak production, employees work more hours, and employers hire temporary help. The GDP numbers do not correlate to the overall employment picture, nor do they indicate a difference in the number, or value, of living wage opportunities for our diverse workforce. So, what exactly is the meaning of GDP numbers on Main Street America?
In order for increases in the GDP numbers to have real and significant meaning on Main Street, they must coincide and run parallel to meaningful increases in employment, and a significant reduction in our import dependency. Again, increases in GDP does not mean that we're taking back lost industries and once again providing living wage opportunities for our diverse and growing workforce.
Also, how much of the increase in GDP is for domestic markets, and how much is exported? Are we actually demanding and buying more U.S. made products? What does the increase in GDP tell us about our competitiveness in global markets?
While day traders and Wall Street react to GDP numbers, Main Street America reacts to their precent economic nightmare, and the realization that there aren't enough living wage jobs to satisfy the need.
Ok, firstly I think it needs to be clear what gross domestic product is, GDP means only stuff in this country. I think the BEA this time put a great definition front and center:
Real gross domestic product -- the output of goods and services produced by labor and property .located in the United States.
So, while we can get into some stuff that is "foreign being counted erroneously, that's what all of this big honkin' bookkeeping is about, they are isolating economic activity to the above.
Inventory build ups are domestic, if there are foreign goods being added to the shelves, they are subtracted off via the import part of the equation. Inventory build up can be for any reason, either they are preparing for more sales in the future, or they are not making enough sales and have not scaled back yet.
Those are domestic producers, they could sell those inventories, domestically, abroad, the point is its domestic production. When they make the sale and move that inventory off the shelf, if it goes abroad, it's no longer an inventory, but now an export.
This quarter does show less demand for imports and if you look at the "real demand" graph, it's so much stronger than last quarter overall. Keyword "dependency" is another kettle of fish, so if you click on trade deficit reports there you can find the monthly import totals. Less imports of oil, less "dependency" of it, but define "dependency".
It could mean overall less demand vs. any sort of shift to domestic production, so one needs to look at domestic production as well as overall energy. i.e. did people switch to ?? solar panels instead of electric, you wouldn't see that shift w/o looking at total energy consumption/usage for a month (or 3) and then determine overall demand.
From the increase in PCE (C), I'd claim it does imply we're producing more and the IP numbers reasonably correlate. To see individual categories, products, NAICS codes,
all of the economic reports I overview, always with links to the corresponding government website/database where you can obtain more details.
This is the GDP report, it's the "macro kahuna" but what went into it is from other more detailed monthly report.
Hey, you won't see me claim that magically our trade deficit is going to reduce, this is just for that quarter, which is a good thing, but I already wrote some overviews on the trade deficit projected increases, so this probably will not last.
GDP isn't static, this is a 3 month snapshot and it's the advance report, odds on a host of these components will be revised.
Increase in GDP should matter to main street because there are employment multipliers, for every 1% increase in GDP is a corresponding increase in future employment...
*that* said, we've already written how Okun's law is broken on this site and I will assuredly do another "where are the jobs" post soon.
So, in other words, due to a host of reasons, while in the past this should indicate a lot of jobs....it's not.
But this does matter to main street as well as Wall Street. You cannot have job growth without a humming economy.
Your words: "The trade deficit represents stuff outside the nation. Gross Domestic Product is Domestic, or what's happening only inside the U.S.A. so a deceleration of the trade deficit means people had to utilize more domestic goods, stuff from the U.S.A. to maintain the same level of economic activity, therefore, a decrease in the trade deficit translates to an increase in what's being produced in the U.S. for that same time period."
Questions: Would/could inventory "build-ups" in the U.S.A., account for less being purchased from foreign manufacturers? If U.S. markets are not selling what is already on-hand ( in inventory ), where would be the need to order more from abroad? Also, if the GDP shows an ( a significant ) increase for one quarter, does that indicate less demand and dependency on foreign imports?
A big question would be, concerning the products manufactured in the U.S.A., that could possibly lessen our dependency on the same products presently manufactued abroad, what are those products? An increase in GDP doesn't mean that we're producing more of what we're using and consuming. It just means that we're prodicing more of what we don't import. In other words, the increase in GDP doesn't mean that we're building new textile mills, electronic assembly plants, or weaning ourselves away from our dependency on foreign imports.
Our long-running trade deficits do fluctuate, as does the GDP. But, neither fluctuate due to our weaning ourselves from the dependency on foreign imports. We're not taking back the steel, electronics, furniture, tool, toy, and other industries.
While an increase in GDP may have meaning to day traders on Wall Street, until it coincides with "steady decreases" in unemployment and our import dependency, it holds little meaning to John Q. Public on Main Street America.
I was reading around the Internets and then saw Dean Baker's post on how most analysis of the Q4 GDP report ignore the trade deficit deceleration.
It is the #1 component which created increased GDP growth, #2 being the deceleration (negative) on private inventories.
I'll bet money most financial reports do not even read the BEA report and beyond that, I'll bet they do not understand how the slope, or change of either of these two, private inventories, trade deficit, affects GDP and why that measure is valid.
Inventories are inventories, so people are making stuff and it's sitting around, waiting to be used, that's economic activity, even though it's not a final sale.
The trade deficit represents stuff outside the nation. Gross Domestic Product is Domestic, or what's happening only inside the U.S.A. so a deceleration of the trade deficit means people had to utilize more domestic goods, stuff from the U.S.A. to maintain the same level of economic activity, therefore, a decrease in the trade deficit translates to an increase in what's being produced in the U.S. for that same time period.
It's not intuitive and there is no doubt, understanding the GDP report takes work...
Folks, just a reminder we are a news source. There were some technical problems that were fixed last night and we're still working on keeping out of news aggregators posts which are not news.
That said, while this is a layperson's economic blog, make sure your posts are well formatted, cited and accurate, with loads of data.
While we want to add our voice to give the regular folk slant on the economy and issues surrounding it, we sure do not want to add to the noise out there.
That's the argument the Bush-Gingrich crowd used against strategic defaults and successful challenges of fraudulently conceived and executed mortgage contracts. But when it comes to screwing the state employees and the citizens out of services, they're OK with default.
I do think that there is at least an awareness of the collective effects of chaos by the perpetrators. They're living off of their vapor value stocks and watching the people suffer. Not a pleasant seen and not tolerable for long. Very good point on your part.
The people of Tunisia and Egypt have had enough. Conditions were so bad in Tunisia, people chose self-immolation as a way out. There was no religious underpinnings of that revolution and Egypt's is free of that, it appears.
It's time to say enough, no more. Fix it or get out of the way and let us fix it. How many times do we need to see a politician talk about how productive the American worker is? It's become both trite and revolting, at the same time. The element of the society that isn't productive is the faction in control. They failed miserably. So, I'm sure they're expecting a promotion.
The financial crisis on the state level, as well as on the federal level, can best be understood by examining each individual part, that collectively, combine to produce the economic chaos being felt and reported all across this nation. What we're seeing is the proverbial "domino effect", where "A" influences "B", which in turn, causes "C". On the state level, we have fat unmerited and unwarranted pensions for state workers. As reported a short while back, some police officers in California receive over $100k a year in retirement pay. Also in California, its been reported for years that illegal immigrants receiving benefits from social programs, such as medical care, food stamps, housing and education, are a huge cost to state revenue funds. And, as it is with the federal government, years of "run-away spending" and "no-bid government contracts", have finally taken their toll. The big picture is comprised of many pieces, and each piece has contributed to the financial and socioeconomic crisis across this nation.
When you have more money going out than coming in, you have to borrow money to meet your obligations. This borrowed money ( debt ) soon becomes the proverbial snowball rolling down the mountain, getting bigger and bigger as it rolls. Lost and declining tax revenue, deficit spending, and growing demand for state and federal funded services and programs, collectively will produce a financial train wreck.
The unemployment situation has contributed much to the financial misery of both the state governments and the federal government. High unemployment results in less tax revenue through payroll deductions, less sales taxes, more demand on state provided assistance programs, more demand on assistance programs provided by the federal government, and less spendable income in the pockets of consumers to support retail.
Another piece of the big picture is the huge drop in property taxes. Property devaluation has resulted in less tax revenue for local and state coffers. Many previous homeowners are now renters, and renters don't pay property taxes.
In addition, tax revenue is lost through corporate tax breaks, job out-sourcing, unemployment benefits, assistance programs, tax loop-holes, tax cuts, and unrealistic pension gaurantees. In short, the "debt buzzards" have finally come home to roost.
Bankruptcy is not the answer, nor is it a cure. There're no signs or indications that the financial crisis is a temporary problem, or one that can be rectified in the near future. Even after possible bankruptcies, the problems will remain, as will the shortage of tax revenue. Besides, bankruptcy doesn't cure irrresponsible spending, habitual waste, and a system founded on debt based operation.
As long as we have a "dependent economy", these problems and conditions will remain, and realistically, get much worse. We do not have a self-supporting economy, sufficient enough to meet the financial challenges facing state governments, the federal government, and Main Street America.
There are a lot of stories on this report. Firstly the one large financial institution not in peril of immediate collapse according to Bernanke was JP Morgan Chase. Those extortion fees on credit cards must have really paid off.
Secondly, the report does go into derivatives extensively but the reason I am critical is we, during the crisis, showed repeatedly the actual mathematics, the actual models is invalid. The math is invalid. Then, we overviewed some research from computer science which also proved one cannot validate most of the CDOs by the way they were structured, there isn't enough computer power in the world.
That said, at least the report points to some derivatives as well as the credit ratings agencies.
I don't know what the GOP are smokin' except a strong desire to not regulate their Wall Street pals.
"Mr. Speaker, the trade deficit is at $10 billion a week, $40 billion a
month, a half trillion dollars a year. Unbelievable. Japan continues to take
$60 billion out of our economy a year, and China is now taking over $100
billion a year out of America, and both Japan and China continue to keep
American products out.
Now, if that is not enough to neuter your dragon, China has missiles
pointed at us.
Beam me up. A Nation that buys more than they sell will go bankrupt, and a
Nation that allows illegal trade destroys all American industry.
I yield back the bankruptcy of America's steel industry. Day after day the
filings continue to mount up."
12,000 deaths from unnecessary surgeries;
7,000 deaths from medication errors in hospitals;
20,000 deaths from other errors in hospitals;
80,000 deaths from infections acquired in hospitals;
106,000 deaths from FDA-approved correctly prescribed medicines.
The total of medically-caused deaths in the US every year is 225,000.
This makes the medical system the third leading cause of death in the US, behind heart disease and cancer.
I think what scares people the most is that they call it "Health Care Reform" when it is actually "Health Insurance Reform." Our care doesn't need reformed but the insurance and the cost of that care does. It is terrible how the self-employed pay so much more for insurance.
that makes sense. Hopefully Churchill's quote about the U.S. doing the right think after exhausting all other possibilities will come true. We need revenue very badly.
Robert,
No, I do not ignore statistics. And, yes, I do understand that this site is all about statistics. I believe that you've explained that point very well several times.
My comments were meant to be additions to the information that you provided.
Trade deficits do adversely effect economic growth, which GDP numbers fail to include. My comments were meant to express points which show that GDP numbers alone, do not fairly represent the overall economic picture.
I was only adding to what you had presented. I'm in agreement with your take on the situation.
Robert,
Yes, correct, GDP is domestic. No, I'm not confused.
At a time of economic crisis such as we're experiencing now, GDP numbers are nothing more than fodder for Wall Street. While they do indicate output, they indicate little else.
Examples :
(1) If GDP output increased by 2.0% in one month, what would it tell us about the overall state of the economy?
(2) If GDP output decreased for 3 out of 6 months, what would it tell us about the overall state of the economy?
(3) If GDP output increased for 3 consecutive months, but no other economic indicators moved, what would it tell us about the direction the economy was moving towards?
(4) If GDP output increased for 12 months, yet, unemployment remained high, trade deficits increased, and consumer spending remained weak, what would it tell us about the economic conditions on Main Street?
In order for GDP output to indicate economic strength or weakness, it must be accompanied by supporting data such as employment, trade deficits or surpluses, consumer buying habits, commercial investment, and domestic demand for domestic products and services.
You will find overviews on all sorts of economic reports and data. This report has some personal income in it, but it's the aggregate, not the median. I like to break it up to focus on just GDP breakdowns. The Labor Economics link has the unemployment report overviews where I dig around to locate the missing and not counted from the BLS data.
I just wrote State of the Spinon as quite the slam on Obama and his corporate lobbyist talking points. Even Krugman noticed the stir, repeat on the same lobbyist lines claiming bad trade deals create jobs. They said the same thing about NAFTA, yet it only by reading these trade deals can one see the details and see how they will be more offshore outsourcing, job loss.
In the Saturday reads, Public Citizens job losses on the Korea FTA by State.
If there is anything in this report that really should wake people up, is how much the trade deficit affects domestic economic growth.
But the numbers are what the numbers are, and I'm not sure what all these comments are about, do you wish to ignore the statistics? This site is all about statistics, including GDP.
Firstly, I think you are confusing GDP. GDP is domestic production. On employment, there is something called multipliers. GDP has a correlation to employment, called Okun's law. That said, it has been diverging and I believe that's due to offshore outsourcing, increases in productivity (which is a combo of elements).
For example, on Stimulus myself and other economic bloggers railed on it due to the refusal to add buy American and hire America requirements for funding and much of the Stimulus was not "Stimulative". There's an example where taking GDP multipliers isn't going to work for increased employment because they are busy not keeping temporary stimulus within the U.S. borders. There are also different multipliers for different things, case in point tax cuts are not very stimulative.
The breakdown of how much is exports is right in this post. The percentage point spread was 0.22 or not a lot. It was the deceleration of imports that made the difference.
GDP is one economic indicator of economy activity. Here is the last post on Okun's law and it looks like I need to update a new one on the correlation of GDP to jobs.
Robert,
** A Side Note :
President Obama talked about doubling exports in the State of the Union Address last night as a strategy to create jobs. It's a great sound bite, but woefully incomplete economics. While exports support American jobs, imports displace them; when imports grow faster than exports, our trade deficit expands and American jobs are lost. Between 2001 and 2007 (both business cycle peaks), we lost 3.4 million U.S. manufacturing jobs, and the fact that the trade deficit as a share of GDP rose by roughly one-third is a key reason why. Lately, when the president has talked about jobs and trade, he mentions the jobs associated with exports but ignores those lost due to growing imports. It's like watching baseball, but only counting runs scored by the home team—lots of fun, but it won't tell you anything about who is ahead.
[ January 26, 2011 - http://www.epi.org/analysis_and_opinion/entry/exports_and_jobs_less_than... ]
------------------------------------------------------------------------------------------------------------------------
GDP numbers do not reflect a host of economic data that reveals the true picture of our problems. GDP does show increases/decreases in production, and should be reported along with supporting data on employment, domestic consumption, the ratio between GDP and imports, and the reason(s) for any increase or decrease.
Inventories, seasonal demand, cost of living ( energy, food, etc. ), spendable income in the pockets of consumers, interest rates, technology and innovation, new products and services, the availability of capital on balance sheets, etc., all influence GDP numbers.
GDP numbers do reflect demand for products and services, but are incomplete without supporting economic data.
Robert,
Yes, you're correct, the economy does matter to Main Street. And yes, increases in GDP does mean that our workforce is not idle.
But.............
First, the GDP is not an indicator of our economic well-being, nor is it an indicator of our dependency on cheap foreign imports. Secondly, Wall Street reacts to the GDP numbers, but rarely do those surviving off of government assistance programs and unemployment checks. And thirdly, the GDP numbers do not mean that we're producing more of what we use and consume.
Technology and innovation has enabled us to produce more with less manpower. During peak production, employees work more hours, and employers hire temporary help. The GDP numbers do not correlate to the overall employment picture, nor do they indicate a difference in the number, or value, of living wage opportunities for our diverse workforce. So, what exactly is the meaning of GDP numbers on Main Street America?
In order for increases in the GDP numbers to have real and significant meaning on Main Street, they must coincide and run parallel to meaningful increases in employment, and a significant reduction in our import dependency. Again, increases in GDP does not mean that we're taking back lost industries and once again providing living wage opportunities for our diverse and growing workforce.
Also, how much of the increase in GDP is for domestic markets, and how much is exported? Are we actually demanding and buying more U.S. made products? What does the increase in GDP tell us about our competitiveness in global markets?
While day traders and Wall Street react to GDP numbers, Main Street America reacts to their precent economic nightmare, and the realization that there aren't enough living wage jobs to satisfy the need.
Ok, firstly I think it needs to be clear what gross domestic product is, GDP means only stuff in this country. I think the BEA this time put a great definition front and center:
So, while we can get into some stuff that is "foreign being counted erroneously, that's what all of this big honkin' bookkeeping is about, they are isolating economic activity to the above.
Inventory build ups are domestic, if there are foreign goods being added to the shelves, they are subtracted off via the import part of the equation. Inventory build up can be for any reason, either they are preparing for more sales in the future, or they are not making enough sales and have not scaled back yet.
Those are domestic producers, they could sell those inventories, domestically, abroad, the point is its domestic production. When they make the sale and move that inventory off the shelf, if it goes abroad, it's no longer an inventory, but now an export.
This quarter does show less demand for imports and if you look at the "real demand" graph, it's so much stronger than last quarter overall. Keyword "dependency" is another kettle of fish, so if you click on trade deficit reports there you can find the monthly import totals. Less imports of oil, less "dependency" of it, but define "dependency".
It could mean overall less demand vs. any sort of shift to domestic production, so one needs to look at domestic production as well as overall energy. i.e. did people switch to ?? solar panels instead of electric, you wouldn't see that shift w/o looking at total energy consumption/usage for a month (or 3) and then determine overall demand.
From the increase in PCE (C), I'd claim it does imply we're producing more and the IP numbers reasonably correlate. To see individual categories, products, NAICS codes,
all of the economic reports I overview, always with links to the corresponding government website/database where you can obtain more details.
This is the GDP report, it's the "macro kahuna" but what went into it is from other more detailed monthly report.
Hey, you won't see me claim that magically our trade deficit is going to reduce, this is just for that quarter, which is a good thing, but I already wrote some overviews on the trade deficit projected increases, so this probably will not last.
GDP isn't static, this is a 3 month snapshot and it's the advance report, odds on a host of these components will be revised.
Increase in GDP should matter to main street because there are employment multipliers, for every 1% increase in GDP is a corresponding increase in future employment...
*that* said, we've already written how Okun's law is broken on this site and I will assuredly do another "where are the jobs" post soon.
So, in other words, due to a host of reasons, while in the past this should indicate a lot of jobs....it's not.
But this does matter to main street as well as Wall Street. You cannot have job growth without a humming economy.
The "real economy" matters to main street.
The only reason that these states have financial problems is that the rich and corporations don't pay anywhere near their share in taxes.
Robert,
Your words: "The trade deficit represents stuff outside the nation. Gross Domestic Product is Domestic, or what's happening only inside the U.S.A. so a deceleration of the trade deficit means people had to utilize more domestic goods, stuff from the U.S.A. to maintain the same level of economic activity, therefore, a decrease in the trade deficit translates to an increase in what's being produced in the U.S. for that same time period."
Questions: Would/could inventory "build-ups" in the U.S.A., account for less being purchased from foreign manufacturers? If U.S. markets are not selling what is already on-hand ( in inventory ), where would be the need to order more from abroad? Also, if the GDP shows an ( a significant ) increase for one quarter, does that indicate less demand and dependency on foreign imports?
A big question would be, concerning the products manufactured in the U.S.A., that could possibly lessen our dependency on the same products presently manufactued abroad, what are those products? An increase in GDP doesn't mean that we're producing more of what we're using and consuming. It just means that we're prodicing more of what we don't import. In other words, the increase in GDP doesn't mean that we're building new textile mills, electronic assembly plants, or weaning ourselves away from our dependency on foreign imports.
Our long-running trade deficits do fluctuate, as does the GDP. But, neither fluctuate due to our weaning ourselves from the dependency on foreign imports. We're not taking back the steel, electronics, furniture, tool, toy, and other industries.
While an increase in GDP may have meaning to day traders on Wall Street, until it coincides with "steady decreases" in unemployment and our import dependency, it holds little meaning to John Q. Public on Main Street America.
I was reading around the Internets and then saw Dean Baker's post on how most analysis of the Q4 GDP report ignore the trade deficit deceleration.
It is the #1 component which created increased GDP growth, #2 being the deceleration (negative) on private inventories.
I'll bet money most financial reports do not even read the BEA report and beyond that, I'll bet they do not understand how the slope, or change of either of these two, private inventories, trade deficit, affects GDP and why that measure is valid.
Inventories are inventories, so people are making stuff and it's sitting around, waiting to be used, that's economic activity, even though it's not a final sale.
The trade deficit represents stuff outside the nation. Gross Domestic Product is Domestic, or what's happening only inside the U.S.A. so a deceleration of the trade deficit means people had to utilize more domestic goods, stuff from the U.S.A. to maintain the same level of economic activity, therefore, a decrease in the trade deficit translates to an increase in what's being produced in the U.S. for that same time period.
It's not intuitive and there is no doubt, understanding the GDP report takes work...
Folks, just a reminder we are a news source. There were some technical problems that were fixed last night and we're still working on keeping out of news aggregators posts which are not news.
That said, while this is a layperson's economic blog, make sure your posts are well formatted, cited and accurate, with loads of data.
While we want to add our voice to give the regular folk slant on the economy and issues surrounding it, we sure do not want to add to the noise out there.
Clarity, not confusion.
That's the argument the Bush-Gingrich crowd used against strategic defaults and successful challenges of fraudulently conceived and executed mortgage contracts. But when it comes to screwing the state employees and the citizens out of services, they're OK with default.
I do think that there is at least an awareness of the collective effects of chaos by the perpetrators. They're living off of their vapor value stocks and watching the people suffer. Not a pleasant seen and not tolerable for long. Very good point on your part.
The people of Tunisia and Egypt have had enough. Conditions were so bad in Tunisia, people chose self-immolation as a way out. There was no religious underpinnings of that revolution and Egypt's is free of that, it appears.
It's time to say enough, no more. Fix it or get out of the way and let us fix it. How many times do we need to see a politician talk about how productive the American worker is? It's become both trite and revolting, at the same time. The element of the society that isn't productive is the faction in control. They failed miserably. So, I'm sure they're expecting a promotion.
The financial crisis on the state level, as well as on the federal level, can best be understood by examining each individual part, that collectively, combine to produce the economic chaos being felt and reported all across this nation. What we're seeing is the proverbial "domino effect", where "A" influences "B", which in turn, causes "C". On the state level, we have fat unmerited and unwarranted pensions for state workers. As reported a short while back, some police officers in California receive over $100k a year in retirement pay. Also in California, its been reported for years that illegal immigrants receiving benefits from social programs, such as medical care, food stamps, housing and education, are a huge cost to state revenue funds. And, as it is with the federal government, years of "run-away spending" and "no-bid government contracts", have finally taken their toll. The big picture is comprised of many pieces, and each piece has contributed to the financial and socioeconomic crisis across this nation.
When you have more money going out than coming in, you have to borrow money to meet your obligations. This borrowed money ( debt ) soon becomes the proverbial snowball rolling down the mountain, getting bigger and bigger as it rolls. Lost and declining tax revenue, deficit spending, and growing demand for state and federal funded services and programs, collectively will produce a financial train wreck.
The unemployment situation has contributed much to the financial misery of both the state governments and the federal government. High unemployment results in less tax revenue through payroll deductions, less sales taxes, more demand on state provided assistance programs, more demand on assistance programs provided by the federal government, and less spendable income in the pockets of consumers to support retail.
Another piece of the big picture is the huge drop in property taxes. Property devaluation has resulted in less tax revenue for local and state coffers. Many previous homeowners are now renters, and renters don't pay property taxes.
In addition, tax revenue is lost through corporate tax breaks, job out-sourcing, unemployment benefits, assistance programs, tax loop-holes, tax cuts, and unrealistic pension gaurantees. In short, the "debt buzzards" have finally come home to roost.
Bankruptcy is not the answer, nor is it a cure. There're no signs or indications that the financial crisis is a temporary problem, or one that can be rectified in the near future. Even after possible bankruptcies, the problems will remain, as will the shortage of tax revenue. Besides, bankruptcy doesn't cure irrresponsible spending, habitual waste, and a system founded on debt based operation.
As long as we have a "dependent economy", these problems and conditions will remain, and realistically, get much worse. We do not have a self-supporting economy, sufficient enough to meet the financial challenges facing state governments, the federal government, and Main Street America.
There are a lot of stories on this report. Firstly the one large financial institution not in peril of immediate collapse according to Bernanke was JP Morgan Chase. Those extortion fees on credit cards must have really paid off.
Secondly, the report does go into derivatives extensively but the reason I am critical is we, during the crisis, showed repeatedly the actual mathematics, the actual models is invalid. The math is invalid. Then, we overviewed some research from computer science which also proved one cannot validate most of the CDOs by the way they were structured, there isn't enough computer power in the world.
That said, at least the report points to some derivatives as well as the credit ratings agencies.
I don't know what the GOP are smokin' except a strong desire to not regulate their Wall Street pals.
Someone went back and compares a Herbert Hoover SOTU speech to Obama, with frightening similarity.
Read it here.
"Mr. Speaker, the trade deficit is at $10 billion a week, $40 billion a
month, a half trillion dollars a year. Unbelievable. Japan continues to take
$60 billion out of our economy a year, and China is now taking over $100
billion a year out of America, and both Japan and China continue to keep
American products out.
Now, if that is not enough to neuter your dragon, China has missiles
pointed at us.
Beam me up. A Nation that buys more than they sell will go bankrupt, and a
Nation that allows illegal trade destroys all American industry.
I yield back the bankruptcy of America's steel industry. Day after day the
filings continue to mount up."
February 7, 2001
Rep. Jim Traficant (D-OH).
Richard,
FYI :
Every year in the US there are:
12,000 deaths from unnecessary surgeries;
7,000 deaths from medication errors in hospitals;
20,000 deaths from other errors in hospitals;
80,000 deaths from infections acquired in hospitals;
106,000 deaths from FDA-approved correctly prescribed medicines.
The total of medically-caused deaths in the US every year is 225,000.
This makes the medical system the third leading cause of death in the US, behind heart disease and cancer.
( http://www.dailypaul.com/node/153886 )
I think what scares people the most is that they call it "Health Care Reform" when it is actually "Health Insurance Reform." Our care doesn't need reformed but the insurance and the cost of that care does. It is terrible how the self-employed pay so much more for insurance.
that makes sense. Hopefully Churchill's quote about the U.S. doing the right think after exhausting all other possibilities will come true. We need revenue very badly.
To prevent us from stopping there eventual take over ov Taiwan.
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