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Question on GDP growth rate?

Does anyone know how much of the GDP this past quarter was deficit spending and also how much of it was due to the stimulus and/or goverment spending? I would suspect it to be higher than usual(if growth is seasonally adjusted)

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Gross Domestic Product { GDP } is not what it seems.

Lets break these words down:
Gross: Overall, full amount, etc.
Domestic: Produced within the USA or its territories.
Product: A tangible thing of value.

My opinion of what GDP has morphed into is; How many dollars have circulated in the past quarter, which is very misleading because dollars in circulation do not represent a product in many cases.
Dollars are I.O.U. notes created at the bidding of the congress, Treasury, and Fed, out of thin air.

Do the dollars represent Gold, Silver, Copper, or any other tangible "Product"?

Therefore, when interest payments of I.O.U. notes are added together quarterly, because of an ever depreciating value of currency, the "official" GDP numbers, should always rise, even when the production of tangible "Product" declines.


everyone agrees

that things like the stimulus and cash for clunkers helped cause that number to go much higher than it should have or would have been. that is the reason that we are not officially" out of the recession yet. gdp growth is a good thing but the question is and always has been; what is the cost of the growth. only time will tell if the cost is worth it.


only measures quantity of spending.

It says nothing as to the QUALITY of spending.

GDP is a measure that should be taken with a large grain of salt, up or down.


Freedom - Peace - Prosperity

SteveMT's picture

The devil is in the details as usual. They control the numbers.

For all of 2009, the economy shrank 2.4 percent, the worst single-year performance since 1946.

Read more: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Sy...

Third-quarter purchases received a boost from the government’s auto-incentive program that offered buyers discounts to trade in older cars and trucks for new, more fuel- efficient vehicles. The plan expired in August.

Household purchases dropped 0.6 percent last year, the biggest decrease since 1974.

Read more: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Sy...

And especially:

Today’s GDP report is the first for the quarter and will be revised in February and March as more information becomes available.

Read more: http://www.tradingeconomics.com/Economics/GDP-Growth.aspx?Sy...

The real question...

If GDP rose 5.7% for the 4th quarter but our actual deficit rose to 11.2% of GDP for 2009, why do our ~economic experts~ think we are no longer in a recession?

The dramatic expansion of the deficit in 2009 (up from 3.2 percent of GDP in 2008) results from a projected rise in outlays of 24 percent (the largest percentage increase since 1952) and a drop in revenues of 17 percent from last year’s levels (the largest percentage drop since 1932).

As a result, debt held by the public would continue to grow as a percentage of GDP during that time. That debt, which was as low as 33 percent of GDP in 2001, would reach an estimated 54 percent of GDP this year and grow to 68 percent of GDP by 2019.

I think that happy days are not yet here again.

Of course, I'm merely a layman in respect to the field of economics... so what do I know?

Edit: Sorry, pulling numbers from the CBO report. Documentation here...


~Live life to its fullest, with an open heart, open arms and most important... an open mind~

You know...

more than most Devon!

Only thing I would add is the Debt/GDP figures from the .gov versus from a 3rd party source.

Rogovv & Reinhart have it at 84% for the U.S., an increase of 75% from 2007 to the end of 2009.

UK 72%
Iceland 69%

In October of 2008 I did a statistical analysis of Iceland vs. the U.S. before the Iceland collapse. Iceland actually had better data than the U.S. back then.


And of course things have only got worse for us here....

No "happy days" indeed.... More like enjoy your happy days while you have em... unfortunately...

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Hi Doug!

I enjoyed your comparison, down to the ~yea right~ for our inflation number!

I do agree that it would be far more interesting working with 3rd party numbers on a lot of this, where they are available.

However, when even thier OWN numbers add up to the word Unsustainable it has to give one pause for thought.

If there was still such a thing as journalism, the majority of our economic experts would be depicted as nothing more than pom-pom carrying cheerleaders for the status quo.

~Live life to its fullest, with an open heart, open arms and most important... an open mind~

Very true...

Yes Devon...even their numbers "give one for thought" ha...

Your comment;

"If there was still such a thing as journalism, the majority of our economic experts would be depicted as nothing more than pom-pom carrying cheerleaders for the status quo."

is something I try to point out all the time. Relating to gold, on my site I challenge journalists, CFP's, CFA's, PhD's and even a Harvard Ecoomcis professor on their understanding of it. The training I had as a financial advisor (20+ years) never included any relevance to gold, all the way down to the CFP books I bought when I was going to become one. I even had the California license plate "CFP" ...(which I sold for $1,000 - ha!).

About 5 years ago I decided to give up my career and pursue my passion to write, but I had to get smarter first and did about 3 years worth of research, which I still continuously do.

When it comes to these statistics thrown out on CNBC and via the media, how they come up with them is never discussed, so most investors take them as gospel without knowing the numbers are historically rigged.

Today's CPI and Unemployment numbers can't be compared on a historical basis to yesterday's because of all the manipulations. And then there's "revisions that reflect the Pollyanna Creep of the latest methodological shifts in the GDP reporting" that John Williams of Shadow Government Statistics reminds us of.

It's not all black and white eh? But I know you know that...

For anyone else, regarding GDP, John Williams from SGS writes: "The SGS-Alternate GDP is an estimate of what the GDP would look like net of changes in reporting methodologies since the early-1980s. These changes generally have added upside reporting biases to GDP growth, biases that have moved GDP reporting up and away from common experience. (The methodology for the SGS-Alternate GDP series was discussed in the August 2006 SGS).

The alternative second-quarter 2009 GDP growth reflects the "advance" estimate, with many of the methodological gimmicks of recent decades removed."

Without knowing the difference, one can make some bad investment decisions. Heck, remember George W. Bush telling everyone we're not in a recession? Another thought is how can all of these Harvard, Yale and Wharton boys not see coming what most of us that follow Ron Paul (before he decided to run for President) knew was coming?

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Haven't researched the numbers yet...

but your suspicion is well founded...

There is some positive effect of the green shoots, but when you break it down, they cannot be long lived...

Of the four components for GDP, government spending is the only thing making (or trying to make) things tick.

We don't manufacture much any longer, so we are a net importer of cheaper goods. Besides, our (mostly union) labor costs are too high.

Consumers aren't spending, sans the one's who really dn't know what's going on and think things are "business as usual" and "all is well" in the economy.

Businesses aren't spending and can't even get loans to grow because banks used the TARP money to shore up their own balance sheets (keep in mind that some businesses are benefiting from the government's implementation of new policies, like that window manufacturing company and other green related technologies, but they are few and far between).

That leaves government growth.

You notice Obama talking the last few days about fixing the infrastructure. Where does the money come from to pay for that?

This isn't rocket science. GDP is only supported by government spending. When the money runs out (possibly the beginning of 2011 when Obama says they will put a freeze on spending), then what will support GDP? Will businesses all of a sudden become productive? Who will buy their products? Will consumers have jobs that will allow them the ability to buy more goods from these businesses? Will the government jobs created go on forever? Can we ever compete with China when their currency is tied to ours? The list goes on....

Congress is voting(voted?) on a 1.9 Trillion increase of the deficit along with the 300 billion Christmas Eve gift they gave themselves. It won't end there. Fannie and Freddie alone will see to that...

Maybe this answered your question...at least from a secular point of view...

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!