GDP (Gross Domestic Ponzi)

[peilthetraveler]

Quote from Martinghoul:

This is silliness... Even if you assume constant trend growth starting from the 80s, you'll arrive at the real (as opposed to nominal) GDP of somewhere arnd $10trn. That's a rather conservative estimate, as it assumes no TFP increases.

How many producing jobs have disappeared since the 80s though? For instance...back in the 80s, if you called a company, you get an operator to help you. Today...you get a computer telling you to push buttons or go to their website if you want help. When you finally do get a real person, they are not even in the United states....they are in india.

We had a chance to get some jobs with the information age, but now alot of software developing has gone to other countries too.

Jobs like back-office bank jobs and medical transcription are all going overseas. When you lose jobs, you lose GDP if its not replaced by something and for a while we replaced that lost GDP with dot coms that employed a ton of people while that lasted in the late 90s. Then we had everyone getting rich with real estate until 2007. Now the government is dropping money out of helicoptors to keep us going. Giving us cash for clunkers, giving us 8k to buy a house and even sending everyone a $600 check to spend once every year.


yes, government spending is part of any economy, but when you are blowing through more than you take in, its not real growth. Its like a guy that makes 50k per year goes out and spends 25k on his credit card and then telling everyone he made 75k that year. Now imagine he did that every year over and over. All his friends & family thinks he is making 75k per year because he is spending money like he is, but pretty soon, he is not only going to have to pay that back, but his spendable income is really going to drop.

Or he could just claim Bankruptcy i suppose.

 

[Kassz007]

Quote from peilthetraveler:



yes, government spending is part of any economy, but when you are blowing through more than you take in, its not real growth. Its like a guy that makes 50k per year goes out and spends 25k on his credit card and then telling everyone he made 75k that year. Now imagine he did that every year over and over. All his friends & family thinks he is making 75k per year because he is spending money like he is, but pretty soon, he is not only going to have to pay that back, but his spendable income is really going to drop.

Or he could just claim Bankruptcy i suppose.

If only there were a way that this guy could implement some kind of policy to induce inflation...not hyperinflation, but moderate inflation. Some way some how. This man would be very happy as the large amount of debt he owes, suddenly is not so large and much more manageable.

Suddenly the future for this man does not look so bleak, even though all of his friends and family are telling him his life will be ruined in the near to mid term future.

 

[Martinghoul]

Quote from peilthetraveler:

How many producing jobs have disappeared since the 80s though? ...

yes, government spending is part of any economy, but when you are blowing through more than you take in, its not real growth...

I disagree with you... IMHO, you're not seeing the forest for the trees. In fact, the process you describe is exactly how economies grow. It's never a smooth process, but seems to work, in the end.

Firstly, losing specific types of jobs is not, in the long run, necessarily detrimental to the economy. Suppose you lose jobs that are are low-paying and unskilled labor-intensive. Subsequently, they get replaced with industries and jobs that generate more value-added. That is positive for GDP in the long run. Obviously, this is a lengthy process that takes multiple decades, maybe longer.

Secondly, why is it not real growth? Take a simple example. Suppose hypothetically that your government invests more than it takes in into large infrastructure developments. Why couldn't these projects, when completed, provide enough of a productivity boost that you have more than enough to cover your investment?

 

[djkla]

Quote from Martinghoul:



Firstly, losing specific types of jobs is not, in the long run, necessarily detrimental to the economy. Suppose you lose jobs that are are low-paying and unskilled labor-intensive. Subsequently, they get replaced with industries and jobs that generate more value-added. That is positive for GDP in the long run. Obviously, this is a lengthy process that takes multiple decades, maybe longer.



Nice theory.

U.S. manufacturing went from manual labor-intensive to computerized and automated, then even those "value-added" high-tech jobs went away.

 

[Martinghoul]

Quote from djkla:
Nice theory.

U.S. manufacturing went from manual labor-intensive to computerized and automated, then even those "value-added" high-tech jobs went away.

How is this a theory? Isn't this pretty much what all of human economic history is about? Colonization, industrialization, computerization, you name it...

The problem is that somehow Americans got it into their heads that they have some sort of a 'divine' right to win at these games (all this 'manifest destiny' type of rhetoric never ceases to amaze me). Unfortunately, that's not how this particular cookie crumbles. There's a few more players and they have learned a few new tricks.

 

[endsongs]

Quote from Martinghoul:

...
Secondly, why is it not real growth? Take a simple example. Suppose hypothetically that your government invests more than it takes in into large infrastructure developments. Why couldn't these projects, when completed, provide enough of a productivity boost that you have more than enough to cover your investment?

The gov't is running a huge deficit which means that it is taking in less than the investment it has put out. See the percentage of bailout money that has been loaned back out by the banks for an example.

 

[Misthos]

I agree with peil.... wow that was hard to type.

Anyway, for all the kool-aid drinkers out there, how can this paradigm continue:

Seems to me that the ponzification of the US economy began in earnest in the early 1980s. Kind of troubling, if you ask me, that every year more debt is required to create a dollar of gdp growth. I have posted this chart in different forms many times. I have yet to hear a good explanation as to how this will end well, or if it is normal.

 

[Martinghoul]

Quote from endsongs:

The gov't is running a huge deficit which means that it is taking in less than the investment it has put out. See the percentage of bailout money that has been loaned back out by the banks for an example.

So what?

Isn't this type of scenario relatively common in business? Why is that such a horrible thing, especially when you consider that your govt is a monopoly, where provision of public goods is concerned... Moreover, Japan and other countries have been doing this for the past couple of decades.

Obviously, that's all fine only as long as the govt doesn't do a Lehman/Bear; i.e. it has to be able to roll its funding. Do you think there's a danger the US govt wouldn't be able to fund itself in the near future?

 

[stock piker]

Quote from Misthos:

I agree with peil.... wow that was hard to type.

Anyway, for all the kool-aid drinkers out there, how can this paradigm continue:

Seems to me that the ponzification of the US economy began in earnest in the early 1980s. Kind of troubling, if you ask me, that every year more debt is required to create a dollar of gdp growth. I have posted this chart in different forms many times. I have yet to hear a good explanation as to how this will end well, or if it is normal.

Perhaps Martinghoul would comment on this rosy scenario. Imagine the wage-earner netting $100k a year with $375k in unsecured debt and zero savings. Would that individual be considered solvent?

 

[Scataphagos]

Quote from Misthos:

"... I have yet to hear a good explanation as to how this will end well, or if it is normal.

Rome.