Posted on 04/26/2013 5:02:39 PM PDT by blam
LAKSHMAN ACHUTHAN: Yes, It's Possible To Be In A Recession With GDP Growth At 2.5%
Sam Ro
Apr. 26, 2013, 10:37 AM
Earlier today, we learned that real GDP grew at a 2.5% rate in Q1.
While this was much lower than the 3.0% growth rate forecasted by economists, it still seems to be a clear indicator of economic growth.
But not everyone sees it that way.
Lakshman Achuthan of the Economic Cycle Research Institute has long argued that the U.S. economy slipped into a recession in mid-2012.
And he is convinced that we continue to be in a recession now.
We asked Achuthan how today's GDP report fit into his thesis. Here's his response:
So, with U.S. GDP growth at 2.5%, how can we be in recession?
Few realize that GDP data for almost all the early quarters of recent recessions have been revised down dramatically.
Recall that the GDP release on August 28, 2008 – with the economy eight months inside the Great Recession – revised Q2/08 GDP growth to 3.3% from 1.9%, up from 0.9% in Q1/08. But both of those data points, as well as GDP data for the first two quarters of the 2001 and 1990-91 recessions, were revised by 2 to 4 percentage points over time. This is how real-time data often behave during recessions.
Furthermore, yoy nominal GDP growth at or below 3.7% has occurred only in recessionary context. Q1 2013 read is 3.4%, the second straight quarter below 3.7%.
In summary, revisions have historically been negative, real GDP appeared to grow handily in the last recession, and nominal GDP (which combines real GDP with inflation) is still very low.
ACHUTHAN: Look At These Charts And Tell Me We're Not In Recession
(Excerpt) Read more at businessinsider.com ...
How much is GDP in the hole when you subtract what the fed is pumping into it?
That’s a good question. Another is, why does the Fed have to keep printing money and pumping it into our economy if the economy is recovering?
Also,where’s GDP if inflation is factored in?
Why do they have to collect taxes when they can just print it? /snark
Stating of the obvious.
Government spending is 1/3 of GDP.
Incidentally, this is why Milton Friedman, whose works on capitalism and freedom, was completely wrong in thinking monetarism could be controlled by tying the increase in the money supply to GDP.
If the government wanted to print an extra 100 billion next year, all they need to do is increase spending enough to raise the GDP to reach that goal, even if it is only on paper.
By the way, Debt-to-GDP is now at 105%.
Clearly an exercise in “FUN with NUMBERS.”
This sentence makes no sense. Nor does your feeble attempt to discredit Friedman on this thread.
Of course it’s possible, if GDP is measured in a floating (sinking) dollar. Suppose I double my savings in 5 years. Great, if there is NO inflation. But suppose also that the Fed is pumping 85 billion dollars into the economy every month. Do you think that doubling my savings actually doubles my wealth?
Of course not - when the unit of measure changes, the measurement is no longer compatible with measurements made prior to the change. Especially when the government pretends to account for the amount of change.
probably -1 to -3% at least...
Farmer Bob here: GDP=T-I: where t= dollars of total goods and services and I= inflation. Inflation is really about 8% calculated truthfully (ref Shadow Stats). Each president since Clinton has adjusted the inflation formula so inflation comes out smaller (to yield a positive GDP and to save billions in cost of living raises). Suppose the BLS reports GDP is 4% (positive means growth) and also reports that inflation was 3% (ie, 4=7-3); but, if inflation was really 8%, then GDP was really -1% (negative is shrinkage) (ie, -1=7-8).
Let me explain it for the reading-impaired.
Friedman was a monetarist.
Monetarism is a socialist system of finance and monetary control.
Friedman wrote great books on freedom and how capitalism and the free-market economy is the best system for providing freedom and is the most democratic of all economic systems.
Monetarism is a form of central banking, which is a socialist banking system, which is the antithesis of free enterprise.
Even Friedman in his later years started to turn against monetarism.
Why?
Because if you give one small, elect group of people control over the currency, then the voluntary contracts that others involved in the free-market economy are under the control of that elect group of people.
Toward the end of his career, Friedman suggested that monetarism could only work if there were a constitutional amendment to restrict the growth of the money supply to a percentage of GDP.
My point was that Friedman should know that if 1/3 of GDP is government spending, then wicked politicians would figure out a way to print all the money they want which is the problem we have today, and which is built into monetarism and central-banking.
Did you know that Friedman is a darling of the Keynesians, too?
As I said, I like is writings on free markets and freedom, but his support of monetarism which is controlled by central banking, is antithetical to his support of free markets and capitalism and freedom.
Does that clear it up for you?
Next time, instead of being a wise-ass and insulting me, just ask me to clarify what I’m talking about. I’m happy to educate.
If you support free-markets and capitalism, you need to look into the Austrian school of economics.
Hey brainiac, f-you. read your own original sentence, no, its not even a sentence. read you own post. it makes no sense.
But with your longer post I now realize its all Milton Friedmans fault. yeah sure.
Did you actually resort to third-grade name-calling? And did you actually tell me to eff off? Wow. Brilliant. And I’m petrified.
I’ve made the point about Friedman’s massive self-contradiction so many times here on FR that I assume most people are somewhat familiar with the argument. Most who have had an exchange with me learn to accept what I have: that his writing and lectures/debates on capitalism and freedom are priceless but that his support of central banking and monetarism contradicts his free-market arguments.
It is hard to accept at first. But if you study what I wrote, you’ll understand that we conservative patriots have more economic allies in the Austrian school (which is truly a free-market based economic set of principles) than we do with the monetarists.
Good luck with your studies, and with that thin skin of yours.
Your pedantic arguments are less than convincing.
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