Requisite Commentary: We are talking about
"GDP." You need to understand exactly what "GDP" is .
. . . . . . . . and it is the measure of all things for which there is the exchange
of money whether that includes wages, paid out benefits, paid
insurance claims, the cost of food whether fresh or prepared, a gasoline
fill up, cigs, loan payments, a quarter in a toilet booth if
someone tracks that sort of thing --- and, depending on why
you are in that booth, I suppose . . . . . . ANYTHING for which money comes
into play. Currently, our nation's Gross Domestic Product is 15
billion dollars, annually. What this country buys and sells
annually, double China or Japan and no other country is even that close.
We are the richest nation on earth and we spent money like it.
Commentary:
Commentary:
Generally, GDP is
a good thing. It is a measure of wealth transfer. But, not all product added to the GDP report is a sign of good times. And this last quarter's report is a
perfect example of this caveat.
Here are the
facts.
There are four
quarters in a year and the last quarter of 2011 was just announced, as
relates to GDP.
The average GDP
for the entire year (2011) was 1.7% and that includes the fourth quarter
of . . . . . .
2.8 percent as a
total for the last quarter.
Anything under 3%
GDP is bad; anything close to 1% GDP is recessionary; two quarters
of sub 0% GDP is officially a "recession."
Conversely, people can start bragging when GDP gets to 3% or higher
and stays there. The economy is said to be prospering if 3% GDP
becomes an average percentage. At this point in time of the Reagan
recovery, the economy was pumping out 6 and 7 percent GDP numbers.
Yesterday,
the 4th quarter report was 2.8%.
Obama jumped all
over that number, as he is given to do -- kind of like a
little kid when he discovers a dollar bill laying on the ground,. So
Obama starts talking about "the economy is back" and away we
go.
Understand that he
could be right, but we will have to wait and see. What Obama does not understand,
apparently, is that this latest fourth quarter report, is not a good report as relates to evidence of an acceleration of economic growth; economist on CNN and Fox Business agree. Why?
Of the 2.8%
"growth," 2.1% of the GDP for the 4th quarter was purchased
inventory. That leaves us with a 0.7% GDP for the quarter. Only
Obama would proclaim the end to the recession simply because we all bought
inventory and set it aside for the sake of future business
One more thing:
the official average GDP for the entire year of 2011 was a pathetic 1.7% . . . . . . . including
this latest quarter with its inflated inventory numbers.
Keep in mind,
businesses increase inventories AT THE END OF EVERY YEAR . It is part of a reporting strategy for the purpose of reducing the income tax burden, Obama's excitement is misplaced. This is not the first time he has jumped to conclusions regarding the vitality of the current "recovery." I seem to remember "the summer of recovery." That was two years ago.
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