Wednesday, September 22, 2010

It's all in the formuala ,Stupid

How they figure GDP the measure of growth.  The Formula.

Let's look at the components:

Y = C + I + E + G



C = Consumer Spending

I = Investment made by industry

E = Excess of Exports over Imports

G = Government Spending

As we all know consumer spending is down and over the past year essentially flat  

Investment by industry.  Non existent at best, estimates they have 1.8 trillion bucks in cash.  Waiting for what?  Consumer spending.  Which we already know is way down and with no jobs and a 22% unemployment rate , credit cards maxed out, houses underwater, low wage Walmart jobs where even to working  full time at Wally Worlds make at best 40K .  There is little consumer demand and there for business is laying off workers, shipping jobs overseas , and reducing wages across the board isn't likely to increase demand anytime soon.

Excess in Export not a chance. You don't even have to look at this graph to know that imports exceed exports by tons. 

Government Spending=  this number includes much we don't have access to but does affect this number.  We all know that the government has been printing money like mad , most of which has gone to banks who along with the Plunge team have been running the stock market up and down making the banks and the Hedge Funds tons of money in an effort by them to counter the zillions of bad debt hidden off their books.

So evaluating the above formula the only number that could really affect the GDP in any significant manner is Government spending, which we all know is the only number that has changed enough to really make a difference.  Running the stock market up is the index they think will make us think that all is well.  We know better.  Things are bad are about to get worse.  Ignore the Bull that we are out of recession, just the plateau before we fall off the cliff. 


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