True Gross Domestic Product Q3 2010
The true gross domestic product has declined by another 3.63 percent to 10,010 million (= about 10 billion) gold ounces in Q3 2010.
The important ratio of consumer vs production goods has declined to now 93.16 percent.
True GDP – Q2 2010
The True Gross Domestic Product in Q2 2010 has dropped by 8.77% from last quarter. It is at its lowest point since Q3 1988 and thus marks a 22 year low.
What about the ratio of consumer goods vs factors of production turned out in the US at this point?
This quarter it looks like the relative rise in consumer goods production, induced via various misguided government stimulus measures, has been reversed and the ratio is once again trying to get back to more sustainable levels of consumer goods vs. capital goods produced.
This is a good sign but it’s still a long way down from here.
Historically, this ratio needs to fall at least below the 89% avg., and probably a lot lower before we can speak of any meaningful correction and ensuing recovery, if there is to be one at all any time soon.
The government, so far, has done everything it can to not let this recovery occur. Instead, as I have pointed out many times, it has beautifully set the stage for a Great Depression 2.0.
Gross Domestic Product Q4 2009 Updates; True GDP & Consumption as Percentage of GDP
True GDP Q4 2009
True GDP in Q4 2009 has fallen to $10,655 million gold ounces, a 15.2% drop from the previous quarter.
True Consumption as Percentage of GDP
The true consumption ratio will need to come down significantly before a true alignment of resources in the production structure toward a recovery will be possible.
A close up to the years 2000 through now:
Government stimulus and bailout programs since the beginning of 2008 have fundamentally accomplished one thing: The ratio of the production of consumer goods versus factors of production has been bumped up for a little while.
Road to Recovery?
Contrary what the government says, they have not lead us onto a “path to recovery”. In fact, they have done the exact opposite! They have used all means at their disposal and all the force and dedication in the world to pull people in precisely the opposite direction.
This is the outcome of all the corporate bailouts, the cash for clunkers program, the 10,000 tax credit for homebuyers and what have you. Instead of abstaining from producing overproduced consumer goods and re-aligning toward capital goods, businesses have thus continued to produce excess trash and continued to engage in overly risky activities.
The payback for supporting this nonsense will be a double dip recession, Uncle Sam sends his regards.
True GDP Q4 2009 – Down 15.4 %
True GDP in Q4 of 2009 has dropped by 15.4% from Q3.
Obviously the recently reported 5.7% GDP growth is a complete joke, even for the regular GDP. It is so ridiculous that I expect it to be revised downward significantly at the end of February.
Even looking at the official and available data, in my calculations I don’t get anywhere near 5.7%, more like 1.5% for the official number. I don’t know where the 5.7% is coming from. Either I am missing something or they made a mistake. But that said, the officially reported GDP is a sham anyway, so who cares …
True Gross Domestic Product – Q3 2009 – Down 21.8 Percent
In Q3 of 2009, true gross domestic product has fallen to 12.14 billion gold ounces. This is a decline of 21.8 percent from Q3 2008.
True Gross Domestic Product Q2 2009 – Down 5.8%
True GDP has fallen to 13.42 billion gold ounces in Q2 2009, down 5.8% from Q2 2008.
True Gross Domestic Product – Q1 2009
Click on image to enlarge.
The True GDP has paused its decline and risen to 13.9 billion gold ounces in Q1 of 2009, a 6% increase from 1 year ago.
True GDP – Q4 2008
Click on Image to Enlarge
The True GDP has fallen to 15.38 billion gold ounces in Q4 of 2008. This is a decline of 12% from 1 year prior. Considering how dire the situation is it is not unrealistic to assume that it will go as low as it did in 1980.
The most noteworthy items in the new GDP number are personal consumption expenditures which have begun to fall from the previous quarter’s level for the first time since 1958 (!) . This marks an epic shift in American consumer behavior and is consistent with the consumer credit contraction that has already begun and will continue throughout the next years.
Job Market & the True GDP
Reuters writes:
U.S. employers axed payrolls by 533,000 jobs in November, the most in 34 years and far more than expected, government data on Friday showed, as the year-old recession hammered every corner of the U.S. economy.
U.S. stock markets opened lower, oil prices and the dollar weakened and U.S. government bond prices rallied as the data showed the U.S. downturn was deepening.
“You can’t get much uglier than this. The economy has just collapsed, and has gone into a free fall,” said Richard Yamarone, chief economist at Argus Research in New York.
As far as the True GDP is concerned, this should not appear as a big surprise. Those who follow that number will generally be able to predict developments like this long before they occur. For example, the True GDP in the US has been steadily declining since 2001. The same applies to the period from 1970-1975.
Even after the official recession in 2001 was over, it kept on falling while stock and real estate markets surged again. This enables those who monitor this figure closely whether or not a boom appears justified and sustainable, or whether or not a correction is impending. More importantly: The longer the supposed boom lasts, the more severe will the correction be if the True GDP contracts during that boom time.
The True Gross Domestic Product
The Gross Domestic Product (GDP) is a figure that, in itself, tells us virtually nothing about the true state of the economy. The purpose GDP is to estimate the output of factors of production inside the territory of a country.
The way this is calculated is by adding up all money prices spent on goods by domestic individuals, plus the price of goods exported to individuals abroad, minus the price of goods imported, so as to exclude products that were not produced inside the country.
The GDP adds up as follows:
GDP =
Private Consumption (sum of prices paid for consumer goods by domestic non-government Individuals)
+ Private Investment (sum of prices paid for factors of production by domestic non-government Individuals)
+ Government Expenses (sum of prices paid for consumer goods and factors of production by government individuals)
+Exports (sum of prices paid for consumer goods and factors of production sold abroad)
-Imports (sum of prices paid for consumer goods and factors of production for goods produced abroad)
The main problems with this figure are the following:
- All prices are added as US dollar prices. Thus the effect of inflation is not taken into account satisfactorily. Even in the so called Real GDP, the deflator used is based upon the insufficient consumer price index.
- Government expenses are added to the total product at cost. Bureaucratic waste is not accounted for.
Thus we shall employ the following makeshifts in order to better approximate the country’s true productive capacity:
- Instead of US dollar prices we shall add up the price of goods sold in fine ounces of gold, a true and stable money.
- Government expenses shall be discounted significantly. All expenditures by the federal government shall be included at 30% of reported prices and local and state governments, due to better oversight, shall be included at 50% of reported prices.
Below please find the historical development of the True Gross Domestic Product in the United States from 1947 through 2008:
Click in image to enlarge.
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