Friday, July 27, 2007

US GDP grows beyond Expectations

Fire of Liberty

Now matter how much the MSM and Democrats try to argue the dreadful economy by pointing to drop in the Dow (Though it's only a mere 2%) or the troubles in the sub-prime lending market, the economy keeps on proving them wrong by producing some 3.4% growth in GDP and low inflation during the second quarter. Here's what the NY Sun had to say about this fantastic growth.


shliknik said...

You can't just look at the 3.4% growth. As the old saying goes, "Nothing but lies, and damn statistics." (or something like that).

I was reading in 'Business Week' (I think) within the past month about how the GDP is calculated and the loophole that exists which skews the GDP statistic. I'm no economist and I'm sure to butcher what I'm about to type, but there is a problem w/ the way the GDP is calcuted as it hasn't caught up w/ the amount of offshore business that's developed over the past decade.

Yes...the economy 'appears' to have grown over the past few years, but GDP doesn't factor in where the items are manufactured. The mag used the example of a furniture plant.

Say the plant manufactured/sold 1,000 chairs 1 year ago. The president then starts to use an offshore manufacturer in China and closes shop/lays off employees in (let's say North Carolina). The factory in China then produces/sales 1,500 of the exact same chair and ships it to the N.C. plant.

When the numbers are compared, there seems to be an increase of 500 chairs produced (which would lead to an increase in the economy, right), but as of now, the way the GDP is calculated doesn't factor in the closed plant, the lost jobs, or where the chairs are produced - just that the production number of the EXACT same chair has increased.

The article mentioned that the loophole has to be fixed and when that happens, there will be a 'market correction'....and that doesn't sound good.

Believe me...if any economist reads what I just typed, they're sure to explain it better than me, but don't believe every article on how the economy is all peaches and cream.

jstarley05 said...

I'm no economist either but I believe that as long as a company has its headquarters in the US, then whatever they create and sell will still be counted as part of our GDP(Vice versa for other countries).

shliknik said...

You're long as the company has it's headquarters in the U.S., it factors in with the GDP, but what the article was stating was how they factor it is out of touch with the economy.

The drastic movement overseas of US manufacturing/jobs changes things.

As my example states, if you just look at the numbers of chairs produced (originally 1,000 chairs from an US business...then later 1,500 chair made in China then shipped to the US), it appears the economy has grown because the way the GDP is calculater does not factor in jobs or where the product is produced. IT'S ONLY NUMBERS.

When the US company laid off its entire work force for us to have 500 more chairs? Does that suggest a healthy economy?

The point of the article is the GDP will have/needs a new way to calculate it. With the loss of manuafacturing jobs in the US, you can just go by the number or percentage of goods.

Sure...we have more chairs...maybe a little cheaper even...but when 1000 people lost their jobs because we could have $20 on a chair, does that suggest a healthy economy?