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Old 05-11-2007, 14:12   #31
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about those GDP numbers....

I posted this sometime back on another forum and almost forgot about it.

It's interesting to note that Wall Street, Fed policy making, and economic stimulus packages are all dictated by our Gross Domestic Product. When the GDP goes up, the financial markets are very happy and when it goes negative we are said to be in recession.

On June 18th Business Week published an article by a little known economist, who had no ax to grind, and could probably be best described as a back room bean counter. The reason she got the article is that in studying how GDP numbers were compiled, she made a discovery. When Business Week contacted the BLS (Bureau of Labor Statistics) looking for an official to refute her discovery, they didn't... instead they confirmed it.

What she uncovered was that when an American Company, closed a domestic plant and offshored it's production, that the 25% or 30% savings the company realized as additional profit resulting from labor savings are being added to the USA Gross domestic Product!! Plant closed, people laid off and the GDP goes up!

In looking for confimation, they looked around for an industry that was all but gone in the good old USA. They interviewed the head of a North Carolina Furniture manufacturer, who told Business Week that BLS numbers had him scratching his head. Furniture production has pretty much come to an end in America, yet Furniture Manufacturers continue to show positive growth numbers in domestic manufacturing inside of the GDP numbers. BLS is counting imports in our GDP numbers.

I know, it sounds like I made this up. Read the Business Week article here.

The Real Cost Of Offshoring

The magazine admits that it's difficult to quantify this error. They took a stab at it and come up with 40% of all GDP growth in the last few years is total fiction due to this problem. Subtract real inflation from the remainder and I wonder what everyone is so happy about.

This is the first article I've read which does something to explain why all the domestic economy numbers look great on paper yet domestic wages are suffering. And this is just one small item in the the GDP numbers. I wonder what they would find if a group of economists took the entire GDP process to task?
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Old 05-11-2007, 14:52   #32
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Quote:
Originally Posted by rickm505 View Post
I wonder what they would find if a group of economists took the entire GDP process to task?
Though I don't recall exactly where I read this (I suspect it was something Jim Sinclair wrote), I remember that the writer was suspicious that foreclosures were being added to the GDP number, on the theory that the properties were being "sold" to the foreclosing lender. This was later confirmed to be the case.

Why anyone would believe anything they're told by the government is beyond me. I would imagine it's because most people want very much to believe that those in authority are honest and trustworthy - despite being burned repeatedly for having made that assumption. <sigh>

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Old 05-11-2007, 15:41   #33
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Future Boat Value

If anyone can accurately predict the future value of any commodity, be it a boat or water, then wealth awaits. I own a car dealership and we struggle daily on the trade value of a vehicle we trade are trading for. 90 days in the future all bets are off and we start counting our losses and writing them down. A boat 5 years out is impossible.
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