Comments on: 4 REASONS THE “GOOD” GDP IS WORSE THAN IT LOOKS http://pragcap.com/4-reasons-the-good-gdp-is-worse-than-it-looks Sun, 12 Feb 2012 13:32:07 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: ike tossia http://pragcap.com/4-reasons-the-good-gdp-is-worse-than-it-looks/comment-page-1#comment-11277 ike tossia Sat, 30 Jan 2010 04:22:47 +0000 http://pragcap.com/?p=16178#comment-11277 with all those numbers coming out for the last two months, ajusted, seasoned, some system we got here, feels like we have an enron type of an economy, and those guys went to jail. how sad... with all those numbers coming out for the last two months, ajusted, seasoned, some system we got here, feels like we have an enron type of an economy, and those guys went to jail. how sad…

]]> By: Ben Wade http://pragcap.com/4-reasons-the-good-gdp-is-worse-than-it-looks/comment-page-1#comment-11271 Ben Wade Fri, 29 Jan 2010 22:56:37 +0000 http://pragcap.com/?p=16178#comment-11271 No way on God's earth did the GDP increase at 5.7% rate in any meaningful way. Simply looking at housing, consumer spending, and employment would tell anyone that a 5.7% increase in GDP is pure b.s. No way on God’s earth did the GDP increase at 5.7% rate in any meaningful way. Simply looking at housing, consumer spending, and employment would tell anyone that a 5.7% increase in GDP is pure b.s.

]]> By: Charley http://pragcap.com/4-reasons-the-good-gdp-is-worse-than-it-looks/comment-page-1#comment-11264 Charley Fri, 29 Jan 2010 20:56:53 +0000 http://pragcap.com/?p=16178#comment-11264 TO follow up: what I think Rosie is saying is that companies overshot to the downside and are now aligning their inventories with sales, not building inventories in anticipation of stronger sales. TO follow up: what I think Rosie is saying is that companies overshot to the downside and are now aligning their inventories with sales, not building inventories in anticipation of stronger sales.

]]> By: chris http://pragcap.com/4-reasons-the-good-gdp-is-worse-than-it-looks/comment-page-1#comment-11263 chris Fri, 29 Jan 2010 20:54:34 +0000 http://pragcap.com/?p=16178#comment-11263 guess what happens when firms restock inventory? their suppliers can start hiring again! wsj had an article awhile ago about this with respect to catepillar, calling it the whipsaw effect. people start going back to work, they can start buying again, and the inventory will need to be replenished, and you go from a vicious cycle to the beginnings of a virtuous cycle...but i am just an investor, not an economist... guess what happens when firms restock inventory? their suppliers can start hiring again! wsj had an article awhile ago about this with respect to catepillar, calling it the whipsaw effect. people start going back to work, they can start buying again, and the inventory will need to be replenished, and you go from a vicious cycle to the beginnings of a virtuous cycle…but i am just an investor, not an economist…

]]> By: Charley http://pragcap.com/4-reasons-the-good-gdp-is-worse-than-it-looks/comment-page-1#comment-11262 Charley Fri, 29 Jan 2010 20:49:41 +0000 http://pragcap.com/?p=16178#comment-11262 I found this: Inventory adjustment: "The inventory adjustment process differs over the business cycle: for a given level of excess inventories, firms disinvest more in recessions than they do in expansions. The inventory adjustment process has changed little between the 1980s and 1990s, suggesting that recent advances in inventory control have had little effect on adjustment costs. Nevertheless, the optimal inventory-sales ratio in the durable goods sector has declined significantly..." And this: Inventory cycle: "Also termed stock cycle, an inventory cycle is the fluctuation of GDP caused by the accumulation and the selling of stocks/inventories. If production is greater than demand, GDP will rise but companies will also accumulate unsold stocks. This will encourage some to scale back production, cutting GDP even if demand remains constant. An economic cycle is created and normally the inventory cycle amplifies the existing economic cycle as stocks are accumulated in good times and production is reduced in bad times. In the global recession of 2008, demand plunged, leaving companies with significant unsold inventory. They responded by mothballing factories leading to a plunge in industrial production, output and GDP. Once the stock was sold output rose again purely because some production lines were restarted." ++++++++++++++++++ What I get from the two meaning is that inventory adjustment is an ongoing process of aligning stock with sales. While the inventory cycle is designed to rebuild stock after they were depleted during the contraction. Hope that helps I found this:

Inventory adjustment:

“The inventory adjustment process differs over the business cycle: for a given level of excess inventories, firms disinvest more in recessions than they do in expansions. The inventory adjustment process has changed little between the 1980s and 1990s, suggesting that recent advances in inventory control have had little effect on adjustment costs. Nevertheless, the optimal inventory-sales ratio in the durable goods sector has declined significantly…”

And this:

Inventory cycle:

“Also termed stock cycle, an inventory cycle is the fluctuation of GDP caused by the accumulation and the selling of stocks/inventories. If production is greater than demand, GDP will rise but companies will also accumulate unsold stocks. This will encourage some to scale back production, cutting GDP even if demand remains constant. An economic cycle is created and normally the inventory cycle amplifies the existing economic cycle as stocks are accumulated in good times and production is reduced in bad times.

In the global recession of 2008, demand plunged, leaving companies with significant unsold inventory. They responded by mothballing factories leading to a plunge in industrial production, output and GDP. Once the stock was sold output rose again purely because some production lines were restarted.”

++++++++++++++++++

What I get from the two meaning is that inventory adjustment is an ongoing process of aligning stock with sales. While the inventory cycle is designed to rebuild stock after they were depleted during the contraction.

Hope that helps

]]> By: murphy654321 http://pragcap.com/4-reasons-the-good-gdp-is-worse-than-it-looks/comment-page-1#comment-11256 murphy654321 Fri, 29 Jan 2010 19:42:46 +0000 http://pragcap.com/?p=16178#comment-11256 Can someone explain how to discern between the onset of a new inventory cycle and a transitory realignment of stocks to sales? Can someone explain how to discern between the onset of a new inventory cycle and a transitory realignment of stocks to sales?

]]> By: Free Texas in 2012 http://pragcap.com/4-reasons-the-good-gdp-is-worse-than-it-looks/comment-page-1#comment-11253 Free Texas in 2012 Fri, 29 Jan 2010 17:28:01 +0000 http://pragcap.com/?p=16178#comment-11253 What? Are we to believe the GDP numbers are not truly reflective of a robust economy? I learned years ago to go with what looked and felt right, not what the government reported. That instinct has served me very well. Instincually, can we really believe that a 5.7% growth is realistic? Perhaps, but my instinct say, no way. What? Are we to believe the GDP numbers are not truly reflective of a robust economy? I learned years ago to go with what looked and felt right, not what the government reported. That instinct has served me very well. Instincually, can we really believe that a 5.7% growth is realistic? Perhaps, but my instinct say, no way.

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