IS THE GOVERNMENT UNDERSTATING THE SEVERITY OF THE RECESSION?
Great read here from the Brookings Institution on the extent of the downturn and how government issued GDP is understating the severity of the current recession:
“The U.S. produces two conceptually identical official measures of its economic output, currently called Gross Domestic Product (GDP) and Gross Domestic Income (GDI). These two measures have shown markedly different business cycle fluctuations over the past twenty-five years, with GDI showing a more-pronounced cycle than GDP. The goal of this report is to determine which measure better reflects the business cycle fluctuations in “true” output growth, and a broad range of results favor GDI. GDI currently shows the 2007-2009 downturn was considerably worse than is reflected in GDP.”
GDP as reported by the government:
Brookings findings on GDP (I):
Read the full paper below:
TPC: Thanks for posting this article.
For a Quick read– section 5 on —plus the charts will give most folks the info they need.
Note: GDP measures expenditures–GDI measures income
Data from the National Accounts
Double entry bookeeping–these series should equal or at least come close enough for govrnment work!
That does not mean keeping 2 sets of books “madoff style”
Wish you would have posted Figure 5 and Figure 8
How about posting your chart on valuations with GDI in place of GDP?–Please
From 2000 would be informative.
Inquiring minds want to know?
Rosenberg has mentioned the wide difference between the latest GDP and GDI numbers –” the largest difference every recorded in these 2 series”
The GDP revision comes out 02/26/2010–tomorrow–I wonder how many folks will look at the GDI number?
I work in a software company, and we have a new release 1.0 out. It’s terrible. It doesn’t do what it’s supposed to. It doesn’t scale, it barely works, and some of the data coming back is clearly wrong.
However, it passes 95% of its “test” cases, even though the test cases don’t really test anything in a realistic situation. In the internal emails to his superiors, the manager touts the release as a success, that customers are excited, etc. He actually believes this.
So, is the government lying to itself? Could it be possible they are clueless? Yes. They are seeing what they want to see. I can completely believe this because it happens all the time in real life.
To jedwards:
You have put forth a reasonable theory, but IMHO it does not fit the facts. The current scenario is almost a carbon copy of what Steve Keen wrote happened after the Great Depression ( article is Debtwatch:34). In it are many quotes from 1930 and 1931 by economists, business leaders and politicians who all thought that they were in the process of successfully coming out of a recession. Their universal belief was that if everyone would talk and write positively about the situation that they would emerge triumphantly. That is the same tactic that todays group of economists, business leaders and politicians are taking. However as Keen so pointedly shows, it is not about the attitude it is all about the mountain of debt!