GDP Gap Stuck at 6%
Pro Growth Liberal points us to this interpretation of new economic data:
GDP Gap Stuck at 6%
Dean Baker gets it right with respect to the latest news on GDP:
A sharp drop in government spending, heavily concentrated in defense, coupled with a decline in inventories caused GDP to shrink at a 0.1 percent rate in the 4th quarter. Government spending fell at a 6.6 percent annual rate, driven by a 22.2 percent decline in defense spending, subtracting 1.33 percentage points from the growth rate in the quarter. A 40.3 drop in the rate of inventory accumulation reduced growth by another 1.27 percentage points. Without these factors, GDP would have grown at a 2.5 percent annual rate in the quarter. Pulling out these extraordinary factors, the GDP data were largely in line with prior quarters.
GDP can be looked at quite simply as income plus new debt. Aggregate demand is a simple thing to grasp. What would be interesting is taking GDP and comparing it to wealth. If wealth is increasing at the same time as GDP is falling, one can only assume that people are hoarding cash and assets. The key to getting all that wealth back into the economy is the real issue here.
Woolley,
I have shown here in the past using Sauz’s data that the top 1%’s income is doubling faster than the GDP.
First 43 years doubling: GDP 8.6 yrs, 99%’ers 10.75 yrs, 1%’ers 14.3 yrs.
Next 32 years doubling: GDP 10.6 yrs, 99%’ers 11 yrs, 1%’ers 8 yrs.
http://www.angrybearblog.com/2008/12/income-distribution-and-gdp-it-matters.html