May 20th, 2012 
Alexander 
The most commonly used measure of an economy’s progress by government agencies is the GDP, or gross domestic product. It is a dollar value measure of all of the goods and services that are in an economy during a time period, generally quarters or a year. It’s simple formula is GDP = C + I + G + NX, or GDP equals the sum of consumption, investment, government expenditures and the net of exports. In concept it is that simple, but its usage as a tool to measure an economy and provide objective conclusions turns it into nothing more than an unreliable tool that is severely flawed and in any practical purposes, should simply be disregarded every time it is reported.
What is Economic Growth
For simplicity purposes in this demonstration, say that in year one, all of the variables had $100. GDP is therefore $400. That means the value of all the goods and services in the economy that year was $400. Now in the second year consumption increases by $1, while everything else remained the same. Now GDP is $401. It is growing! This is basically what we hear on the news and from government agencies 4 times a year. They attempt to brag to the public about their amazing progress in growing the economy. Despite this, and against all the facts, and the numbers used in the example, around two thirds of the GDP is consumption (private activity) and the second largest portion is investment ( private activity). Nearly 80% of the GDP is private activity and is unrelated to the government in the first two variable alone, besides the actual limitations placed upon it by the government in the forms of taxes, regulations and other restrictions. Take those away and consumption and investment would actually be much higher, but that is not the overall topic for here. So despite the fact that most of the activity is not by the government, the officials then get out their press secretaries and brag to the public about the amazing job they have done for creating growth… which is indeed inherently dishonest. Creating growth through giving back some of the money already stolen away to increase consumption is like a bank robber taking$50 from everyone’s bank account, putting then mailing all the account holders $10 and saying, “I increased the size of your bank account by $10.” That just doesn’t make sense, but the government, news, and public allows this to become an accepted idea.
Continue reading “Debunking Economic Growth | What is a Recession | What is Economic Growth” »
