This page has been archived and commenting is disabled.

Guest Post: Can We Please Stop Pretending the GDP Is "Growing"?

Tyler Durden's picture


Submitted by Charles Hugh Smith from Of Two Minds

Can We Please Stop Pretending the GDP Is "Growing"?

The Federal Government borrowed and spent $5.1 trillion to get $700 billion in total GDP "growth" from 2008-2011. In constant dollars, there was no growth at all.

The Federal government borrowed and spent $5.1 trillion over the past four years to generate a cumulative $700 billion increase in the nation's GDP. That means we've borrowed and spent $7.28 for every $1 of nominal "growth" in GDP.

In constant dollars, GDP is flat: we got no growth at all for our $5.1 trillion: zip, zero, nada. In constant dollars, the GDP in 2011 might return to the 2007 level, if the economy continues "growing" at the same pace reached in the first three months of 2011. If not, then the GDP will actually be lower than pre-recession levels.

If you borrowed $7 to get $1 in your pocket, would that strike you as a good deal? How long do you reckon you could borrow $7 to get $1 of "growth" in your finances?

Let's say you need $3,000 a month to pay all the household bills. No problem, just go borrow $21,000 and your household economy will "grow" by $3,000. If this isn't the height of fiscal nonsense, then what is?

Here are the numbers, drawn from these sources: U.S. GDP by year and U.S. GDP in constant (2005) dollars.

Total public debt in 2007 (pre-recession) was $8.95 trillion.
Total public debt in 2010 was $13.53 trillion. This is an increase of $4.58 trillion. Add in the 2011 deficit of $1.6 trillion and the total is $5.1 trillion in additional debt in the four years from 2008 to 2011.

GDP in 2007 (pre-recession): $14.08 trillion
GDP in 2008 (recession starts): $14.44 trillion ($364 billion gain)
GDP in 2009 (recession officially ends in mid-2009): $14.12 trillion ($322 billion decline)
GDP in 2010: $14.51 trillion ($390 billion gain)

Let's be generous and assume the U.S. economy continues "growing" at the first-quarter pace of 1.8% for all of 2011: GDP advanced 1.8% in Q1 2011 (BEA). That would add $260 billion to the 2010 GDP, so the GDP at the end of fiscal year 2011 would total $14.77 trillion in nominal dollars. In constant dollars, it might reach back up to 2007 levels, but only if the economy doesn't roll over.

Total up the gains and declines in annual GDP for the four years from 2008 through 2011, and you get $690 billion. That's the total sum of each year's gains for the four years. That means we as a nation borrowed and spent $5.1 trillion to get $700 billion in GDP "growth." That means we borrowed and spent $7.28 for each $1 of nominal GDP "growth."

In constant (2005) dollars:

GDP in 2007 (pre-recession): $13.23 trillion
GDP in 2008 (recession starts): $13.31 trillion
GDP in 2009 (recession officially ends in mid-2009): $12.88 trillion
GDP in 2010: 13.04 trillion

GDP in 2011 (assuming 1.8% annual real growth): $13.3 trillion

In constant (2005) dollars, the economy actually shrank in the three year span of 2008-2010. Add in a couple hundred billion of real "growth" in 2011 and we're back to 2007 levels, at best.

That's what we bought with $5.1 trillion in additional debt and Federal spending.

Just as a refresher:

Federal revenues

2007 $2.56 trillion
2010 $2.16 trillion

Federal spending

2007 $2.72 trillion
2010 $3.72 trillion

In three years, Federal spending jumped almost exactly $1 trillion, or 36.7%.

In 2011, the Federal deficit is 11% of the nation's GDP.

In 2011, the Federal government is borrowing 42% of its expenditures.

And don't forget, the recession ended in mid-2009, so we're two years into a "growing economy" here in mid-2011.

Does anyone seriously believe the economy won't buckle if the Federal government doesn't keep borrowing and spending 11% of the entire GDP each and every year until Doomsday?

All we're doing with these vast sums borrowed from future generations is propping up a bloated, no-accountability, cartel-Crony Capitalist/Central State Status Quo.

Here are the deficits of the past three years, and the estimated shortfalls for fiscal year 2011:

2008: $458 billion
2009: $1.4 trillion
2010: $1.3 trillion
2011: $1.6 trillion (est.)

These don't include "supplemental appropriations" for war costs, losses in Fannie Mae and Freddie Mac, etc., which is why the debt has risen by more than the sum of the "official" deficits.

Notice the trend here? The deficits keep getting larger as the "recovery" continues. If we keep "recovering" at this pace, we'll soon be borrowing 50% of the Federal budget each and every year.

And of course this doesn't include the $2 trillion increase in the Federal Reserve's balance sheet--trillions squandered on propping up the housing markets--(look how successful the Fed was in propping up housing valuations), nor does it include TARP and other "off-balance sheet" Treasury bailouts and guarantees.

I have covered this before in regards to the "self-sustaining recovery": Is the Recovery "Self-Sustaining"? Here's a Test (March 22, 2011).

Does borrowing and blowing $7 to get $1 of nominal "growth" seem like a good deal to you? Does it strike you as sustainable? If it does seem sustainable and a good deal, congratulations, you are qualified to run for Congress.


- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 06/02/2011 - 10:25 | 1332167 postban
postban's picture

The only thing growing in this country is the size of Michelles ass

Thu, 06/02/2011 - 10:32 | 1332180 SheepDog-One
SheepDog-One's picture

Whole country has too much junk in the trunk! 

Thu, 06/02/2011 - 10:35 | 1332201 TheTmfreak
TheTmfreak's picture

I'd rather have junk in the trunk so when shit hits the fan you might be able to miss quite a few meals and still be ok.

Thu, 06/02/2011 - 11:47 | 1332504 nonclaim
nonclaim's picture

Unless your body is able to burn fat efficiently the extra weight you have to carry around while "gathering" will actually speed up your demise. The thing is most people can't burn fat efficiently; it is good to keep at least a routine of one long walk once a week.

Thu, 06/02/2011 - 10:41 | 1332230 2DollarBill
2DollarBill's picture

the trunk don't pack itself.

Thu, 06/02/2011 - 10:37 | 1332186 Conrad Murray
Conrad Murray's picture

That gorilla faced bitch is one disgusting waste of oxygen. But that Barack...he's so eloquent, a great speechist. I mean, it totally changed what I thought about black people. I'm so glad I voted for him. And no, it wasn't to prove I'm not racist: I have lots of black friends! I don't care how much money he has to spend to pull this ditch out of the car! We need our unions and you mega wealthy yacht owners need to pay your fair share. Spread that wealth around like jam on lamb.

I never had any hope there would be real change until I saw what that poor Kenyan/Indonesian/Muslim/Christian-American had done with himself. It was the first time in my life I was proud to be an American. My only regret is that I can't send my kids to a school where they sing songs of praise to our dear leader all day long. I sure hope little Jenny finds a stud of a fella like Barry O. He's really a game changer on the race-mixing front going forward.

Thu, 06/02/2011 - 10:40 | 1332224 theopco
theopco's picture

Hey- fuck off, okay?

Thu, 06/02/2011 - 10:51 | 1332250 DaveyJones
DaveyJones's picture

you do realize you're complimenting him by giving him the cause. He's just another crooked pawn.  

Thu, 06/02/2011 - 11:25 | 1332313 ElvisDog
ElvisDog's picture

Anyone who says or writes "I'm not racist: I have lots of black friends!" has proven that he is in fact racist. But if your post was a parody, then, well, never mind.

Thu, 06/02/2011 - 11:57 | 1332538 malek
malek's picture

Anybody bringing up such crap as reasoning to claim the moral highground for himself is just otally ucked.

Edit: oh ford, I am one myself as I didn't write himself/herself

Thu, 06/02/2011 - 11:04 | 1332316 Montgomery Burns
Montgomery Burns's picture

Maybe zerohedge needs some kind of a basic intelligence test before people are allowed to post or junk comments. Hope this helps.


[sahr-kaz-uhm] Show IPA –noun
harsh or bitter derision or irony. 2.
a sharply ironical taunt; sneering or cutting remark: a review full of sarcasms.

Thu, 06/02/2011 - 11:27 | 1332396 theopco
theopco's picture

too bad you couldn't see the sarcasm in what I wrote.



Thu, 06/02/2011 - 13:48 | 1333083 Montgomery Burns
Montgomery Burns's picture

You're brilliant. OUCH!  (I didn't junk you though)

Thu, 06/02/2011 - 11:18 | 1332352 JR
JR's picture

"I never had any hope there would be real change until I saw what that poor Kenyan/Indonesian/Muslim/Christian-American had done with himself."

Now that's change you can believe in! I mean, that's change you can see!

Thanks for the tongue-in-cheek, Conrad. Priceless!

Thu, 06/02/2011 - 10:58 | 1332278 SoNH80
SoNH80's picture

Long grape soda and fried chicken

Thu, 06/02/2011 - 11:05 | 1332305 ElvisDog
ElvisDog's picture

Oh come on. Include links to before and after pictures so we can compare.

Thu, 06/02/2011 - 11:11 | 1332328 JR
JR's picture

By the looks of it, it appears that when Michelle proclaimed that in order to get the things she wants “someone is going to have to give up a piece of their pie (that’s you) so that someone else can have more,” she took most of the pie.

Reminds me of Charlie Rangel’s philosophy in that old joke when he got a call from his banker telling him his account was overdrawn. Yelled Charlie: “Whaddya mean, I’m overdrawn?  I still have my checkbook!”

Nothing like lining up for “your share” of a pie someone else baked.

Thu, 06/02/2011 - 18:03 | 1334116 Sam Clemons
Sam Clemons's picture

And the awareness that the Federal Reserve "system" is a cartel and primarily exists for the benefit of government "solvency" and the already wealthy.

I'm glad someone else finally put this type of article out there.  GDP "growth" is a really silly measure of how good life is getting for people when it is measured in currency units that are worth less in real terms on a daily basis. 

How about real wealth growth per capita?  Or purchasing power growth per capita?


Thu, 06/02/2011 - 10:26 | 1332170 the not so migh...
the not so mighty maximiza's picture

good article

Thu, 06/02/2011 - 10:51 | 1332265 trav7777
trav7777's picture

When facing unacceptable reality, all you have left is pretend, isn't it?

We can go down a list of "truths" people in this country cling to, just think about what's politically correct versus what is real.  Things which people emotionally react to, etc.  Just go down and list them; it's huge.

Thu, 06/02/2011 - 10:31 | 1332173 Problem Is
Problem Is's picture

I like John Williams' analysis at Shadow Stats...

2% GDP growth = 0% Real Growth
Massively understating inflation by manipulating the CPI overstates GDP on the PCE side by about 2%...

Thu, 06/02/2011 - 10:40 | 1332212 breezer1
breezer1's picture

lets not forget the importance of manipulating the price of PMs to hide inflation.

Thu, 06/02/2011 - 11:42 | 1332492 AbandonShip
AbandonShip's picture

I just automatically subtract 3% from the headline GDP number.  The first 3% is the NBER "gimme" which doesn't count. Like my first 90 strokes on an 18-hole course.

Thu, 06/02/2011 - 10:31 | 1332174 SheepDog-One
SheepDog-One's picture

Just a freakin nightmare someone let me off this stupid cheap carnival ride!!

Thu, 06/02/2011 - 16:01 | 1333721 DaveyJones
DaveyJones's picture

and the best part of the analogy is that the operators are low class criminals.

Thu, 06/02/2011 - 10:31 | 1332175 Hedgetard55
Hedgetard55's picture

Hilarious. Hitler rants about Anthony Weiner.

Thu, 06/02/2011 - 10:35 | 1332188 Problem Is
Problem Is's picture

His name is WEINER!
Wasn't it only a matter of time before he posted a picture of his Johnson (albeit, a Photoshopped enlargement) on the internet???

Thu, 06/02/2011 - 10:47 | 1332240 baby_BLYTHE
baby_BLYTHE's picture

I saw the pic. He ain't packin' much.

Thu, 06/02/2011 - 11:09 | 1332333 Clowns on Acid
Clowns on Acid's picture

b_Blythe - Apparently Weiner sent the pic to the coed and asked, "Do you know what this is?"

Coed replied, "It looks like a penis, only smaller".

I think she will have a good chance to sue in Small Claims court.

Thu, 06/02/2011 - 11:24 | 1332371 baby_BLYTHE
baby_BLYTHE's picture

wonder what his wife thinks about this:

Traveling the world with Hilary must give her a 'smaller' perspective on things

Thu, 06/02/2011 - 11:42 | 1332480 FreeNewEnergy
FreeNewEnergy's picture

"Don't worry, Barney Frank has begun tweeting him."


Thu, 06/02/2011 - 10:33 | 1332178 Chuck Bone
Thu, 06/02/2011 - 10:30 | 1332183 hugovanderbubble
hugovanderbubble's picture

THanks Charles H.S.


Im expecting a sp between 1220-1250

Thu, 06/02/2011 - 10:34 | 1332197 hugovanderbubble
hugovanderbubble's picture

Tyler, look at last 2 days decorrelation between Uprising EURUSD and bearish Silver... (VERY STRANGE)

Thu, 06/02/2011 - 10:56 | 1332285 espirit
espirit's picture

I noticed that also, but am unable to pattern any FX pairs - and that is strange.

It's like removing any traces of intention.

Thu, 06/02/2011 - 10:55 | 1332185 TruthInSunshine
TruthInSunshine's picture

We could pretend, but there's a super election cycle coming up in 2012.

Of course the real GDP of the United States is shrinking, given that a larger share of it is comprised of services which derive their value, in large part, from wages paid, and these wages will be under continuing pressure in both real and even nominal terms.

And then there's the big fact that more of the U.S. GDP is a function of deficit spending by government (adding to our heaping national debt year after year) than at any time since the core years of WWII, which when viewed in proper context, is a wasteful and counterproductive exercise that only subtracts from future GDP, as it will only create higher costs and a higher drag on growth in the private, real, organic economy.

One private business owner's miserable experience in a banana republic is some governmental employee's, or especially, government contractor's banana split sundae.

Thu, 06/02/2011 - 10:35 | 1332200 A Man without Q...
A Man without Qualities's picture

It's astonishing how much bullshit backs up the GDP data - hedonics, substitutions, price deflators.  My gut tells me that the productive economy has been in contraction since at least 1999, hidden by public and private debt growth and dodgy adjustments..


The importance of the price deflater used by the BEA cannot be overstated. In calculating the "real" GDP the BEA continued to use an overall 1.9% annualized inflation rate, which is substantially lower than the inflation rates being reported by any of the BEA's sister agencies. The mathematical implications of the deflater are simple: a lower deflater creates a higher ‘real’ GDP reading. If April's CPI-U (as reported by the Bureau of Labor Statistics) of 3.2% year-over-year inflation is used as the deflater, the reported 1.84% annualized growth rate shrinks to a 0.56% annualized rate, and the ‘real final sales of domestic products’ is actually contracting at a 0.63% rate. If instead of the year-over-year CPI-U we were to use the annualized CPI-U from just the first quarter (5.7%), the ‘real’ GDP would be shrinking at a 1.82% annualized rate, and the ‘real final sales of domestic products’ would be contracting at a recession-like 3.01%.

Thu, 06/02/2011 - 10:35 | 1332202 topcallingtroll
topcallingtroll's picture

So far the script is following classic austrian economic theory that krugman derides so much.

It is requiring increasing levels of debt to generate each marginal dollar of gdp growth.

If growth is not self sustaining by now then a double dip is in our future.

Bennie has no intention of qe3 by the way. The market has yet to price it in.

Thu, 06/02/2011 - 11:08 | 1332213 topcallingtroll
topcallingtroll's picture

The market has yet to price in that there is no qe3 contemplated for now. To clarify.

Thu, 06/02/2011 - 10:51 | 1332264 A Man without Q...
A Man without Qualities's picture

"Bennie has no intention of qe3 by the way."

I wonder if this is part of the reason for the dramatic and sudden deterioration in the data releases.  Has the Treasury has been trying to push the Fed to keep monetizing their borrowings, but Bennie's been resisting? Once you get addicted to something like printing money, politicians find it very hard to break the habit, which is one of the most powerful arguments for an independent central bank..

Thu, 06/02/2011 - 11:03 | 1332309 SheepDog-One
SheepDog-One's picture

Yes good point.

Thu, 06/02/2011 - 11:22 | 1332367 WonderDawg
WonderDawg's picture

Bennie doesn't make the decisions, he's merely the public face for the cartel. Never forget, he works for the cartel, not the other way around. The cartel OWNS the Fed, remember?

Thu, 06/02/2011 - 11:20 | 1332364 downwiththebanks
downwiththebanks's picture

The Austrian's prescription - liquidate everything! - is an equally hopeless failure.  

So it's fine to rip on Bennie, Turbotax Timmy, and Krugman.  But to suggest genocidal deflation as a serious alternative rather than a deranged one is more than problematic.

Fri, 06/03/2011 - 11:36 | 1336187 wngoju
wngoju's picture

What the...  @down - what are you doing here?  This blog is only for Tea's, etc.  

Thu, 06/02/2011 - 12:04 | 1332587 OldTrooper
OldTrooper's picture

Bennie has no intention of qe3 by the way.

So, you're a mind reader now?  I doubt very much that you actually know what goes on inside Ben's bankster-programed head.  Wait, you're not sleeping with him, are you?

Ok, you could easily be right (hell, the odds are 50/50 aren't they).  However, when the withdrawls from removal of easy money start we will find out for certain.  I'd wager that we see some kind of fed action to prop up things no latter than Labor Day - regardless of Ben's current intentions or desires.

Thu, 06/02/2011 - 12:47 | 1332763 TruthInSunshine
TruthInSunshine's picture

You're correct in that it's a guessing game.

Some feel confident that the trend and the economic math and political calculations make it more certain than not.

The real questions that should be asked by more people, and given a deeper analysis, is whether it will matter, and if so, in what ways? What about the law of diminishing and even negative returns? What about the size, scope and type of collateral damage resulting from such distortion and suppression of free market forces?

These are the better questions.

Thu, 06/02/2011 - 14:02 | 1333175 OldTrooper
OldTrooper's picture

No doubt, Sunshine.  Those are better questions.

Even asking questions like that requires a state of mind that I doubt exists in the circles that will make the decisions.  But, for those of us on the outside, how we answer will suggest some obvious courses of action.

Thu, 06/02/2011 - 10:36 | 1332204 GFORCE
GFORCE's picture

World GDP isn't growing. UK, Australia, Japan, Europe.

Thu, 06/02/2011 - 11:22 | 1332385 Bwahaha WAGFDSMB
Bwahaha WAGFDSMB's picture

World oil production is also not growing.  Guess which way the causation goes.

Thu, 06/02/2011 - 10:39 | 1332205 anti Oligarchy
anti Oligarchy's picture

Until we get rid of the power structure in washinton this is what we get

Our wealth stripped and funneled to the top

Next step in a year or two will be a 20% slice from 401k and IRAs

Hide your PMs well

Thu, 06/02/2011 - 10:36 | 1332208 willien1derland
willien1derland's picture

Outstanding post! Although the aftermath reads like a Wes Craven movie...I am praying for the Greek people, I am taking notes as this will be a tale that will end badly -

Thu, 06/02/2011 - 10:40 | 1332209 baby_BLYTHE
baby_BLYTHE's picture

Chaircreature and the Federal Reserve, in buying 70%+ of our debt, are literally printing money for war. This is always how Empires fall, this time is no different.

In the immortal words of Corey Taylor from Slipknot, who predicted the 2008 economic collapse within the lyrics of their latest record All Hope is Gone

America is a killing name

It Doesn't feel or discriminate

Life is just a killing field

It's all that's left, nothing's real

Down, down. We will burn your cities down

Feed the hungry, feed them shit

Feed them bones and politics

You wanna revolutionize?

Be specific and believe your eyes

Start a war in another backyeard

and we'll destroy your house of cards

Give me a minute and I'll change your mind

Give me a bullet and I'll change your life

America, what if God doesn't care?

Thu, 06/02/2011 - 10:42 | 1332218 6 String
6 String's picture

What's amazing is how many "smart" money managers extrapolate that this company's earnings are at 10x and they are working on righting the ship and it won't take much to move the stock blah blah blah etc. etc. etc. while never stoping to ask themselves how real is anything in the economy? I mean this is a market that has only one useful metric that matters: do we keeping printing or not?

Literally, everything else is total noise and non-sense. But tell that to a blind-sided, brainwashed, value investing crowd that will dimiss you faster than they can flush the toilet. Weird.

Thu, 06/02/2011 - 10:44 | 1332231 entendance
entendance's picture

g.s. must go
American corporation against Americans: want to work for g.s.? Then move to China, India or Brazil, because it's there that they're doing a lot of hiring, president Gary Cohn said during a presentation at a Bernstein conference today.
g.s. is chasing growth in GDP

Thu, 06/02/2011 - 10:46 | 1332236 DaveyJones
DaveyJones's picture

"No problem, just go borrow $21,000 and your household economy will "grow" by $3,000. If this isn't the height of fiscal nonsense, then what is?"

lying about it and thinking everyone believes you

Thu, 06/02/2011 - 10:51 | 1332251 Josh Randall
Josh Randall's picture

I thought burger construction and sandwich artist actions were re-classified as maufacturing or some such nonesense -- if so, there's your GDP growth. Seriously what else can it be then, other then a bold faced lie ?

Thu, 06/02/2011 - 11:14 | 1332340 Montgomery Burns
Montgomery Burns's picture

I'm expecting a call from starbucks any day now.

Thu, 06/02/2011 - 14:06 | 1333182 OldTrooper
OldTrooper's picture

Why?  Do you owe them money?

Thu, 06/02/2011 - 10:52 | 1332255 Bwahaha WAGFDSMB
Bwahaha WAGFDSMB's picture

All this government stimulus and monetary policy is just delaying the inevitable.  The world wasn't scheduled to end until 2012, we can't have it collapsing prematurely now.

Thu, 06/02/2011 - 10:50 | 1332259 Caravaggio
Caravaggio's picture

Sounds sarcastic... :)

Thu, 06/02/2011 - 10:53 | 1332260 Madcow
Madcow's picture

no we can't not pretend GDP is growing.  If the economy is not expanding, the fiat money sysystem goes 'poof.'  This car doesn't have a "reverse" gear.



Thu, 06/02/2011 - 10:51 | 1332261 mayhem_korner
mayhem_korner's picture

It's worse when you consider the percent of GDP from government spending is above 40%, more than at any time except WWII.

So we've been enslaved by $5.1 trillion of claims on future private sector cash flows to yield a net decline in private sector production, nominal and real.

Everything according to plan...

Thu, 06/02/2011 - 10:55 | 1332266 Winston Smith 2009
Winston Smith 2009's picture

But, you see, that's how our GDP has been "growing" for decades, with borrowed money.  However, a reduction in private borrowing due to the debt wall hit in 2007 has simply been replaced with sovereign borrowing.  And that doesn't actually fix the debt problem because we are simply bailing the boat rather than plugging the leaks.  Eventually, their arms will get tired and we'll plow into the bottom like the Titanic.

Prepare your own personal lifejackets.

Thu, 06/02/2011 - 10:56 | 1332267 Crack-up Boom
Crack-up Boom's picture

Damn.  That's a hell of a chart.

Thu, 06/02/2011 - 10:56 | 1332270 Jimbo Jones
Jimbo Jones's picture

There is a big difference between borrowing $7 to increase cashflow by $1 and borrowing $7 to create $1 in equity.  At this time, with the system already overleveraged, the first option begins to look less appealing, although that won't stop me from renting out my overvalued and overleveraged underwater townhouse.

Thu, 06/02/2011 - 10:57 | 1332286 janchup
janchup's picture

Ideologs at work, busy creating false realities for the brain dead masses.

Thomas Jefferson said that for our country to survive an educated and informed citizenry was required.

Enough said....

Thu, 06/02/2011 - 10:59 | 1332296 Jack Burton
Jack Burton's picture

 The UK is and has experienced the same lack of GDP growth from an ever growing private and government debt bubble. The US and UK are joined at the hip, we borrwed in the private sector and public sector and lived it up for a decade. The debts fostered little growth except in the FIRE economy and public services. Now the private debt bubble has burst, we await the government sector debt bubble blowing. When debt is factored out, neither economy has any growth potential at all. Except perhaps in crime and poverty.

Thu, 06/02/2011 - 11:00 | 1332297 Peter K
Peter K's picture

If we do, the Bamster doesn't get reelected;)

Thu, 06/02/2011 - 11:03 | 1332299 RobotTrader
RobotTrader's picture

Waiting for a close under 1300 to go short big.

Maybe tomorrow after the McJobs number......

Otherwise, I'll stay long..........

Thu, 06/02/2011 - 11:05 | 1332323 SheepDog-One
SheepDog-One's picture

Staying long in your hd, vz, af, and banking stocks which are plunging, before you go short? Wow you really are a masterful trader.

Thu, 06/02/2011 - 11:00 | 1332300 mayhem_korner
mayhem_korner's picture

It's like raising $1B to campaign for an office that pays $400K.

Thu, 06/02/2011 - 11:06 | 1332311 Libertarian777
Libertarian777's picture

the numbers are off, you can't just look at absolute (or relative 2005 $) GDP numbers!

He should be using GDP 'created or saved' by the deficit spending.

If there wasn't the $5 trillion in spending $12 trillion in GDP would have been 'lost' and on food stamps (think of the little GDP children!).

Get with the (government) program...

<sarc off>

Thu, 06/02/2011 - 11:08 | 1332320 FreeNewEnergy
FreeNewEnergy's picture

Thanks to CHS for another swell reminder that the US - and, by inference, the global - economy is in the tank. The noise gets so loud sometimes that one must turn it off and just go about one's daily activities.

It is clear that our economy has sunken into an expanding debt hole with no way out, so the best option is to simply prepare for Armageddon, because, with the surety of the swallows returning to Capistrano, this economy will crumble.

Shed debt and physical goods of little value. Invest in precious metals, food, land, seed, machinery and tools. Only way out come 2015, if not sooner, maybe much sooner.

Thu, 06/02/2011 - 11:10 | 1332336 SheepDog-One
SheepDog-One's picture

Thats what Im doing, talking to local farmers for a deal to sell off some of their farmable land, raise crops, some animals, whatever it takes to get thru the other side of this obvious collapse because paper wont be worth anything but something to start a fire.

Thu, 06/02/2011 - 11:16 | 1332356 DarkAgeAhead
DarkAgeAhead's picture


A good underlying, organizing principle is to rely on natural forces and sources rather than higher orders of technology and energy.

Thu, 06/02/2011 - 12:51 | 1332790 topcallingtroll
topcallingtroll's picture

Only pay down debt you can't repudiate.

Have six months of food and living expenses,
but a collapse and bankruptcy means assets change hands.
Assets and productive capital won't disappear and
civilization wont collapse.

You dont need to store seeds and farm tools!

Thu, 06/02/2011 - 13:44 | 1333082 DarkAgeAhead
DarkAgeAhead's picture

So most collapses have a shorter shelf life than the 6 months of food and expenses? 

Not sure about that.  Hold physical water (and perpetual ability to purify based on local sunlight), physical food growing means, etc... 

Holding a derivatives to those (i.e., through municipalities) is like holding paper gold. 

Thu, 06/02/2011 - 11:08 | 1332330 Cestabsurd
Cestabsurd's picture

Plus, underneath the numbers, the actual GDP, is comprised of trillions of nonproductive financialization activity. CDS on the phases of the moon, other irrelevancies, all get counted as "product." It's a rotting carcass of an economy, with the meat being stripped from the bones by a kleptocratic elite.

Thu, 06/02/2011 - 11:24 | 1332379 ElvisDog
ElvisDog's picture

I've always thought that government borrowing should be subtracted from nominal GDP. As it is now, the more the government borrows the higher the GDP. Seems like a negative incentive there.

Thu, 06/02/2011 - 11:23 | 1332391 I did it by Occident
I did it by Occident's picture

And that doesn't even account for GDP/capita drop.  Increase in population with GDP barely moving= less GDP/capita = we are reaching wage parity with China sooner than we all think.

Thu, 06/02/2011 - 11:33 | 1332432 nantucket
nantucket's picture

Whenever I see basic and straightforward analysis that exposes the system as a lie, for one second I think "it can't be correct...if it's so simple to see the lie, the citizens would revolt"...but then I remember the conversations with relative at a recent barbaque or party and I recall that they all knew incredible detail about the American Idol singers and every contestant on Dancing With the Stars but had no idea who their state senators were, who their congressperson was, what the Treasury is, how the Federal govt finances its spending, etc, etc.  Then I realize how easy it is to pull off this massive ponzi IN PLAIN SIGHT OF THE PUBLIC.  Just not enough peole know about it...let me rephrase that....not enough people care about it.

Thu, 06/02/2011 - 12:24 | 1332667 alexanderstollznow
alexanderstollznow's picture

the bit you are overlooking is that the proceeds of 'the massive ponzi' are being spent on those people you are referring to ie the public.  they want it; they demand it.  it is not being done to them, it is being done for them, at their insistence as voters.  you might like to consider what would happen to any president who, say, actually tried to stop spending trillions on ideological wars. 

it may suit some people's paranoid fantasies to believe that the entire world of business and government is some monolithic conspiritous whole, but the actuality is that all the fiscal problems of the West are the result of politicians doing what voters demand.  in case anyone hasnt noticed it is a problem almost everywhere.

Thu, 06/02/2011 - 11:32 | 1332446 JR
JR's picture

In addition to a profligate and math challenged Congress, Americans are up against a Fed that is destroying the purchasing power of the few dollars Americans have left after paying for a Nanny State of welfare and warfare and bank bailout.

Says Ron Paul: “People are beginning to realize that when the Fed in effect doubles the worldwide supply of US dollars in a relatively short time, it has the effect of stealing half your money through reduced purchasing power.”

The Fed also is undermining America’s foreign policy by lending in secret huge sums of our money to foreign banks, according to Paul: “In one week at the height of the crisis, about 70% of the money doled out went to foreign banks.

“We were told that bailing out banks was going to stave off a massive depression. Depression for whom?” asks Paul. 

Americans got their depression anyway, “with continued job losses and foreclosures.”

Thu, 06/02/2011 - 11:56 | 1332545 TruthInSunshine
TruthInSunshine's picture

Don't worry, Bernanke has testified before Congress and told incredibly piercing 60 Minutes interviewers that he is fully prepared, and in fact, anxious to "withdraw liquidity as needed and when the time is right."



Thu, 06/02/2011 - 12:12 | 1332623 alexanderstollznow
alexanderstollznow's picture

problems with this rubbish from ron paul:

*the US$ is no lower than it was before all the QE started in the first place

*the Fed did not double the worldwide supply of US$

*purchasing power has not halved (see first point)

some other issues

*bank bailouts have been profitable where large banks were concerned

*bank bailout losses (all unrealised as yet) are all on regional banks, and the total is utterly miniscule in the context of the US fiscal problems

*warfare, OTOH, is very expensive, and we know which side of the political spectrum is right into that.

as usual, dont let a few facts get in the way of the usual platitudes...

Thu, 06/02/2011 - 12:32 | 1332692 JR
JR's picture


Thu, 06/02/2011 - 12:48 | 1332738 alexanderstollznow
alexanderstollznow's picture

that's what i like, reasoned intelligent, incisive analysis.

Thu, 06/02/2011 - 12:00 | 1332562 daneskold
daneskold's picture

It's the jobs saved paradigm.

How far would GDP have fallen without the $5 Trillion borrowing?

Thu, 06/02/2011 - 12:19 | 1332642 JR
JR's picture

Reminds me of the recent Matt Taibbi story in Rolling Stone of the two well-connected Wall Street wives who got together and formed a real estate investment company on a $220 million so-called free-money “loan” from the Fed. You know, job stimulus money.

Then, one of the wives bought a $13.5 million home with her husband, the CEO of Morgan Stanley. You know, trickle-down stimulus money.

Thu, 06/02/2011 - 12:01 | 1332567 Dolemite
Dolemite's picture

Silver short term top in at 37.50

Equites and oil dont look too hot either...

Thu, 06/02/2011 - 12:06 | 1332595 proLiberty
proLiberty's picture

" If you borrowed $7 to get $1 in your pocket, would that strike you as a good deal? How long do you reckon you could borrow $7 to get $1 of "growth" in your finances?"


Mal-investment on steroids.

Stein's Law: what cannot continue forever, won't.



Thu, 06/02/2011 - 12:22 | 1332657 dugorama
dugorama's picture

so, it has to be asked.  what would have happened without the $5 trillion in borrow/spend?   Okay, the biggest part of our reaction to the Bush recession was to loan banks money at 0.01% so they could loan it back as excess reserves at 0.4%.  But without the stimulus spend where would GDP be?  Everybody's community rebuilt roads and other such stuff to put the construction workers back on the job.  Would we have been at a $9 T economy?  There's no way to know, but it was assumed this prevented an epic collapse.

Thu, 06/02/2011 - 12:31 | 1332698 The Rock
The Rock's picture

GDP is growing, just negatively...

Thu, 06/02/2011 - 12:58 | 1332785 alexanderstollznow
alexanderstollznow's picture

honestly, this whole thread is just such utter bullshit. GDP is growing, and the entire planet of anyone who cares, already knows that GDP includes government spending.   so the only point here is that GDP ex governement spending is not growing.  if that is so, then it is not some startling revelation, it is just a different line on the same data release. 


if it is such a bother for some people to have a positive growth number in this economy, then invent your own with some other definition, and use that.  in the meantime, GDP is a measure with a well understood meaning, and it has positive growth.

Thu, 06/02/2011 - 13:01 | 1332843 topcallingtroll
topcallingtroll's picture

GDP ex government spending must grow faster than government spending or the misallocation of capital and erosion of capital base will impoverish us all.

You must be from daily kos!

Thu, 06/02/2011 - 12:52 | 1332796 steveo
steveo's picture

It is actually worse than just a "bad investment".

Because Gov spending is directly added into GDP, if they borrowed 7T and got 7T more in GDP, then that would be a "bad investment" with a yield of zero. 


They are just pissing money away, our money, in poorly allocated form that produces nearly nothing in the way of organic growth.

Thu, 06/02/2011 - 13:11 | 1332890 American Sucker
American Sucker's picture

"Total public debt in 2007 (pre-recession) was $8.95 trillion.
Total public debt in 2010 was $13.53 trillion. This is an increase of $4.58 trillion. Add in the 2011 deficit of $1.6 trillion and the total is $5.1 trillion in additional debt in the four years from 2008 to 2011."

4.5 + 1.6 = 6.1, not 5.1

CHS's math is wrong.  It's even worse.

Thu, 06/02/2011 - 13:41 | 1333054 TruthInSunshine
TruthInSunshine's picture

Or 202 trillion USD, but who's keeping track?

U.S. Is Bankrupt and We Don't Even Know It: Laurence Kotlikoff

...the Congressional Budget Office whose Long-Term Budget Outlook, released in June, shows an even larger problem.

‘Unofficial’ Liabilities

Based on the CBO’s data, I calculate a fiscal gap of $202 trillion, which is more than 15 times the official debt. This gargantuan discrepancy between our “official” debt and our actual net indebtedness isn’t surprising. It reflects what economists call the labeling problem. Congress has been very careful over the years to label most of its liabilities “unofficial” to keep them off the books and far in the future.

For example, our Social Security FICA contributions are called taxes and our future Social Security benefits are called transfer payments. The government could equally well have labeled our contributions “loans” and called our future benefits “repayment of these loans less an old age tax,” with the old age tax making up for any difference between the benefits promised and principal plus interest on the contributions.

The fiscal gap isn’t affected by fiscal labeling. It’s the only theoretically correct measure of our long-run fiscal condition because it considers all spending, no matter how labeled, and incorporates long-term and short-term policy.

Thu, 06/02/2011 - 14:13 | 1333219 clinger9
clinger9's picture

only thing holding this country together is free Internet PORN!! If the feds take that away, people would have an introspective epiphany that would shake the every foundation of government.. Reason Porn makes you feel inferior to the images you see and allows you to stop thinking. 

Thu, 06/02/2011 - 14:23 | 1333278 OldTrooper
OldTrooper's picture

Why not start using 'accelerating' to describe GDP.  That way, as long as there was some change, we could say, "All is well, GDP is accelerating."

Fri, 06/03/2011 - 00:45 | 1334890 Element
Element's picture

Can we stop pretending GDP matters?

Fri, 06/03/2011 - 15:51 | 1337309 AldoHux_IV
AldoHux_IV's picture

+ $14trillion

Not even a good measure of economic prosperity and merely a tool to mask the theft of the real economy in real terms.

Wed, 06/08/2011 - 23:24 | 1353532 Element
Element's picture

Yes, not to mention that a goodly portion of the $14.5 trillion nominal GDP is just the result of preceding massive credit bubble misallocation, and Govt debt growth, to prevent total dis-embowelment of said "GDP"


Anyone who thinks this is growth is not reading their music as they play along in the symphony of bankster chaos.

Fri, 06/03/2011 - 15:47 | 1337298 AldoHux_IV
AldoHux_IV's picture

Another way of saying this is that the banking cartel et al stole $6 for every $1 in supposed allocation for growth in the economy.

Do NOT follow this link or you will be banned from the site!