US GDP Will Be Revised Higher By $500 Billion Following Addition Of "Intangibles" To Economy

Tyler Durden's picture

Those who have been following the US debt to GDP ratio now that the US officially does not have a debt ceiling indefinitely, may have had the occasional panic attack seeing how this country's leverage ratio is rapidly approaching that of a Troika case study of a PIIG in complete failure. And at 107% debt/GDP no explanations are necessary. Luckily, the official gatekeepers of America's economic growth (with decimal point precision), the Bureau of Economic Analysis have a plan on how to make the US economy, which is now growing at an abysmal 1.5% annualized pace, or about 5 times slower than US debt growing at 7.5% annually, catch up: magically make up a number out of thin air, and add it to the total. And it literally is out of thin air: according to the FT the addition will constitute of a one-time addition of intangibles, amounting to 3% of total US GDP, or more than the size of Belgium at $500 billion, to the US economy.

From FT:

The US economy will officially become 3 per cent bigger in July as part of a shake-up that will see government statistics take into account 21st century components such as film royalties and spending on research and development.

 

Billions of dollars of intangible assets will enter the gross domestic product of the world’s largest economy in a revision aimed at capturing the changing nature of US output.

 

Brent Moulton, who manages the national accounts at the Bureau of Economic Analysis, told the Financial Times that the update was the biggest since computer software was added to the accounts in 1999.

 

“We are carrying these major changes all the way back in time – which for us means to 1929 – so we are essentially rewriting economic history,” said Mr Moulton.

What exactly will constitute GDP growth going forward? In a word, intangibles: films, books, magazines and iTunes songs.

“We’re capitalising research and development and also this category referred to as entertainment, literary and artistic originals, which would be things like motion picture originals, long-lasting television programmes, books and sound recordings,” said Mr Moulton.

 

At present, R&D counts as a cost of doing business, so the final output of Apple iPads is included in GDP but the research done to create them is not. R&D will now count as an investment, adding a bit more than 2 per cent to the measured size of the economy.

Nothing like adding intangibles in the fluid, ever-changing definition of what constitutes an economy.

Naturally, the only reason for this artificial "boost" to the US economy which apparently can be any old arbitrary number agreed upon by a few accountants, and which always goes up post revision, never down, is to make US debt/GDP under 100% once again, if only very briefly. Surely a few months later something else can be "added" to GDP making the US economy appear better than it is once more.

Finally, all of the above is a distraction for idiots.

As most people should know by know (this logically excludes economists), the only factor leading to economic "growth" is the expansion of liabilities of the financial system, whereby new credit (in a healthy environment, not one centrally-planned by several Princeton real-world rejects, where the central bank is forced to create all credit expansion with money that never leaves the banks and the capital markets closed loop) creates new money, creates demand for products and services, and circulates in the economy.

This can be seen in the chart below which shows the nearly perfect correlation between total bank liabilities in the US, as per the Fed's Flow Of Funds report, and total US GDP.

Bottom line: the BEA can capitalize air consumption if it thinks it will make US GDP soar, but unless new credit and bank liabilities are created not due to forced supply but demand, and unless the private financial sector is finally willing to start lending money (which for the entire duration of QE it has not) US growth will stall and then proceed to decline.

Case in point: total US commerical bank loans are still lower than they were the day Lehman filed.

In other words, all the GDP "growth" since the Lehman failure has come on the back of money "created" by the Fed.

And there are still those who think the Fed will ever unwind...

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
ihedgemyhedges's picture

Intangibles, seasonal adjustments, etc etc.  They'll do whatever it takes.........

SolidSnake961's picture

what intangibles? the bullshit ability of the BLS and the Fed?

HD's picture

Intangible: SEE HOPIUM

 

Cdad's picture

Fabulous.  Yet more Banana Tree Republic crap from the failed status quo of America.  Yeah....more of that nonsense, please.  

toys for tits's picture

It must be serious now.  You know what that means.

 

Funny statement from Tyler: "Finally, all of the above is a distraction for idiots."

MisterMousePotato's picture

This honestly reads like something from The Onion.

I give up.

Pinto Currency's picture

 

Fractional reserve GDP.  Nice.

Stackers's picture

And the biggest GDP lie of all are "imputations"

or transactions that never even happened. Like the rent you should have paid yourself if you own your home. Or your free checking, which you should have paid for.

http://www.bea.gov/faq/?faq_id=488

Pool Shark's picture

 

 

Hey! I like that. I think I will lend myself $1 trillion.

I am now an 'imputed' trillionaire!!!

 

Cognitive Dissonance's picture

"Hey Rocky. Watch me pull a rabbit out of my hat."

"Again?"

"Nothing up my sleeve. Presto!........Whoops. Gotta get me another hat."

Cognitive Dissonance's picture

LOL

The Bureau of Economic Analysis would have you believe otherwise. :)

knukles's picture

Next addition coming January 2014 when the latest additions fail to revise Current Abysmal Growth* will be

Hope
Charity
Goodwill
Joyous Frivolities
Happiness
Sound Sleep
Wet Doggie Noses
Talking Parrots
Christmas Cheer (to be revised into Kwanza)
Patriotism
Past Advances in Social Justice

What could go wrong?
Yes, no questions about it, considering the quality of records kept since 1929

Fucking Idiocy

*remember, the net long term effect will generally be a one time jump in the accumulated GDP figures and become increasingly less with the passage of time which the BLS, et al will readjust with annual millennial readjustments (no such thing to yet be invented and itself added to the New Shit)

 

Nothing that any Good Olde Bond Guy can't cope with (as in ignore)
Cunts

PS.  All my uber-liberal buds are gonna trumpet this as a Miracle of The Messiah, his very own little self, ain't shit grand
Krugman'll have a 4 hour purple throbber.

PSS  By God's Wounds I hate these fucking people.

COOKING THE FUCKING BOOKS AGAIN

Richard Chesler's picture

In other words, Obozonomics.

Boris Alatovkrap's picture

On occasional, Boris is like long hot bath and is make steamy bubble of similar intangible.

AlaricBalth's picture

As it stands right now, oil and gas production account for about 1% of GDP. If we add all of the noxious hot air being produced in Washington we can certainly boost GDP by another trillion annually. Then if we can include the bullsh-t manufactured by the MSM we will have our debt/GDP ratio down to under 50%.

Spinelli's picture

Quantifying MSM bullshit would take an einstein like figure and a 50 year period for people to understand the complex equations involved... Ive tried myself but always get NAN or infinity...

A Nanny Moose's picture

I think you for got to add "dropping a deuce" to that list

StychoKiller's picture

Please to add the "intangilbe" of ignoring Reality (well, until the consequences of said ignoring bites everyone's head off...)

Dr.'s picture

 

 

 

 

INTANGIBLES .. see BITCOIN  !!!

.. so the FED's monetizing Bitcoin now? /sarc

 

hehe!!

 

 

Urban Redneck's picture

If they simply counted FED UST monetizations they could solve their GDP problem instantly.

butchee's picture

Does this mean I should buy those DJIA 16k August Calls?

EscapingProgress's picture

Economists have just discovered a crucial element in economic growth calculation. It's called the “add a few zeros effect”.  This occurs when there is actually no economic growth which leads to what economists call “reduction in fantastical ideas of DOW 30K and subsequent stampeed out of stawks”.  The economists influence the interdependency of this closed system loop by adjusting the data upwards.

Unfortunately, this engenders an augmentative feedback system so the data requires constant adjustment upwards in order to maintain ever increasing levels of hysterical economic fantasy. The loop then spirals out of control and millions of brainwashed muppets are swept up into the self-perpetuating vortex of absolute insanity.

 

StychoKiller's picture

So, in summary, we can count on the support of 90% of the population (#WINNING!)

WmMcK's picture

I've had both of my legs imputed.

akak's picture

No, but I suspect that we will not be hearing anything about "Core GDP" anytime soon.

nmewn's picture

Imputed...is like retroactive taxation with an infinite accounting Forward matrix kicker...lol.

I take it all back, fuck the lawyers, kill the accountants first.

Boris Alatovkrap's picture

At first they came for accountant, then they came for lawyer, then they came for banker. When all gone, no one is remain to screw me.

StychoKiller's picture

Boris is have enjoinment of hot chick from Ukraine, then.  :>D

Boris Alatovkrap's picture

Boris is love wife, even if not "hot chick". Boris learn in youth keep kielbasa in trouser.

jerry_theking_lawler's picture

I thought intangibles meant all the gold in Ft. Knox.....

NoDebt's picture

Let's add Social Security, Medicare, Medicaid, food stamps and welfare to GDP while we're at it.  The books will always balance then.

Stackers's picture

NoDebt: They already do. It's called "redirection"

http://www.bea.gov/faq/?faq_id=488

the GDP accounts redirect certain transactions so that the consumption is attributed to the ultimate recipient of the good or service rather than to the payer.  An important example is health care, which is generally paid for by private health insurance (often provided by the employer), by government insurance plans such as Medicare and Medicaid, or by consumer out-of-pocket payments for deductibles, copayments, and uninsured expenses.  In the GDP, these health-care transactions are redirected so that they are included in personal consumption expenditures, reflecting the role of households as the final consumers of those health goods and services.

NoDebt's picture

Stackers- thanks for the link.  I read it 3 times.  I'm a recovering economist, so it's not like I'm completely illiterate in such things.  But, man, that was a lot weirder than what they taught me back in Macro Econ!

If I can summarize what I think I learned..... GDP is a worthless statistic.  Am I close?

If you own your house, guess what- you are contributing to GDP because your house is paying you a "market housing value" every single month (do you feel richer?).  Government health care counts as GDP even though it's clearly a zero-sum game being taken from those actually producing.  Collecting royalties on a movie are now GDP with the recent revisions, above.

Shit, the whole damned economy could be nothing but rich people (or government) owning everything plus government transfer payments and GDP would still be clicking right along without a blip!

I think I see where this is headed now.  "Passive" activities are given more and more weight in GDP relative to "active" um...... activities.  Ok, ok, stupid way of describing it, but you get what I'm saying.  Since more and more people are getting by via passive sources we just include those passive sources in GDP..... problem solved!  We could all sit on our couches getting government payments (or collecting royalties, rents, etc.), producing nothing.... and GDP is blind to that. 

No wonder it feels like a depression but the "statistics" don't show it.  They're built NOT to show it!

Seriously, thank you for the link.  I need to go reexamine my whole life now.

 

socalbeach's picture

GDP is the $ amt of domestically produced goods and services.  I'm surprised they're not adding to GDP every time a baby is born in the US.

Boris Alatovkrap's picture

But America is kill babies - or import from Mexico. This is to hurtful of GDP, no!?

socalbeach's picture

GDP is only counts domestically produced babies.  Babies imported from Mexico is not count in GDP. Is not help GDP and is not hurt GDP.

GeezerGeek's picture

I wonder if the GDP is increased when I cut my own lawn? Or when I cut my neighbor's lawn and she bakes a pie and gives it to me.

Thus far we have not been forced to declare such interactions as income.

Clever Name's picture

Wow, that is unreal.

Another important imputation measures financial services provided by banks and other financial institutions either without charge or for a small fee that does not reflect the entire value of the service

Assumedly this (maybe this is a bad example, actually) 'service' provided without charge is built into the 'cost' of banking, as in the lower interest rate they give you? Assuming that its not built in, the bank offers it for free, but the govt will assign a value to it to add to GDP? How much is a ketchup packet at McD's worth? Is that factored in also? Why not?

Wait, I think I know. Maybe because it will show how important said banks are to GDP? This is why theyre tbtf! If I open a free checking account at every bank that has no minimum with $.01, think of how much I'll be adding to GDP! I am a GDP mulitplying force to be reckoned with! Do your part!

The real question is, what would GDP be without these numbers added in?

If I can summarize what I think I learned..... GDP is a worthless statistic.  Am I close?

No, no, no, of course not. Dont you see the value of a free service? You should be happy to be a valued customer of   (strikethru not working?) serve a TBTF bank!

Pool Shark's picture

 

 

So,...

If I'm reading this correctly; we should all steal ketchup packets from McDonalds to help increase GDP?

Wow! What would be the effect if we also broke a window on the way out?

 

Boris Alatovkrap's picture

Now you are get clue. If is work together, can break many shop windows and all is get rich!

SimplePrinciple's picture

Unreal is right.  Take R&D.  Commerically successful R&D produces value in terms of the value it adds to product sales.  R&D is an intermediate service.  If you count the spending as a final service, then you would be double counting as the the full value of the extra sales from the R&D that facilitated that output are already counted.  In that case, you should subtract the R&D expenses from the value of output already sold in prior years.  Don't see em doing that, so double counting!

A Nanny Moose's picture

"The economy" is but an abstraction. It's measurement managed by unproductive bureacrats who work for yet another abtraction (The People), by producing absolutely nothing. Go with that which is real.

StychoKiller's picture

Mmm, crazee pills (eat 'em by the handful!)

Jake88's picture

Yeah. The happy feeling we get when the stock market rises. The wealth effect. Look around. Isn't everyone 500 billion worth of happy.

natronic's picture

Looks like the Fed's haven't run out of tricks yet.  Funny the stock market is going down today since it's been announced.

LetThemEatRand's picture

They should simply account for the cost of fuel for Ben's helicopter.  And ink.  And cotton and paper.  That would raise GDP by a huge percentage.

YHC-FTSE's picture

They're gonna add that next month, a one-time (honest!) Inclusion to the GDP under "Incidentals". $1 trillion ought to do it.

Stuck on Zero's picture

If they would add in under-the-table payments, graft, shakedowns, extortion, Congressional gratuities, Senatorial kickbacks, House of Reps free corporate travel perks,  benefits for legislation, Vatican Bamk account interest gleaned by staffers, Bahamian stock shorts by Whitehouse staffer insiders, and mysterious foil wrapped refrigerator packages they could boost the GDP by another 5-10%.

 

max2205's picture

Yes you can make this up

Now Japan can add breathing t o their CPI