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...

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Yen Cross's picture

  When you have nothing, and make someting of it.

    The pricks that pooled Student loans and credit card (advances to kill people ) are last on my invite list! Some people might disagree with me. (I respect their ignorance)

    To the asshole that thinks student loans aren't abused?  http://www.zerohedge.com/news/2013-02-28/delinquencies-student-loans-sur...

    In the " Old Days" I would get mad<

The Second Rule's picture

I blew two accounts by shorting so I'm with you there.

km4's picture

What a joke !

Bu this isn't.....Robert Johnson on the Oligarchs: “They’re All Standing on the Deck of the Titanic Looking in Each Other’s Eyes” http://po.st/vrPaOZ via @po_st

you enjoy myself's picture

so wait, do you mean to tell me music, film, and books were previously not part of GDP?  Hollywood revenues were not part of GDP?  how in the world is that possible?   or is this an addition of some fungible concept like goodwill, whereby these works of art carry some nebulous value on top of their sales/licensing numbers?

TruthBeforeAll's picture

Have government employees ever been calculated into the GDP?

pashley1411's picture

This is simply political correctness applied to government stats.   Who could possibly be surprised.

icanhasbailout's picture

The Fed will unwind... all at once.

vincent's picture

WTF seems to be the prevailing thought every week now.

Where do we go from here?

 

FieldingMellish's picture

I wonder if films like GI Joe 2 count as a negative intangible?

laomei's picture

America has full employment and hundreds of million of new "carbon dioxide manufacturing" jobs.

q99x2's picture

I liked the platinum coin idea better.

yogibear's picture

Bubble Bernanke and the Fed have to do printing catchup with Japan.

The Fed is ready to buy all the debt Obama and his admin can come up with.

It's going to hit $17 trillion soon with a ramp to $25 trillion in 4 years or bust.

The Fed will then make trillions of debt disappear. The US federal Reserve bankster  debt shell game.

LOL, 9 TRILLION Dollars Missing from Federal Reserve

http://www.youtube.com/watch?v=GYNVNhB-m0o

 

 

surf0766's picture

9000 new green jobs created in 2012.. but their estimate was 500,000.  1.8% efficiency.

Catullus's picture

Why don't they add goodwill as well? There's got to be some brand value to the ole USA trademark. All those flybys and songs and pretty costumes for the First Responders/Standing Arounders. Marketing. That's where the money's at.

GDP: a number that means nothing, estimated off fake numbers, that shows only which particular agenda is being serviced needs it to show.

These mofos would try to convince you that a foot is 13 inches.

laomei's picture

GDP: An imaginary number representing how many times the same dollar passed back and forth.  It's all pretty much bullshit.

Curt W's picture

"These mofos would try to convince you that a foot is 13 inches."

I once convinced a girl that 6" was 9" her sence of measurement hasn't been the same since.

trip kitchen's picture

So they don't even try to make their BS seem rational anymore.  Why should they?  The vast majority of america idle can't understand or don't care what it means anyway.

 https://www.youtube.com/watch?v=q6TRVXG4kQE

Lost Wages's picture

Hopefully they are adding Bitcoin profits then.

toys for tits's picture

I was attempting to have sex, but my partner said my dick was intangible.

Common_Cents22's picture

Dont forget the GDP multiplier effect that Nancy "you have to pass it to see whats in it" Piglosi said about unemployment welfare and obamastamps.   They are stimulative!

Agent 440's picture

We are living the model now. : (

Jack Burton's picture

I would say that this fake number designed to make the big lie about the American recovery look real was a fucking joke. But government will stop at nothing to control the image and to lie about the collapse of Middle Class America. Now they have another way to fudge and already hoax GDP. Just more evidence that the collapse is real and the government has become a propaganda machine full of lies. All they do now is support the sending of jobs overseas, make wars across the globe and fill America's increasing for profit prisons with millions of inmates.

 

kchrisc's picture

Government and their bankster masters are a lie. They are a cabal of murderous criminals whose existence is predicated on living off of us like we are their farm animals. They live off of our product and our souls. The lie is that we need them instead of the other way around.

The lie that is them keeps all governments working feverishly to control speech and thought because they cannot have the sheeple discover the truth and begin to withhold and use for themselves the product of their efforts and lives.

The lie, the basis for their entire existence, must be sustained by more lies, control and fear and the killing of the truth and truth bearers. Here we have a fine example of lies being used to sustain the lie, while things like  NDAA is them preparing to kill the truth and truth bearers.                      hujel

devo's picture

Is porn already included?

The unemployed can't look for jobs 16 hours per day.

robertocarlos's picture

Goodwill on the USA balance sheet should be up at least a trillion after defeating the terrorists last week.

suteibu's picture

These are not serious people.  They are like high schoolers plotting to change their grades.

And what's the tax angle on this?

Yen Cross's picture

 Short < SHIT Coins<

newengland's picture

Yen, my friend. Get your best trades in place before August.

experimentals's picture

How does one take into account private lending, seperate from commercial lending? I see it by the 10's of millions weekly even daily some weeks (remember this is just my observation) in the Southern California , actually the Los Angeles County, Orange County, Riverside County, San Bernardino County is all I participate in.   So many private hard money lenders. I even know business owners who put $5,000,000 of their own money and source hardmoney flips all day long. Meaning they fund loans where other small investors put in 40%, and they put in the other 60%.  The small investor then invest more capital in rehabbing/remodeling then sells it to a desperate to jump in buyer. There are plenty buyers with 750 FICO scores. Steady W2 Incomes from careers not just jobs, but limited capital. So the Government Teet helps facialite with FHA 3.5% downpayment loans at historically low (3.5% soon to be 2.5% 30yr fixed) interest rates. So the average joe is back to demanding this lipsticked pigs, and this time around eveyone is making sure htey don't miss out on the flip game. I've been flipping for the past 4 years with personal very limited capital.  The cash that's pouringing now is ridiculous.  Specially the foriegn cash.  

 

The Investor gets his 12%-15% Steady return. The broker who sells the loan product to sales reps gets his 1% of a wholesale volume. The sales rep gets his commission split off of the 3-4% premium the investor pays while the brokerage gets the remainder.  The small investor makes his profit. The two real estate agents get their commission splits and their brokerages keep the remainder. The only person who doesn't come out ahead financially on paper is the homebuyer.  Except wait, it's a bubble!!! so in 6_12 months the motherfucker will look like genius because he invested $9,000 plus another $6,000 for downpayment and closing costs. Has a place to live which was bought for $300,000, but now it can be sold to next guy who will be getting a 2.5% 30 yr fixed and can easily pay (borrow) $400,000 . Better yet wait until next year after the next hiccup and the QE levee's just break and now you have buyers at 1.5% 30 yr fixed mortgages. Those mother fuckers will be pounding on your door to buy it at $500,000.

 

 

It's stupid and it shouldn't happen again, but I lived through it once and stayed way too cautious, this time I'm leveraging to the hilt and getting what I can and ride this mother fucker until it pops. For those that were not in the real estate game when it first popped  Dec 2006 (New Century BK), then Aug 2007 (ABC Conduit aka AHS BK) , then you have no idea how easy it is to hit the exit in Real Estate before the lemmings that are all in it realize that the building is on fire.  

 

Case in point.  Hemet California Nov 2005,  I remember going in very cautious because subprime was already starting to show the stress via the rules and standrads of the wholesale banks.  Of course only about 5 of us 500,000 licesed proffesionals in the country could see it coming. Anywas, by Nov 2006 When we put he Hemet house on the market everything was breaking down, the Rates rising and underwriting guidelines tightening killed the demand.  All the cracks in the portfolios started showing up via emergency sales of one wholesale bank to another. Emergency wind downs of direct lenders.  Retail Direct Lenders losing their credit lines from the Wall Street big boys.  It was happening all around us the signs were obvious. 

 

So I told my partner on the deal.   "We've never not made a good amount of money ona flip.  And we have definately never lost any money on a flip. We certainly can't afford to lose on a couple to learn a lesson.  So let's try and keep our clean sheet. You see how things are going in our industry (I owned a mortgage brokerage back then) let's bail the fuck out and call it quits. They are gonna hate us in hemet but we cant risk losing even one penny of our capital.  Let's drop the price 20% below market. We'll get an offer right away and of course kill the market but fuck it."  (at this point properties were sitting ont he market, prices were slowly creeping down, it was an eery feeling after so many years of the exact opposite).  SO we dropped from $200,000 to $160,000 and sold right away and we walked away with a $2,500 profit.  We check that market a year later and we were the highest price sale for the following 12 months.  awwww the good old days. When I was 25 yrs old.  Yes I was a product of the bubble, but at least I did it learning a very valuable lesson and learnig it hard with my own money.

newengland's picture

Do not fight the Fed on its own turf. 

Buy gold, silver, land. 

Bernanke is a believer, not a deceiver. The experiment has failed. Trade accordingly.

Golden_Rule's picture

Gov is clamoring over legalizing the illegals too, adding ~10 million to US workforce.

RockyR's picture

Have we reached peak bullshit, yet?

newengland's picture

Peak bull$hit comes in the summer shortly before Jack$hit Hole.

Blano's picture

A new peak is reached each day.

booboo's picture

We got jizz banks too, we have that going for us.

kchrisc's picture

My computer must be infected or something. When I search Google for "banana republic" it keeps showing me a map of the US. Next thing you know it will show me supposed US civilian "leaders" in military uniforms, medals and all.

I better get this thing fixed soon.         hujel

Jack of All Trades's picture

We had a great recovery going, and perhaps Fed would have been unable to unwind, but the Boston Marathon bombing is going to set everything back.  Wait to hear that as an excuse for economic underperformance . . .

knukles's picture

Well sure, Waterford/town/ville/whatever was closed down by an unsaid martial law decree for some 24-48 hours, so about 7/8s of the quarters GDP is lost.
Fucking Lost I Tell Ya!

Hengist's picture

Yes but surely all that police overtime added about 9/8ths, the increase in donut consumption alone must have been epic.

toys for tits's picture

+1

The only people allowed on the streets were law enforcement and donut chefs.

syntaxterror's picture

Just add all of the money "saved from ending" the Vietnam, Iraq, Korean, WWII, and Afghan wars. Easy 5 trillion or more right there.

Akrunner907's picture

Put more lipstick on the pig............

Hengist's picture

Well this explains why they removed the word "lunatic" from the criminal code recently.

Hengist's picture

It reminds me of the time Italy in the 1980's decided to revise it's GDP by including the "black" economy, this added about a third to GDP figures.  The Italian press were crowing that their economy was now bigger than the UK's.  To which one Great lady Mrs Thatcher replied she was pleased for them and and that as EU contributions were calculated on GDP at the time then she hoped they would be happy contributing more to the EU and receiving less back.

After this they removed those figures.

Yen Cross's picture

      Why is it, that it takes a "Chapter", to define ones understanding of financial prowess?

    Some people feel the need to discuss what is already, "common knowledge"? Being Human means having the ability to share knowledge. Knowledge is shared learning?

     Put a hole in my cranium. Bernanke must be an alien?

 

jonjon831983's picture

They have another card to play, they can add Goodwill.