Thursday, August 27, 2009

Why GDP Numbers (and American Democracy) Are A Joke


From today's BEA GDP release:
"The decrease in real GDP in the second quarter primarily reflected negative contributions from
private inventory investment, nonresidential fixed investment, personal consumption expenditures
(PCE), residential fixed investment, and exports that were partly offset by positive contributions from
federal government spending and state and local government spending. Imports, which are a subtraction
in the calculation of GDP, decreased....

Real personal consumption expenditures decreased 1.0 percent in the second quarter, in contrast
to an increase of 0.6 percent in the first. Real nonresidential fixed investment decreased 10.9 percent,
compared with a decrease of 39.2 percent. Nonresidential structures decreased 15.1 percent, compared
with a decrease of 43.6 percent. Equipment and software decreased 8.4 percent, compared with a
decrease of 36.4 percent. Real residential fixed investment decreased 22.8 percent, compared with a
decrease of 38.2 percent.

Real exports of goods and services decreased 5.0 percent in the second quarter, compared with a
decrease of 29.9 percent in the first. Real imports of goods and services decreased 15.1 percent,
compared with a decrease of 36.4 percent.

Real federal government consumption expenditures and gross investment increased 11.0 percent
in the second quarter
, in contrast to a decrease of 4.3 percent in the first. National defense increased
13.3 percent
, in contrast to a decrease of 5.1 percent. Nondefense increased 6.2 percent, in contrast to a
decrease of 2.5 percent. Real state and local government consumption expenditures and gross
investment increased 3.6 percent, in contrast to a decrease of 1.5 percent.

The change in real private inventories subtracted 1.39 percentage points from the second-quarter
change in real GDP, after subtracting 2.36 percentage points from the first-quarter change. Private
businesses decreased inventories $159.2 billion in the second quarter, following decreases of $113.9
billion in the first and $37.4 billion in the fourth..."

So to recap: Consumption was down, private investment was way down, inventories were down, exports were down, global trade(exports AND imports) is still severely contracting and yet GDP is only -1% ? Not to worry folks, the private economy doesn't matter in Keynesian-Monetarist Bizarro World because we have the resplendent state with our omniscient overlords at the helm picking up the slack. The reason why GDP isn't cratering (like it should if we only looked at private consumption, investment, and trade) is because of an increase of 11% in gov consumption/investment and the fact that we've been forced to import less crap for consumption. This also assumes we don't purposely understate the deflator to hide inflation and overstate GDP.

The most comical part is the "anti-war" candidate
, and the democratic congress, who were elected ostensibly to challenge the foreign policy establishment have sat by as defense spending rose 13.3% !! Lockhead, Boeing, Raytheon, United Tech, KBR, GE etc; the pentagon, state department, and military proper; AIPAC, AEI, CSIS, CFR and the litany of think-tanks, lobbies, and foundations that promote western hegemony/empire must not have gotten the message that we elected a "change" candidate. American Democracy is such a joke. De La Boetie was correct - which makes our situation all the more pathetic.

UPDATE: For all those convinced Military Keynesianism is utilitarian and/or economically sound (ignoring traditional morality) here's an interesting tribute to Seymour Melman by economic historian Thomas E. Woods, Jr.: 'The Neglected Costs of the Warfare State: An Austrian Tribute to Seymour Melman'

UPDATE 2: My earlier fulmination about American Democracy just reminded me of a favorite Mencken quote: "[Democracy is] the worship of jackals by jackasses"
; as trenchant now as then.