I don't have a lot to talk about tonight. It's getting late, and I'm getting tired. I'll be traveling the next two weeks, but I'll do my best to check in and keep posts going...
This week, the Bureau of Economic Analysis released the statistics on GDP for the last quarter of 2008. GDP declined in the U.S. in both real and nominal dollars. It was a bad quarter. I am closer to formulating some alternate measures to the GDP - that will be the subject of some upcoming post. In the meantime, it is important to remember that politicians and economists use GDP as the key measure of "the economy". GDP is essentially spending. If we spend more, then GDP goes up and politicians can claim success in "growing" the economy.
Stimulus, spending, multipliers, ... all of these things are aimed to grow GDP - which, as you may recall, according to Okun's (so-called) Law, is linked to unemployment. These two simple measures have the eyes of Washington. So, as we watch the Senate debate and edit the American Recovery and Reinvestment Act, remember that spending - even when we don't have any money or when the spending produces nothing - will be the key measure of success.
If the government borrows money to pay someone to dig a hole and fill it up... unemployment will decrease and GDP will go up. I hardly see this as economic growth.
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