Quote:
Originally posted by eatapeach@Feb 29 2004, 11:37 PM
i didn't say manipulated, i said fictitious. anyway, here's richard daughty from barron's explaining the gdp in his own special way. read this, then reread what i wrote.
http://www.dailyreckoning.com/home.cfm?loc...qs=id=3769&tp=c
"Suppose you, as a successful capitalist swine, hire a hundred guys to make a hundred widgets, and sell the widgets for a dollar apiece, and thus GDP is $100. So far, so good.
Then a few days pass, and we wake up with a blinding headache in a strange, seedy little hotel on the outskirts of town with a one-eyed woman who says her name is Darla, and when we frantically call in to the office, we find that you raised the price to two dollars, and you also figured out a way to make widgets with only fifty employees!
The hike in price, unfortunately, reduces widget sales by 25%. But GDP jumps to $150! And because you fired half the employees, labor costs plummeted, and the next thing you know Alan Greenspan jumps on an airplane and flies down to visit your factory and give you an award as Proud Poobah of Productivity, which you deserve because productivity has soared.
In the old days, it took a hundred guys to make a hundred widgets. Now it takes only fifty guys to make seventy-five widgets, and you doubled the price to more than make up for it. You're a genius!
But unemployment is up by 50%, total sales volume is down, and inflation has soared to 100%. Only a Fed chairman as clueless as Alan Greenspan could possibly see just an upside in this."
you seem to see an upside in this too, colin 
|
eatapeach,
There you go again. That's a political article, not an economic one. ;-)
For all that have complained about the FED flooding the system with money, take a good look. It appears that they have been reducing the money supply for 6 months now. The US economy grew more the past six months than in any other six month period in the past 20 years and it happened it with less money in circulation. As the Austrians on this board will probably point out, you can't be sure the money supply drop is intentional as the FED's actions are non-transparent but there it is.
I'll tell you why GDP matters. Defense. Most developed countries spend about the same 3% of GDP on defense as each other. The US is nothing special in this regard. What it does is buy the US more aircraft carriers than all the rest of the world combined. What it does is permit the US to spend more on advanced military technology than all the rest of the world combined.