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GDP and Debt growth
#1
Here is a general question for you, wiser than me economists:

If the economy grows by $0.1t per year while the debt increases by $1t, is it fair to say that the economy actually shrunk by $0.9t ?

Assuming there is something to this idea, here is an Awara chart to look at:

[Image: gdp_chart4.png]

So... did the US/EU/UK/France/etc economies actually shrunk in the last decade? Germany is an anomaly, easily explainable.... they really do not like "Stimulus" indebtedness.... so Germany shows some growth.

Same chart normalized:

[Image: gdp_chart5.png]

Now, if US et al economies actually shrink, it makes the following chart much more understandable:

[Image: gdp_chart11.png]

G7 are borrowers, Emerging G7 are not.... so G7 are shrinking and fading.

And of course this also explains the necessity for the US to provoke WWIII .. the only chance to be competitive is to physically destroy most of the competition.
Sodomia delenda est

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#2
Quickely: NO
(I would love to say Yes, but it's NO)

The economy doesn't shrink if the national debt increases.
More detail next...
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#3
It only shows that the relative endebtness of the governement has rocketed through the charts the last 10 years.
The equation is not Growth - Debt = Real Growth because growth is not substracted by debt, the right equation is Debt - Growth = Real Debt. If debt increases as fast or not faster than growth, debt increase relative to the economy is zero.

Giving the level of governement debt, I don't understand the recent slump in oil and gold prices.

I'v been reading a header on the internet: "The Fed prepares for QE Infinity". Thought I din't have the time to read the article, it was exactely what I had in mind. They can stop QE now (while the EU starts their own QE) but they won't be able to keep stopped very long.

The charts also show clearly that state borrowing doesn't help growth. Otherwise % growth and % debt should be equal.
It's easy to explain, beside the Big Governement ineficiency theory, most of the debt serves former debts and interrests. In the case of the US it also served the war effort.

HTH
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#4
OK, my thinking:

Using GDP solely and ignoring new debt as usually done is surely wrong. Debt does subtract from growth.
Subtracting debt from GDP like in this study is also wrong
The correct approach is likely something like (GDP growth)-(Debt growth)/C. What is C?

When one buys a business and borrows say $1m one looks into net profit and figures out that $1m should be paid back within 3-5-7 years (depending on business).... this may be the same C as above? But is it 3 or 5 or 7?

I did say I know nothing about economics, but perhaps one can look at this as an accounting problem?
Sodomia delenda est

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#5
mv,

It may seem a little antiquated, but do a search on the "multiplier effect" that the original Obama fiscal stimulus was based upon. You get mixed results depending on the partisan source you consult, but the theory as stated stands out as the exact opposite as what you're describing above. For every dollar of government spending, there was supposed to be a $ + x effect on GDP ... essentially you are speaking Keynesian heresy!! You are toying with a notion that defiles the fiscal perpetual motion machine that people like Paul Krugman consider sacred gospel. Why on earth would Janet Yellen be doubling down on QE(x) policy if it was actually yielding a non-positive return? S13

... in general, you have to spend money to make money ... but business owners and politicians all to often lose sight of the fact there absolutely is no guarantee that things will work out that way. If it were really that easy, Zimbabwe would be a paradise now wouldn't it?
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#6
Krugman.... I thought we were talking about the real world, not John's favorite ferrets?
Sodomia delenda est

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#7
(10-12-2014, 06:52 PM)mv Wrote: Krugman.... I thought we were talking about the real world, not John's favorite ferrets?

Yellen and Lew seem real enough ... and yet they are adherents to the same magic 'school' of economics as Nobel Laureate Krugman ... unless you think they're some sort of fairy tale accountants like the goblins running the Wizarding Bank in Harry Potter ... then again the former Treasury head did had a certain 'Elfin' air about him. Hmmm....

[Image: th?id=HN.607993569282689889&pid=15.1&P=0]

Then again, to paraphrase Freud ... sometimes smoke and mirrors are really just smoke and mirrors ...
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#8
Oh, and speaking of my favorite ferret: NYT's Krugman Throws Love Fest for Obama. I half way expect the Ferret to begin work on his newest fantasy novel as soon as possible. Something having to do with dragons and fairies, I presume. S13
___________________________________________________________________________________________________
"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#9
The right equation is:
Code:
GDP Growth - Inflation = Real Growth

National debt doesn't directly affect growth but in the long term it creates inflation because no country in the world is able to pay debts proportionaly as big as that of the US without printing money (hence QE Infinity).
So yes, sort of, one can try to estimate real growth on a long term basis by taking national debt in account. But, first inflation created by debt can take a decade to materialize and second, the equation is not forcibly a simple substraction.

To determine inflation from debt, one could imagine such equation:
Code:
Inflation = Debt Interrests + Wasted Money
Anti-Obama hard core poeple here will argue that the variable "Wasted Money" = 100% of the debt, but more seriousely, money spent by the governement is never totaly unseen in the economic growth.
Poeple who recieve social security checks spend them immediately, increasing consumer spending.

The point is that some wasted money has to be factored in, not only the interrests of the debt.

So we get something like this:
Code:
GDP Growth - (Debt Interrests + Wasted Money) = Real Growth
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#10
Deficit (aka debt growth) is still more than half a trillion a year...
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#11
(10-13-2014, 04:26 PM)Fredledingue Wrote: ...money spent by the governement is never totaly unseen in the economic growth.

It's not that there is no effect, it is that there is a poor effect.

When Obama created his Stimulus packages, the rationale behind it was buried in a footnote. His economic advisor said that for every one dollar taken out of the economy and spent by the government $1.50 would be returned to the economy. Like most of Obama's "transparent" actions, that was buried and hidden away. Even so, there is not a respected economist in the world who doesn't point out that far less is ever returned than the amount taken out. 85¢ on the dollar is what the most Progressive economist might expect, but most put it far less.

So it is not that government spending is unseen, it is just that it takes away money that would have shown far better return if left in the private sector.
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#12
So it is not that government spending is unseen, it is just that it takes away money that would have shown far better return if left in the private sector.
[/quote]

Not if you are a confirmed Statist, and collectivist to boot. S18
___________________________________________________________________________________________________
"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#13
(09-11-2015, 07:00 PM)WmLambert Wrote: So it is not that government spending is unseen, it is just that it takes away money that would have shown far better return if left in the private sector.

I'd take it a step farther than that. Money taken away that could actually enhance living standards is put toward regulations that retard living standards and make living more expensive. e.g. directing money toward enforcement of Obama's war on coal. Energy prices rise steeply and we have absolutely no say. It's worth a public debate to discuss reasonably priced electricity v.s. threats posed by coal ash, particulates and sulfur emissions. Those should be part of the public discourse ... but they aren't as the decisions have been made unilaterally and funded with tax dollars ... regardless of how it affects our economy.

California is working on regulations that would reduce fuel consumption by 50%. Any bets on what that would do to California's GDP? Here's is a perfect example of how the creation of poverty is a publicly funded activity. Other than the government giving free heroin and needles to school children, it's hard to imagine how pauperism could be manufactured more efficiently.
"Democracy is the theory that the common people know what they want and deserve to get it good and hard."
-- Henry Mencken
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#14
(09-12-2015, 11:35 AM)mr_yak Wrote: California is working on regulations that would reduce fuel consumption by 50%. Any bets on what that would do to California's GDP? Here's is a perfect example of how the creation of poverty is a publicly funded activity. Other than the government giving free heroin and needles to school children, it's hard to imagine how pauperism could be manufactured more efficiently.

The continent is indeed tilted downward to the west. All loose nuts tend to roll to California.
___________________________________________________________________________________________________
"INSIDE EVERY PROGRESSIVE IS A TOTALITARIAN SCREAMING TO GET OUT" - David Horowitz

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#15
California and Obama's strategy to curb Greenhouse gasses by cutting hydrocarbon usage by 50% is not about economics. It is about creating a crisis and exploiting it. Environmental impact. No one cares a whit about snail darters and spotted owls. Thousands of species go extinct all the time, and are replaced by more successful related species filling the void. There is nothing bad about species fading into oblivion. It occurs naturally. Fuel usage is also targeted to get the blame for unproven Anthropomorphic Global Warming. No one cares about the reasons the pols want fuel usage cut except the pols.
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#16
All those commercials selling gold and silver show the debt clock ticking away. However; since the inauguration, it should have stopped and even started running backwards. Here.

Yes, that's correct, the Debt has shrunken by $60B. Who'd a thunk it?
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#17
why-debt-ceiling-is-worthless-and-should-be-abolished

https://www.cnbc.com/2017/09/06/why-debt...ntary.html
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