Close X Cookies are necessary for the proper functioning of 24hGold.com. By continuing your navigation on our website, you are accepting the use of cookies.
To learn more about cookies ...
EnglishFrench
Gold & Silver Prices in

A Cottage Industry in Measuring Against “Potential” GDP

IMG Auteur
Published : February 14th, 2013
302 words - Reading time : 0 - 1 minutes
( 0 vote, 0/5 )
Print article
  Article Comments Comment this article Rating All Articles  
0
Send
0
comment
Our Newsletter...
Category : Crisis Watch

How do you get a number to look small? Compare it to a big number.

How do you get a number to look big? Don’t use a real number, use one that represents the “potential” value of that number – even if this “potential” value assumes the repeat of conditions that no one really wants repeated, such as successive and very destructive asset bubbles in the U.S. and/or global economy.

That’s what passes for conventional wisdom amongst the dismal set these days and its spreading into the mainstream financial media as there now seems to be a cottage industry in measuring things against “potential” GDP rather than the real thing, the latest example being this story at the Washington Post.

This graph shows total private fixed investment relative to the nation’s potential GDP, going back to 1949. (That’s how much the private sector is spending on both houses and commercial installations). After averaging 15.5 percent from 1949 to 2007, private investment fell as low as 10.6 percent in the economic collapse starting in 2008 (it was 12.2 percent at the end of 2012).

24hGold - A Cottage Industry i...

In other words, for the last few years private construction activity has been far below its historic norms. And so long as the private sector isn’t building houses and office buildings and factories, the government can build without crowding out private investment.

As it turns out, you don’t need to compare to “potential” GDP to make the case stated above.

A quick trip over to the vast data repository of the St. Louis Fed known as FRED (where it’s really pretty neat what you can do) produces about the same result using GDP or potential GDP. I guess the point here is that it’s become commonplace to compare things to our past bubble economy rather than the economy itself.

<< Previous article
Rate :Average :0 (0 vote)
>> Next article
Tim Iacono is the founder of Iacono Research, a subscription service providing market commentary and investment advisory services specializing in commodity based investing.
WebsiteSubscribe to his services
Latest comment posted for this article
Be the first to comment
Add your comment
Top articles
Latest Comments
The Way Out
31 MarGypsy1
James, you're wrong to think the people on earth couldn't THRIVE ~ live well, eat well, enjoy great lives, advance mankind ~ with the resources we ...
Time to Eliminate Pilots in Airc...
30 MarShadowdoo1
Hi Mish, Sorry pal, I would rather take the door off than give the controls to some moron on the ground. Especially with that nitwit in t...
Gold: April 2015 Update
30 Marovertheedge
"I have been invited to speak at the Mines & Money Mauritius Conference in June 2015 again. If you would like to join you can receive 25% off your ...
Greece Needs the Magic Formula t...
30 Marovertheedge
Wow dude. "Idiocracy" is obviously not just another dumb-ass movie. I admit that I should have recognized your devotion to Brawndo (it has ...
Signs that America Will Hit the ...
30 MarFalconflight
I'll tell you what signals a return of the Dark Ages....the growing, almost hysterical screed again in the West that those Jews are responsible for...
Misunderstanding "Peak Gold"; Go...
29 MarTed S.1
Hi Mish, You make a good point about the difference between commodities and gold. It's a great point of discussion to counter people who ar...
The Finanser Interviews Jon Matonis
29 Marovertheedge
"In late 2009, I got introduced to Bitcoin by a random email from Satoshi Nakamoto. I didn’t give it much thought at the time and then 3-4 months ...
Gold Effect on Mining & Shale Wa...
28 Marneville1
Thank you Jim Willie for your open and candid report on some of the most urgent matters agrevating this economically and war torn world thanks...
Most commented articlesFavoritesMore...
World PM Newsflow
ALL
GOLD
SILVER
PGM & DIAMONDS
OIL & GAS
OTHER METALS
Mining Company News
Tahoe ResourcesTHO.TO
And Rio Alto Mining Announce Completion Of Merger
CA$ 14.53+4.68%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
EnLink Midstream Partners, LP Completes Acquisition of Victoria Express Pipeline in Dropdown Transaction with Devon Energy
US$ 61.58+2.11%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
Natural Gas Injection Starts Before Heating Season Ends
US$ 61.58+2.11%Trend Power :
Corporate news
Dajin Res.(Ag-Au)DJI.V
OIL SURGES, DOW FALLS 75: Here's what you need to know
CA$ 0.06+0.00%Trend Power :
Corporate news
Devon Energy(Ngas-Oil)DVN
Sector Snap: Energy stocks rise as Iran talks continue
US$ 61.58+2.11%Trend Power :
Corporate news
Dajin Res.(Ag-Au)DJI.V
Stocks are getting smashed
CA$ 0.06+0.00%Trend Power :
Corporate news
Atlanta Gold(Ag-Au-Gems)ATG.V
IIROC Trading Halt - ATG
CA$ 0.00+0.00%Trend Power :
Corporate news
Fortune Minerals(Ag-Au-Co)FT.TO
Releases 2014 Annual Financial Results
CA$ 0.11+4.76%Trend Power :
Financials
Talon Metals(Au)TLO.TO
Talon Reports Results for the Year Ended December 31, 2014
CA$ 0.16-5.88%Trend Power :
Corporate news
Duke Energy(Oil)DUK
US Electricity Generation Falls Shaprly in All Divisions Except 1
US$ 76.83+0.07%Trend Power :
Corporate news
Comments closed
Subscribe to 24hGold’s daily market briefing
  • Prices and data of precious metals in 119 currencies and world mining companies
  • Daily analysis of the economy, markets and more
  • Free, daily and indispensable
Stay informed, subscribe now !
* Your email will never be shared.