Chart usGOLD   Chart usSILVER  
 
Food for thought
You will find that the State is the kind of organization which, though it does big things badly, does small things badly, too
John Kenneth Galbraith  
Search for :
LATEST NEWS  :
MINING STOCKS  :
Subscribe
Write Us
Add to Google
Search on Ebay :
PRECIOUS METALS (US $)
Gold 1281.57-10.00
Silver 19.37-0.10
Platinum 1421.90-0.10
Palladium 868.804.05
WORLD MARKETS
DOWJONES 1697969
NASDAQ 4526-1
NIKKEI 15586132
ASX 56345
CAC 40 426120
DAX 935541
HUI 2440
XAU 1020
CURRENCIES (€)
AUS $ 1.4300
CAN $ 1.4553
US $ 1.3268
GBP (£) 0.7996
Sw Fr 1.2110
YEN 137.7730
CURRENCIES ($)
AUS $ 1.0780
CAN $ 1.0968
Euro 0.7538
GBP (£) 0.6027
Sw Fr 0.9128
YEN 103.8440
RATIOS & INDEXES
Gold / Silver66.16
Gold / Oil13.76
Dowjones / Gold13.25
COMMODITIES
Copper 3.17-0.02
WTI Oil 93.17-0.28
Nat. Gas 3.900.04
Market Indices
Metal Prices
RSS
Precious Metals
Graph Generator
Statistics by Country
Statistics by Metals
Advertise on 24hGold
Projects on Google Earth
A Cottage Industry in Measuring Against “Potential” GDP
Published : February 14th, 2013
302 words - Reading time : 0 - 1 minutes
( 0 vote, 0/5 ) Print article
 
    Comments    
Tweet
Keywords :   Collapse | Fixed | Global | Global Economy | Government | Total |

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.

Tweet
Rate :Average note :0 (0 vote)View Top rated
Previous article by
Tim Iacono
All articles by
Tim Iacono
Next article by
Tim Iacono
Receive by mail the latest articles by this author  
Latest comment posted for this article
Be the first to comment
Add your comment
TOP ARTICLES
Editor's picks
RSS feed24hGold Mobile
Gold Data CenterGold & Silver Converter
Gold coins on eBaySilver coins on eBay
Technical AnalysisFundamental Analysis

Tim Iacono

Tim Iacono is the founder of Iacono Research, a subscription service providing market commentary and investment advisory services specializing in commodity based investing.
Tim Iacono ArchiveWebsiteSubscribe to his services
Most recent articles by Tim Iacono
8/17/2014
8/15/2014
8/15/2014
8/14/2014
8/14/2014
All Articles
Comment this article
You must be logged in to comment an article8000 characters max.
 
Sign in
User : Password : Login
Sign In Forgot password?
 
Receive 24hGold's Daily Market Briefing in your inbox. Go here to subscribe or unsubscribe.
Disclaimer