05/05/10 Tampa, Florida – At work the other day, I was actually considering either doing some actual work or taking the afternoon off, after, of course, I finished reading the government’s Bureau of Economic Analysis release of the news that “Real gross domestic product – the output of goods and services produced by labor and property located in the United States – increased at an annual rate of 3.2 percent in the first quarter of 2010, (that is, from the fourth quarter to the first quarter)” and that last quarter of 2009, “real GDP increased 5.6 percent.”
My face is simultaneously showing surprise, disbelief and outrage – a rare and thrilling theatrical talent – at this news, and to understand the expression upon my face, think about how if the growth in GDP was 3.2% in one quarter, then that would be an extrapolated annual growth of a blistering 12.8%! Wow! I am surprised! You can see why I am disbelieving, and you can see why I am outraged that anyone would say such a preposterous thing!
Okay, this is unbelievable and laughable enough, but get a load of this: if you took the 5.6% increase of the previous quarter’s GDP growth and did the same thing, then that would come out to 22.4% growth in GDP! 22.4%! Hahaha!
This is so ludicrously and humorously preposterous that I actually laughed out loud, and Tom, whose desk is right next to mine, looks over and makes some rude comment like “Mogambo’s looking at porn again!” whereupon everybody else laughs at me.
So I, in my own defense, say in reply, “No, I was not looking at porn on my computer, you halfwit, which any observer would have known by simply noting that I was laughing, and one does not laugh when looking at porn, and instead one makes, you know, kind of a grunting, panting sound and saying things like ‘ooooOOOOooohhhh!’ Morons!”
Before they insulted me, I was going to generously show them that merely computing 3.2% of our $14 trillion GDP, we get the $448 billion dollar figure of the quarterly “growth” in GDP, which comes out to roughly $2 trillion per year, which is – surprise! – roughly approximately nearly exactly precisely how much money the federal budget-deficit spending is now pumping into the economy.
In short, it looks like the entire growth in GDP is due solely to – dollar for dollar! – the deficit-spending by the federal government! Hahaha! “Growth!” Hahahaha!
And this is before another large item is included in the calculation of GDP, which is exports, which are a subtraction from GDP, which means that since we had a $532 billion annual trade deficit (a negative number) in the last 12 months, subtracting a negative number from GDP magically results in an annual addition to GDP of $532 billion – or $133 billion quarterly – just like that! Hahahaha! “Growth!” Hahaha!
You’d never know it from the Bureau, which admitted that “The increase in real GDP in the first quarter” was influenced by “exports”, although it did not say that the trade deficit increased, but, instead, said only that “Imports, which are a subtraction in the calculation of GDP, increased”, although it did not mention, for the benefit of us math-impaired guys out here, that their calculation of GDP was thus increased by a math trick.
Then they actually seem to have told a lie when they said that “The deceleration in real GDP in the first quarter” was partly due to “a deceleration in imports”, which actually went up by $41 billion, which would seem to be an acceleration. Hmmm! What in the hell is going on?
And this does not even get into the ridiculous notion of a $14 trillion free-market GDP, when the federal government is spending $4 trillion and the cities and states are spending $2 trillion, which, ignoring a little double-counting, is a combined $6 trillion, which is already 43% of GDP to start with! Gaaaahhhh!
The really bad news was later in the report, where they noted that “The price index for gross domestic purchases, which measures prices paid by US residents, increased 1.7 percent in the first quarter, compared with an increase of 2.0 percent in the fourth”, which almost gave me a heart attack until I realized that they meant that prices increased by 1.7 percent a YEAR, not in just the quarter. Whew!
Nevertheless, it’s not more than 20 or 30 times a day when I see crap like this when I think to myself “We’re freaking doomed!” and right now is one of those times, and today is one of those days. “We’re freaking doomed!”
Which leads me, seamlessly, to my constant sermonizing to buy gold, silver and oil, which will take, like magic, “you and me” out of the collective “we”, as in “We’re freaking doomed!”
The Mogambo Guru
for The Daily Reckoning
The Mogambo Guru
Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications. For podcasts featuring the Mogambo, click here.
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“Real gross domestic product – the output of goods and services produced by labor and property located in the United States – increased at an annual rate of 3.2 percent in the first quarter of 2010, (that is, from the fourth quarter to the first quarter)” and that last quarter of 2009, “real GDP increased 5.6 percent.”
My face is simultaneously showing surprise, disbelief and outrage – a rare and thrilling theatrical talent – at this news, and to understand the expression upon my face, think about how if the growth in GDP was 3.2% in one quarter, then that would be an extrapolated annual growth of a blistering 12.8%!
– In response, I think it is worth clarifying that an ANNUAL growth rate of 3.2% in a quarter means that the NBER projects that the economy would grow 3.2% this year, should GDP growth continue at such a rate, not that the GDP grew 3.2% in the quarter.
Maybe the ole Mogu doesn’t really know what “annualized” means. It was invented to show that things looked better if they were indeed going to be better not to prove they are better already.
Figures and facts are meant to be manipulated. A good accountant picks up the skill of manipulation as soon as he goes into practice. For instance, with ten of thousand of items in a hypermarket, it is simply not possible to ascertain the accuracy of the remaining stock. Moreover, the stuff is moving as you do the audit. Well, if the stock worth only 100 million, the accountant may clevery quotes it at 120million. Only ghost knows. So, extra 20 millions end up in the P & L. In turn, the 20 million may enable the company to go on board. Subsequently, more cash may gush out on new stock issues. Common & ordinary pratice. HaHaHaHaHaHaHaHaHaHa.
I love your work, Guru, but yes, please look up annualized. However, you should have a heart attack on the Price Index. That quote did NOT say annual; so multiply it by 4 and reach for your nitroglycerin pills. I’m reading it is actually more like 9-9.5%, because the government leaves out those little-used items called food and gasoline.
And no three letter acronyms (TLA)?!? We’re freakin’ doomed!
He used up his TLA quota by using “GDP” so many times, so there was no room for any more Mogambo TLAs.
And you can remove me from the “we”, since I *am* investing in gold, silver, and oil. “Whee! This investing stuff is easy!”
Everyone already beat me to this but, yes, the 3.2% GDP figure was already annualized! Nonetheless, I agree that GDP is a ridiculous measure considering that it ADDS government spending to private consumption and investment, rather than SUBTRACTING it.
MMG clearly admits to being math impaired. Plus when you drink that much, well, …
The EU is about to create another TRILLION in funny money for hapless bailouts?! And people are selling gold, a finite commodity? BWAHAHAHAHAHAHA! Suckers!