Friday, January 2, 2015

Their way of thinking...

If you get the FRED graph of GDP and click the NOTES tab, you'll find a link to the nipaguid (PDF, 28 pages). I still think it's funny that they still use an 8-character filename for it. But that sure will come in handy if you're using DOS 3.2...

A Guide to the National Income and Product Accounts
of the United States

Here's the bit that got me writing:
The most recent comprehensive revision of the NIPAs, which was released beginning in 2003, further improved and updated the accounts. For example...

An improved measure of banking services that includes the services received by borrowers was introduced; previously, such services were only allocated to depositors.

Because of that revision, the work of lenders who created our massive private debt is now included in GDP. So GDP is bigger, and the ratio of debt to GDP is less, because the work of creating debt now counts as part of GDP.

Buying a used car from your neighbor? No, that's not in GDP.

Raising your own children and doing your own housework? No, that's not in GDP.

Capital gains? No, that's not in GDP.

But creating more debt? Yeah, we count creating debt in GDP.

The mindset is the problem. We think...  They think creating more debt is a good thing. That is why they can't fix the economy. Everybody who breathes wants to reduce his own debt, wants to reduce her own debt; but policymakers make policy to encourage private debt creation -- and bean counters count private debt creation as a plus.

This is why they cannot fix the economy. They think what they're doing is good.

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