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There seems to be another economic storm-in-a-teacup over a measure of economic growth, what little there currently is of that elusive beast.

But Thursday’s GDP report offers an alternate explanation: Perhaps GDP isn’t fully capturing recent economic growth. An alternate, lesser-known measure of output, known as gross domestic income, or GDI, shows the economy growing 2.2% over the same period — still not great, but more in line with recent job gains.

In a nutshell, gross domestic product measures expenditures — consumer spending, business investment, international trade and everything else that people, companies and governments spend money on. Gross domestic income, as the name implies, measures income, including both personal income and corporate profits. In theory, the two numbers should be the same:

GDP/GNI both are subject to the expansion of the money supply. Which rather underlines the current scratching of heads by economists. GDP/GNI = goods services bought * price paid. So if prices rise, viz, inflation, and the purchase of goods/services is given, then your GDP rises in line with your inflation.

Prices have been rising. So why the anaemic growth in GDP? The data shows that on aggregate the hourly rate has grown at a 2.7% compounded rate, which is roughly equivalent to the inflation rate.

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The conclusion must therefore be that the puchase of goods/services has fallen [demand]. Except, that also looks to be false.

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The ‘Great Recession’ which started really in 2000, and has been postponed by Federal Reserve bubble blowing policies via monetary policy that has been excessively loose, revolves around the rise in unemployment that is classified as ‘not in labour force’.

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Add these chap’s…

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And these…

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You take the point. The work force has turned to the welfare state, which is not unsurprising given the circumstances, however, it comes at a cost which is the constant consumption of capital that accumulated through the late and early part of the 19’th and 20’th centuries.

With the ever loosening monetary policies of the Federal Reserve originating with Greenspan, the purchasing power of savings has diminished. With a loss of purchasing power…you can only purchase less…hence, another class of persons, contributes an ever decreasing consumption component.

The net effect, is what we have currently. Which is not going away any time soon.

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