Most of this is due to an inventory bounce,but it also shows that Goldman Sach’s had the most accurate estimate all along. They predicted growth to be at 5.8%, while many other economists were suggesting that growth would be lower.
This probably a good link that goes into detail what numbers should be viewed as important.
its the best GDP growth in six years, and some economists would say that an inventory bump would mean that firms would have to start re-hiring again in order to re-fill their stock. if GDP continues to remain positive through out the year than perhaps the unemployment rate will start to fall quicker than I thought.
This is a great propaganda technique: lie about the statistics then “revise” them for accuracy later on, when no one is listening.
GDP = C + I + G + Xnet = SUM(goods*prices) [=] $
If you increase the money supply by 3%, and it doesn’t get saved, GDP HAS to go up 3%. Its a self fulfilling prophecy.
RGDP = GDPcurrent/GDPbase so it only measures changes in volume. BUT credit expansion drives unsustainable investment (and consumption) so RGDP will increase when there is asymmetric inflation (and the money is not being saved).
It should be obvious that the GDP doesn’t reflect anything. If someone goes around breaking windows and they have to be repaired, more glass gets purchased and GDP goes up. If the price level falls year over year, for example in computers, then GDP falls. These are two examples when saying High GDP = Good is wrong.
The truth is, it can’t be said a priori if a high GDP is good. Even RGDP which just measures volume is obviously inconclusive. How much [stuff] should society produce? Oh good we’re producing 2x as many [things] as we did last year.
GDP doesn’t count savings. GDP doesn’t count leisure time as a commodity. It doesn’t measure the quality of good year over year.
The government likes GDP because it hides waste and inefficiency. In a free market economy, measurement of GDP would be a harmless waste of time. When government gets involved, it becomes a sanctuary for destruction.
I’ve been meaning to calculate the importance of money creation in GDP by looking at growth values for the Great Depression. I want to see how the increase in government spending, through deficit spending, doesn’t necessarily get accounted for when inflation is calculated. General price increase doesn’t come until after, and I think that’s a major discrepancy. I’ve read that this is the case, and I believe it, I just want to do the numbers. I’m just really lazy.
its not a propaganda technique, and is instead apart of good research. For example in principles of management we were taught how Firms will use the Delphi technique in order to get the best estimate possible. Right now this number is the first estimate and the second or third revision could report a higher or lower number.
Government spending added more to the increase in the 3rd quarter and the stimulus according to economists had its biggest impact in the third qaurter, but its significance will decline afterwards. This qaurter GDP mainly grew because of an inventory bounce.
//If you increase the money supply by 3%, and it doesn’t get saved, GDP HAS to go up 3%. Its a self fulfilling prophecy.//
only true when the velocity of money is stable and when banks are willing to lend. Right now the Velocity of money may not be stable, but it is certainly true right now that banks are holding back on giving out loans.
Uh huh. I think I’ll wait for the revisions to come out.
Besides, GDP is a fairly meaningless statistic. We had great “growth” from 1933-1937, but does anyone think we were out of the Depression?
no, but our economy was recovering. Right now our economy is in the process of a recovering but it still has a long way to go until all important indicators start to show positive growth. In any event from an historical perspective…The labour market is usually the last thing to recover…Thus GDP,stock market,banking,housing and other things could return to pre-reccesion levels while the labor market still lags behind.
To clarify, how does the velocity of money (and other goods) get factored into gdp? Does it come in on the volume term?
For example, if I trade you bread for 10 dollars, and then you trade me bread for 10 dollars, does GDP go up by 20 dollars? 
the velocity of money is basically how often money turns over…just look it up wikipedia it is a pretty standard concept in economics. It has been around for more than just one century.
Welcome to the Austrian economics forum, where velocity is considered nonsense.
It was trying. FDR did a good job of slowing it as much as possible.
I hear that a lot. Do you have data for that? To me, if the recession is declared over and the labor market hasn’t recovered, the recession isn’t over.
heyek talked about the velocity of money on occasion…
Hayek’s constant-MV norm helps to explain his otherwise puzzling ambivalence toward free banking and the gold standard. His mentor Ludwig von Mises (1980 [1912], 1978 [1928]) had strongly supported them, and Hayek (1991 [1933], p. 26) himself elsewhere viewed free competition and evolved market institutions as irreplaceable means for social coordination. But in a later statement of the vision that guided his early theorizing, Hayek (1960, p. 325) declared that “all money at all times,” without regard to the regime supplying it, is “a kind of loose joint in the otherwise self-steering mechanism of the market.”(2)
notice the phrase constant-MV norm…
You have obviously never read Mises’ The Theory of Money and Credit.
Mises was not the only austrian economist.
What’s your point? Do you want me to give you the name of every book that has refuted the theory of velocity of money? The refutation is not necessarily Austrian, just something the Austrians ascribe to.
This latest episode makes me a believer in Keynesian economics. However, everything has a price. They had to print and borrow a hell of a lot of money to make this happen. I think there will be consequences for those actions.
like what consequences?