Posted on 11/30/2009 3:42:31 AM PST by EternalVigilance
Worthless Government Statistics
It was just back on November 3rd when the Bureau of Economic Analysis (BEA), a division of the U.S. Commerce Department, declared that Gross Domestic Product grew at an annual rate of 3.5% during the 3rd quarter of 2009. Then on November 23rd, the Bureau declared that the actual rate of growth for the 3rd quarter was only 2.8%. So the question that comes to my mind, loud and clear, is what exactly does that mean?
First of all what it does NOT mean is that the economy grew at the rate of 2.8% during the 3rd quarter of 2009. The rate of 2.8% is derived by taking the rate of increase from the 2nd quarter to the 3rd quarter of 0.70% and assuming that this will stay constant for the next 3 quarters (0.70% times 4). Why is this a bogus way of measuring the economy?
When I open my quarterly 401K statement and it reads that my portfolio has increased by 8.0% during the recent period, I don’t automatically assume that my annual rate of return is 32.0% (8.0% times 4). No, on the contrary, I look at the past four quarters to determine my annual return. If I lost 8.0% in the previous three quarters combined, and then gained 8.0% in the most recent quarter, then I am close to breaking even. But have I broken even? No.
To demonstrate, let’s assume my portfolio was valued at $100,000 at the end of the previous fiscal year. After declining by 8.0% in the succeeding three quarters, the value had dropped to $92,000 ($100,000 times 0.92). Now, after gaining 8.0% in the most recent quarter, the value of my portfolio has increased to $99,360 ($92,000 times 1.08). You will note that I have yet to break even. I am in fact still down by 0.64% ($640 divided by $100,000) having started with $100,000 and declined to $99,360 over the past four quarters. So much for growth. Now back to GDP.
GDP has declined by 1.42% over the past four quarters
Now when it comes to GDP, a more reasonable way to look at our present rate of growth, similar to measuring an investment portfolio, is to look at the past 4 quarters. Since the BEA only publishes figures in annual terms, I will approach this by using their figures, but keep in mind that the quarterly GDP figures are shown as annual amounts (in billions).
4th Quarter 2008 - $14,347.3 1st Quarter 2009 - $14,178.0 2nd Quarter 2009 - $14,151.2 3rd Quarter 2009 - $14,266.3
Dividing the above by four, the average GDP over the past four quarters is $14,235.7 billion. The final GDP figure for all of 2008 was $14,441.4. So GDP has dropped by $205.7 billion ($14,441.4 minus $14,235.7) over the past four quarters. That equals a percentage drop of 1.42% ($205.7 divided by $14,441.4) since 2008.
GDP has declined at the rate of 1.21% since 2008
An even more accurate way to look at this is to start with the 2008 total GDP of $14,441.4 billion and to measure the decline over the next three quarters. In this respect GDP declined by 1.82% in the 1st quarter of 2009, by another 0.19% in the 2nd quarter of 2009, and then improved by 0.80% in the 3rd quarter of 2009. Overall GDP has declined by 1.21% since 2008. This is the statistic that’s most meaningful to me.
GDP has declined at the rate of 1.21% since 2008. In dollar terms that’s $175.1 billion per year in lost production in our economy. That’s the equivalent of losing 3.5 million jobs paying $50,000 per year. That’s more meaningful to me than the BEA’s mumbo jumbo.
GDP growth averaged 4.93% per year from 2003 to 2008
While we are at it, you will note on the chart above that GDP was $11,142.1 billion in 2003 and grew to $14,441.4 billion in 2008. That’s an increase of 29.6% over the six-year period, or an average of 4.93% per year. It also represents an increase of $3,299 billion in U.S. production over the period. That’s the equivalent of an increase of around 65.9 million jobs paying $50,000 per year.
Wake me up when Obama’s economy killing policies have created 65.9 million jobs, or when GDP reaches $18,490.7 billion (an increase of 29.6% from today’s level), whichever comes first. But don’t bother me with meaningless government statistics.
Sources:
http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
http://www.bea.gov/newsreleases/national/gdp/2009/xls/gdp3q09_2nd.xls
"Then there is the man who drowned crossing a stream with an average depth of six inches."-- W.I.E. Gates
"Figures often beguile me, particularly when I have the arranging of them myself; in which case the remark attributed to Disraeli would often apply with justice and force: 'There are three kinds of lies: lies, damned lies, and statistics.'"-- Mark Twain
"Say you were standing with one foot in the oven and one foot in an ice bucket. According to the percentage people, you should be perfectly comfortable."-- Bobby Bragan
- Get your facts first, then you can distort them as you please.
Mark Twain
Great post.
Thanks.
“”Say you were standing with one foot in the oven and one foot in an ice bucket. According to the percentage people, you should be perfectly comfortable.”
— Bobby Bragan “
I like that one ;-)
lol....
Sounds to me like a motto to live by.
"98% of all statistics are made up."-- Author Unknown
"Statistics are like bikinis. What they reveal is suggestive, but what they conceal is vital."-- Aaron Levenstein
“”98% of all statistics are made up.”
— Author Unknown”
The other 2% are “made as instructed” computer models ;-)
"The average human has one breast and one testicle."-- Des McHale
Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself.
- Mark Twain
All Congresses and Parliaments have a kindly feeling for idiots, and a compassion for them, on account of personal experience and heredity.
- Mark Twain’s Autobiography;
"The statistics on sanity are that one out of every four Americans is suffering from some form of mental illness. Think of your three best friends. If they're okay, then it's you."-- Rita Mae Brown
I remember thinking to myself that morning upon hearing about the 'growth', "I wonder how much lower they are going to 'revise' this number after the election."
Dang.....I ran out of quotes ;-)
=12
Good eye. That pretty much jibes with mad_as_he$$’s post #12.
"Statistics are no substitute for judgment."-- Henry Clay
Bureau of Economic Analysis (BEA), a division of the U.S. Commerce Department....
“Folks, we ran out of domestic product”
Even eleanor clift said that the 3.5% was BOUGHT with taxpayer money. 24 grand per car is one example.
“The latest survey shows that 3 out of 4 people make up 75% of the world’s population.”
It’s already verrry quietly been adjusted to 2.8%. Believe it or not it will be adjusted a second time as normal procedure.
Did you know that 87.166253% of all statistics claim a precision of results that is not justified by the method employed?
Even if you got one of those numbers wrong, you’d still be right.
:-)
Are you aware that every single person who eats ice cream will DIE?
[I remember thinking to myself that morning upon hearing about the ‘growth’, “I wonder how much lower they are going to ‘revise’ this number after the election.”]
I had the same thought, and having read the BEA report that day, I knew that the final number would not be available until November 24th. I just got around to writing this yesterday after being upset since election day. I think it’s time for a new Party to take over. A party that’s fair, honest, and one that promotes liberty and justice.
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