great article pointing to the .8 multiplier.. 1. Right now the fed govt is about 40 percent of GDP. http://www.usgovernmentspending.com/spending_history Government spending in the United States has steadily increased from seven percent of GDP in 1902 to 40 percent today. Chart 2.21: 20th Century Government Spending Government Spending started out at the beginning of the 20th century at 6.9 percent of Gross Domestic Product (GDP). As you can see from Chart 2.21, the federal share of that spending was modest. Spending got a big kick in World War I and ended up at about 12 percent of GDP in the 1920s. Then came the Great Depression, in which President Roosevelt and the New Deal cranked up federal spending, and total government spending rose up to 20 percent of GDP. World War II really showed how the United States could commandeer its national resources for all out war. Government spending peaked at just under 53 percent of GDP in 1945. 2. Every dollar spent by govt in a zero interest rate environment... ( a fake one) destroys gdp. In a health economy a dollar invested returns more because economic growth should be growing faster than credit growth. But right now credit growth is growing faster than economic growth. Govt spending is destroying gdp because the wasteful companies are not being destroyed and replaced with the productive ones. The govt is destroying our economic future with each dollar they spend. http://blogs.cfainstitute.org/investor/2012/12/05/credit-update-debt-growth-and-gdp/ 3. The mariginal productivity of debt went below zero in 2006. http://www.financialsensearchive.com/editorials/fekete/2009/0330.html 4, in 2011 it took more than 2 dollar in debt to make a 1 of GDP. Consider G is the G in GDP... that means govt spending as debt destroys productivity.
I propose the multiplier effect of govt spending compared to private is negative concerning real wealth. Keynes famous of paying one group to go around digging holes and paying another group to go around filling them is a good example of negative real wealth creation while generating a multiplier effect. In the real world this would only net a waste of time, effort and the consumption of real wealth (tools, gas, injuries to workers etc) would be the result. http://www.elitetrader.com/vb/showthread.php?s=&postid=3745843&highlight=nobel#post3745843
The regular joe gets the shaft because he can't have other people's money. Liberal logic justifies stealing for the 'common good' and too stupid to see such economics isn't about prosperity, it's about envy and hate.
I did not mean to state G is the entire G in GDP. G is 40% of the G in GDP. C+ I + G plus exports minus imports.
It is remarkably off the mark...just about as bad as Maxine Waters comment earlier in the week. Hopefully, Nitro simply reversed the formula accidentally...then again, I've always suspected the guy is a savant of sorts.
The US government and Fed are inflating the world and its GDP not just the US. You would have to look at world tax rates not just the US. Fundamentally the price of oil and gold tell you world output. More complexly, currencies do the same thing. I have no idea why oil is not $125 a barrel, with FV way above that.
When the Fed supports the govt in its deficit spending via QE not only do stocks go up but the price of food and oil go up. For instance every 10 dollar increase in the price of oil - takes .3 percent out of gdp. (I believe the increase in the price of food and the increase in taxes also soaks up a lot of gpd. ) Then as the economy starts to get choked off the price of oil comes down. Overall trying to increase the GDP via deficit spending seems very difficult. I realize the fed is trying to increase commercial real estate values so its member banks can become solvent... but do we really need to debase the dollar to this? The private sector has to grow and become more efficient... like the rest of the world we have to manufacture things the world wants... the dollar has to get stronger not weaker. We need to encourage investment in new techonology via lower taxes... We need to allow our investors to keep more of their profits so they can channel it back into to new technologies. By the way This article also points out what I have been saying for years. This crazy spending in washington is what is causing the wealth inequality in america. http://www.ft.com/cms/s/0/4fdcd560-fb32-11e1-a983-00144feabdc0.html#axzz2MVu8w9d0