I keep reading GDP is exceeding population growth. How
can we be declining economically?
In days of old I farmed and grew corn. I ate some, saved some for seed, fed some to the hogs and
chickens and sold the rest to you, the local corn broker. My productivity could be measured in
bushels (perhaps per acre) and dollars. You might sell my corn, which is now your corn, to be made
into breakfast cereal, recyclable packaging or bio-fuels. Your sales minus your costs
are your productivity. Again, measured in bushels and dollars. Corn was corn and we could count it,
compare it to oats and so on.
We'd say part of the problem began back in Federal Reserve Chairman Greenspan's era as part of a
quest for consistency where correctness was a secondary concern. What that led to was indexing.
Personal computers were indexed to the PC XT which ran at 4.77 MHz and had 10 megabytes of disk
and sold for let's say $2500. Now computers probably cost half that (or less) , are 600 times faster,
have lots more memory and have 1000 times as much disk. Indexing asserts that this must mean
Intel and AMD and others must be fantastically more productive. Actually, the technology
achievements are great, and we have considerable admiration for hardware engineers. But the
computers are just $500 tools. We rather tediously removed most of the influence of indexed
personal computers on GDP and concluded the bulk of the GDP growth was fraudulent. Gasolene
hasn't gotten much better in 20 years - despite tripling in price. Neither have roads or cars. Nor
houses and appliances. So where exactly is all this marvelous productivity coming from? Only thing
we see are very expensive drugs. They are notoriously difficult to value.
We concluded that American GDP had been declining since 1998 and was in serious trouble by 2006.
Maybe there is another solution besides Legions of Light that will trigger a real, sustained recovery.
If you have an idea, let us know. We couldn't find one.