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  • The Gloomy Economists are Wrong [Edit or Delete]0 comments
    May 13, 2011 2:20 PM

     The economists are at it again with yet another round of predictions for slow growth

    Economists see softer growth, slow jobs rebound

    WASHINGTON (Reuters) - Economists have become less optimistic about the U.S. growth outlook but slightly more upbeat about the job market, though employment is still seen recovering only slowly from a deep slump. Source: 
    http://yhoo.it/ikazMd 


    We saw these gloomy predictions in 2009 and 2010 and they never materialized because not only do these economists underestimate permanent zero percent interest rates, or the resiliency of the global and US economy, but overuse of GDP- a fundamentally flawed way of calculating economic growth in the era of dyseconomics.

    GDP is given by:

    GDP = private consumption + gross investment + government spending + (exports − imports),



    GDP has what is called an 'imports deduction' or i. 
    This variable would only matter IF deficits mattered, but with yields at historic lows despite the huge deficit, we can infer that they don't so therefore the 'imports deduction' is irrelevant. 


    The graph below shows exports are booming at $190 billion this year

    http://static2.businessinsider.com/image/4dcaf2f34bd7c8c455100000/chart-of-the-day-exports-may-2011.jpg

    The 'imports deduction' of $230 billion is holding back the true value of GDP 

    http://www.businessinsider.com/boom-march-trade-deficit-worse-than-expectations-largest-since-june-2010-2011-5

    The 'true GDP' is about $190 billion higher than reported. This also explains why companies are reporting higher earnings yields (5-7%/yearly) than GDP would seem to imply.


     

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