Unexpected Slowdown
China’s economic growth slowed more than expected in the third quarter. GDP grew at 6% in the period from a year ago, the slowest pace since the early 1990s and weaker than the consensus forecast of 6.1%. https://t.co/7gsynHSNu6
— Lisa Abramowicz (@lisaabramowicz1) October 18, 2019
Similarly, CNBC reports China says its economy grew 6% in the third quarter, slower than expected
Worse Than It Looks
Funding Non-Productive Activity
Pettis objects to China’s GDP numbers based on “non-productive activity”.
By that measure, what about the US dropping bombs, fighting wars all over the word, keeping troops in Germany and Japan, and overpayment of government employees and their bloated pensions?
And that’s just for starters.
Mike “Mish” Shedlock
Why do we still use such a meaningless number as GDP? Isn’t it better to just watch raw commodity data and compare it to satellite imagery of forest loss, est. raw amounts of concrete used, etc? As soon as AI and quantum computing gets to where it needs to, we shall be able to take more accurate accounting of Earth’s stocks and flows, and from that data, we should be able to peg a more realistic number to currency instruments, whether we have several based on a specific commodity, or a single unit based upon an aggregated sum of all the various stocks and flows that make up the foundation of what we call wealth. Of course, it is impossible to put a number on human creativity, which is also cornerstone of wealth.
This is why it’s more important to look at productivity growth as a measure of true growth. Productivity growth has been lower than 2% for most of time since 2000.
Just a few days ago, there was a post about debt propping up GDP numbers, declining utility of debt:
What’s needed is a debt adjusted GDP indicator.
The prostitution comment made me wonder how much the underground economy, ie drug sales, under the table labor services etc contribute to reported GDP.
OER (owner equivalent rent) represents a significant part of GDP in the US. Prostitution is also counted into GDP in many european countries. The best part is that India counts bull and horse shits into its GDP.
All of that manure can be use as fertilizer, therefore productive.
Unlike much of our government’s expenditures.
What would be a productive use of capital in a deflationary world? In a world that is producing more stuff than the population can afford to buy, there is essentially no productive use of capital. Speculation on asset prices is the smartest use of capital in this environment. Just don’t speculate with more than you can afford to lose.
How much of US GDP is represented by obscenely over-priced “healthcare services”? Something around 15% I believe.
Its around >20% of GDP vs counties with single payer at around 10-11% of GDP. A true non productive use of capital.
So it’s even worse than I thought.
Are loans for houses and college education also counted in GDP?
If GDP was only a measurement of unsubsidized, private sector activity (i.e., where wealth is truly generated), the number would surely be very low!
I trust nothing from China as far as numbers go, and I am beginning to trust nothing in the west either. Their accounting practices are not exactly FASB standard. As to overstating GDP impossible to tell with China, but in the USA GDP is deflated by a number that is dependent upon the rate of inflation, if you are understating inflation you are overstating GDP. So, our GDP is overstated by the cumulative amount that inflation has been understated, and that is immense. Housing alone would indicate that inflation is far higher than the headline so after more than 20 years just since the latest fraudulent system of measuring inflation was started we are talking about a lot of GDP that never existed.
Spot on, the question is which country’s politburo lies more?
Chinese number are just pure fiction, the cost of measuring every widget and every service hour worked in their economy would probably cost more than those are worth, but also because much of the goods and services have a component of government ownership (it is still a communist country after all) if not wholly owned by the government. The government cannot set a real market value on goods and services that have no private equivalent value to measure them by. No market value means any level of price is fictional. Then too the currency is pegged to the dollar, this inculcates a complexity of measurement that is pretty hard to untangle in any meaningful way.
I see US and EU and some other nation’s data to be bent, with application of some logic you can at least get a round number idea of where they are by understanding the fiscal and monetary policies they are trying to promote, but China? Until their economy is transparent enough to get an idea you are flying blind. You are taking the government word for it that they have any growth at all. It is easy to accept 10% or 8% growth because their economy was so small that they could grow at that rate a long time just to get to the point where their economy was half as large as ours. So people just accept it without questions. But, I would make no decisions about real money concerns and the Chinese for some time yet.
Herkie, nice eloquent and probably intelligent comment again ! I say probably because personally I ve never been very good at complex calculations, equations and other mathematical stuff in general I must confess, and to tell you the the truth I don t even care about all those fabricated, interpretable numbers, all it takes is some rational, simplistic approach. While observating the plight of my own country(Belgium) which might be a micro economic model for most developed nations : overendebted and with insane, social liabilities, I can only conclude that our social/economic/financial model is at the end of its endebted wits, running out of steam and out of time regardless all fancy, cooked numbers and political fantasies !
FB, I think you are right, the point is coming where common people are rising up. Hong Kong in turmoil, Lebanon now in riot as the people demand an end to corruption, even Muslims are sacking Hezbollah offices, Catalonia sees hundreds of thousands marching on freeways they took over to demand release of their leaders and brutal riot police tactics last night against protesters in Barcelona. All these mass shootings in the US, public dissatisfaction in the UK, they all have economic roots. People are drowning and being ignored while on the yachts all around them the party goes on unabated and the people are ignored as they cry for help, some of the party goers are even watching them drown and laughing at their bad luck to be born poor.
A critical mass is coming, I do not look forward to it because when societies reach a critical mass NOBODY is happy with the outcome, it is usually bloody and unfair without actually solving the real problems.
They all lie 100% of the time.
Hence why the US Founders did not include “Reporting childish, sophmore-sciency sounding gobbledygook to fool well indoctrinated, dumb underlings into believing Dear Leader serve some sort of useful role”, among the enumerated powers of a civilized country.
You sounds really smart!
Pretty sure that is not meant to be a compliment but then I don’t come here to get my ego stroked so no matter.
“Their accounting practices are not exactly FASB standard”
And our political/banking class change the standard when it suits them.
Some “standard”.
The FASB rule change in effect that exempts the TBTF corporate balance sheets from having to mark to market means you can’t trust any prospectus now.