-1.4% GDP Just Reminds Us of the Abject Stupidity of GDP

“Macroeconomics is a tautology and a myth, a dangerous one at that, sustaining the illusion that prosperity is necessarily linked with territory, national units, and government spending in general.” – Reuven Brenner

Quick, name one product that is solely produced in the United States. Tick tock, tick tock. Stumped? Well, of course you are.

Nothing, not even something as basic as the pencil can claim 100% country origin. To some, this is a sign of economic weakness for a country. More realistically, it’s a sign of immense economic progress. Work divided is the vivification of economic progress simply because the more that the humans who make up what we call an economy can divide up work, the more that they can specialize. Specialized individuals are wildly productive, which explains why one person working alone would spend endless hours, days and years producing an awful television, but thousands of specialized “hands” working in harmony around the world can produce millions of televisions of staggering quality, and at prices that continue to plummet.

Please keep all of the above in mind as the certain in your midst claim “inflation” right now. Actually, command and control implemented by panicky politicians in response to a virus eviscerated trillions of commercial relationships developed over the decades. That production is more expensive today is a blinding glimpse of the obvious as opposed to higher prices being a consequence of currency devaluation. But that’s a digression.

The subject of this write-up is the offense to common sense that is Gross Domestic Product (GDP). Per the Reuven Brenner quote at the top, macroeconomics is a myth. Which means macro’s defining “number” is a myth. An economy is people, and the production of people is a consequence of global cooperation. Only a profession as debased as “economics” or “macroeconomics” could come up with something as ridiculous as GDP. One of the religions within the economics profession, one referred to by its own priests as “market monetarism,” claims it can plan what insults absurd through tinkering with the so-called “money supply.” All the religions wedded to GDP presume countries as autarkic islands in terms of money, credit, and production, when in reality they’re nothing of the sort.

Which brings us to the recent GDP number that rated front-page headlines. The latter was said to be A1 material because it was negative; -1.4% to be more exact. According to those who required PhDs in order to understand human action not very well, one more print like the first quarter’s and we’ll be in a “recession.” There might be something true about the previous assertion if we humans were all alike in ability, discipline, and chosen line of work. Alas, we’re not. An economy is once again just us, and we’re happily nothing alike. Rest assured Aaron Rodgers won’t be in a “recession” if GDP comes out negative again, nor will Michael Dell, or Billie Eilish, or name the individual achieving at a time when what economists imagine to be a blob is shrinking.

Okay, so what were the origins of GDP’s decline? This is where it becomes even more ridiculous. To understand why, please stop to think about why you were able to purchase a peppermint mocha at Starbuck’s this morning, why you’ll have the means to buy a #1 combo at Whataburger midday, why you’ll be able to purchase a really good book (think When Politicians Panicked, or Popular Economics) on Amazon once back at work, and why you’ll be able to buy groceries at Safeway on the way home. Do you just magically have “demand” or is what you do at work the source of your “demand”? The question answers itself. We’re able to consume insofar as we’re able to produce. All trade balances, by definition.

Not according to economists and their favorite number, GDP. As the Wall Street Journal’s Sarah Chaney Cambon explained about the number, the “drop stemmed from a widening trade deficit. Imports to the U.S. surged, and exports fell.” What Cambon describes is an impossibility, at which point we should ask what’s amiss. How can we import so much more than we export? Actually, we can’t. There’s a “deficit” in trade only as a consequence of something wildly bullish: foreign investment into the U.S. is more than sizable. In other words, investors in foreign countries are as eager to own our blue chip companies (think Apple
AAPL
, Amazon, Facebook, etc.) as we are. The only thing is that our “export” of shares doesn’t count in a number that in a normal world wouldn’t be calculated in the first place. Call the “trade deficit,” or the “trade balance,” along with GDP and the myriad other worthless figures “economist relief measures.” That’s all they are. And it’s not just “trade balances” that inform GDP.

Cambon added that “fading government stimulus spending related to the pandemic weighed on GDP” too. Except that government spending is a consequence of economic growth, obviously not a driver. GDP implies that governments have spending power just because they’re governments. If true, Haiti’s answer to its perpetual poverty would be simple. Just have politicians spend. No, it doesn’t work that way. Politicians have spending power after the growth, which means GDP calculations suggesting government spending enhances growth are a monument to double counting. After which they vandalize reason. Really, who other than economists would believe that placing trillions in the hands of Nancy Pelosi and Kevin McCarthy to allocate would instigate growth?

GDP once again is a myth. And a bad one at that; one that sustains the illusion that imports are harmful while government spending is elevating. Reasoned people will ignore what makes no sense, but that both Democrat and Republican partisans routinely focus on in order to score cheap political points that have nothing to do with prosperity one way or the other.