Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
This Dividend Aristocrat Is Leading the 5G Revolution - 22nd July 19
What the World Doesn’t Need Now is Lower Interest Rates - 22nd July 19
My Biggest 'Fear' For Silver - 22nd July 19
Reasons to Buy Pre-Owned Luxury Car from a Certified Dealer - 22nd July 19
Stock Market Increasing Technical Weakness - 22nd July 19
What Could The Next Gold Rally Look Like? - 22nd July 19
Stock Markets Setting Up For A Volatility Explosion – Are You Ready? - 22nd July 19
Anatomy of an Impulse Move in Gold and Silver Precious Metals - 22nd July 19
What you Really need to Know about the Stock Market - 22nd July 19
Has Next UK Financial Crisis Just Started? Bank Accounts Being Frozen - 21st July 19
Silver to Continue Lagging Gold, Will Struggle to Overcome $17 - 21st July 19
What’s With all the Weird Weather?  - 21st July 19
Halifax Stopping Customers Withdrawing Funds Online - UK Brexit Banking Crisis Starting? - 21st July 19
US House Prices Trend Forecast 2019 to 2021 - 20th July 19
MICROSOFT Cortana, Azure AI Platform Machine Intelligence Stock Investing Video - 20th July 19
Africa Rising – Population Explosion, Geopolitical and Economic Consquences - 20th July 19
Gold Mining Stocks Q2’19 Results Analysis - 20th July 19
This Is Your Last Chance to Dump Netflix Stock - 19th July 19
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Is the U.S. Headed for a Recession?

Economics / Recession 2015 Apr 01, 2015 - 06:27 PM GMT

By: DailyWealth


Dr. David Eifrig writes: Are the government's economic statistics to be trusted at all?

Every economic statistic – from gross domestic product (GDP) to employment to inflation – comes from some agency performing calculations in a complex environment. But what do these numbers actually show us? Are these figures finagled by the government or other interested parties?

The answers are tricky...

You can't fully trust economic statistics because they describe quantities of things that can't be entirely known. Measuring the economy is difficult. Very difficult. And in a sense, there are no "real" numbers. But the official measures of inflation, GDP, or employment aren't hiding anything based on someone's conspiracy agenda.

This week, I'm going to cover each of these ideas – GDP, inflation, and employment... and see if the "official" stats are telling us the full story. We'll start with a close look at the official GDP figures...

People like to throw around GDP figures as a measure of a national economy's strength and the individual's standard of living. Most people don't monitor it closely, but they simply note when a headline or TV reporter broadcasts the quarterly update. This is often called the "headline number."

But GDP is complex. It's hard to compute. On January 30, the Bureau of Economic Analysis (BEA) reported the economy grew at a rate of 2.6% from September 30 to December 31. The agency also revised its number for the previous quarter. That's because the BEA gets this number out so fast, it doesn't have all the information yet. So it's constantly revising past numbers to get them closer to reality.

This time, the BEA reported that the third quarter of 2014 didn't grow at the blistering 3.59% pace it initially reported. It actually grew faster at 5%.

That's not unusual. Throughout this recovery, most BEA updates have revised numbers up from initial estimates. Take a look:

This means the economy is doing even better than most "headline" observers realize.

(And it suggests the numbers are honest. Why would you hide the good news in the old numbers no one pays attention to?)

We're following GDP closely. Besides being the biggest catch-all number for the health of the economy, we're watching for extended accelerated growth.

The reason is what's called "potential GDP." In the most basic interpretation, we have a lot of capital, factories, and businesses... and 318 million people in this country. There is a particular amount of economic output that these people will produce.

But in a recession, people don't buy as much, so people don't make as much money. The economy doesn't live up to its potential.

It has, however, been shown that after recessions, economies tend to eventually catch up to this potential GDP. It has also been shown that when you pair a recession up with a financial crisis, it takes even longer for GDP to catch up to the potential level... on average about nine years.

The thing is, we're still waiting to fully catch up...

There's no guarantee when, or if, we'll get back to potential GDP. But plenty of resources are creating pressure that should push growth upward, not downward.

It's clear the economy is doing well. But it's not as overheated as many bears would have you believe. The data show the economy is growing steadily... and we still have plenty of upside potential. Therefore, we don't expect a recession any time soon.

In tomorrow's essay, I'll cover inflation. Specifically, I'll take a look at the official consumer price index (CPI) figures, and see if they're telling us the whole story about rising costs.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

P.S. With the economy slowly recovering, now is a great time to take advantage of one of my favorite ways to earn tax-free income. I call it the "Master's Exemption"... and if you own a home or a condo, you qualify for this 100% LEGAL loophole. A friend of mine makes enough tax-free income from this for several nice vacations a year. You can learn about this loophole and many others in my new Big Book of Retirement Secrets. Learn how to order a FREE copy right here.

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2013 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules