How fast is the economy growing?

Gross Domestic Product growth rate, expressed as a percentage annually, by quarter.

The economy is doing better. Or not. Why do you care? Look in your wallet and tell me how the economy is fairing.

What did you see? Cash, or credit cards? How do measure the economy, and its impact on you?

The graph above reflects growth in the Gross Domestic Product. That’s a number that reflects goods and services produced. Growth is a ratio. Annual growth is how much growth actually takes place in a year. The graph above is of annual growth rates that are based on quarterly growth, and those quarterly numbers are estimates. In other words, the most important thing about the graph is how pretty it is. The choice of colors and symbols is more meaningful in any data put forward, and the data represented is only estimates. Revisions of revisions of revisions, because nobody really knows what the numbers are.

If anyone knew what those numbers were, would anyone know what they mean? They are the basis for international trade, currency rates, and credit ratings, which are themselves only abstract ideas.

Is it important to you that a German company shipping parts made in South America to China by ships registered in Greece so they can be assembled and sold in North America by a company based in France makes a profit in Euros? All those exchanges of goods, services, and currency were based on the relations between the countries involved, at the time of each transaction. A great web of finances, constantly shifting, so you can spread your unemployment check around the world.

Do you measure the economy by other numbers, the Dow Jones average perhaps? Is the stock market’s position important to your welfare? Only if you happen to be selling stocks that happen to be valuable enough to pay the bills you want to pay. When the market drops, do you lose anything? Only if you’re selling shares that have decreased in value. Your portfolio is only a collection of possibilities, and those possibilities are only meaningful on the day you redeem them.

Do unemployment numbers affect your finances? If you’re unemployed, does it matter if there are ten million or twenty million people also unemployed? Do fewer people looking for a job increase your skills in the field you work in? How low does the rate of unemployment need to be to guarantee you a job for which you are not qualified?

Are you impressed with the distribution of wealth? What does it mean that there are four hundred and forty two billionaires in America this year? More wealthy people means fewer poor people? I don’t think it means more poor people, because there is not a finite amount of money.

Notes and coins are money. Debit cards are not. When you buy something with a debit card, the issuing bank charges the merchant two and a half percent of the purchase amount. Credit cards can charge as much as four percent. So the merchant raises prices to cover the expense. If you buy something on sale with a credit card and don’t pay the balance in full? Then you’re paying the bank instead of the merchant, and you’re probably paying more for the item than the original price. When you drive out of your way to buy gasoline two cents a gallon cheaper than in your neighborhood, a full tank of gas might save you thirty cents, thirty cents worth of gas will take you maybe three miles. How far out of your way did you drive?

All the financial data in the world means nothing if you’re hungry. It doesn’t mean much if you’ve never missed a meal either.

If you’re looking for financial advice, ask your grandfather. Don’t buy what you can’t pay for today. Don’t buy what you don’t actually need. Waste not, want not.

There will always be people with more money than others. There will most probably always be people who are so poor in spirit that no amount of money can help them. Life is like that. We are provided with perspective, and opportunities to help those in need. What we do with that perspective affects how we help others.

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3 comments on “How fast is the economy growing?

  1. Of course, all of this is true, but you’ve ‘put it’ in such a lovely and logical way. I especially enjoyed the line ‘Your portfolio is only a collection of possibilities…” (may I use it?). It really is just a shell game isn’t it? (rhetorical). Another masterpiece KB.

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  2. MIke R says:

    You brought it together very well, Blake, considering the topic. Trying to discuss economics in a nation with a government that constantly lies concerning economic numbers and a media full of presstitutes that simply pass it on without using a finger of journalism is a near-impossible task. But you pointed to your conclusion very well. The only amount that matters is whatever means that God has blessed us with and how we use it. Debt is a killer. I know that you are old enough to remember when credit cards did not dominate the world, and when people were thrifty enough to be attracted by trading stamps at the gas station or grocery store. When do you buy a new TV? . .. .when the old TV breaks down.

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