Economics is Gross!

Is Gross Output better than Gross Domestic Product? [The Rude Awakening] June 26, 2023 [WEBSITE]( | [UNSUBSCRIBE]( Economics is Gross! - We usually use GDP to measure the size of an economy. - But are we neglecting essential parts of the economy? - Let’s look at Gross Output to see if we get a better picture. [“Godfather Of AI” Reveals Stunning Prediction]( He’s a 35-year AI veteran who has worked closely on AI technology for decades… - In 1988, the National Science Foundation funded him to build an AI chess program. - He’s written and published academic papers on AI. - And he’s used AI to trade stocks as early as 2001. [But today, he’s stepping forward with a critical prediction that he says every investor needs to hear.]( Whatever you do, I’m urging you to not invest a single dime into AI technology until you see this man’s warning. [Click here for details.]( [Click Here To Learn More]( [Sean Ring] SEAN RING Dear Reader, Good morning from a hot, clear Asti! I hope you had a lovely, restful weekend. Now that Micah has school friends, our social life has been positively hectic! Yesterday, we were at a friend’s house for a birthday party. That’s the third weekend in a row! But I wouldn’t trade it for anything. As new arrivals, we can’t put a price on a full social calendar. Friday night, we fly to Sicily. So I’ll be writing from there most of next week. I’ll try to include some history and some pictures from the journey. But before that happens, let’s get to a mailbag question I didn’t have space to answer in Friday’s edition. That question was: First, thank you for all you do!!! I have a question: When discussing the economy, whether as to where it is and/or where it is going….. Why is the metric GO not mentioned in the discussions put forth? Regards Peter A. I promised to answer that question today. And so, here we go. First, What’s GDP? Gross Domestic Product (GDP) is the sum of all goods and services produced within a country’s borders. Usually, it’s expressed as an equation: C + I + G + (X - M) Where C = consumption; I = business investment; G = government spending; X = exports; and M = imports. (And thus, the trade balance is X - M.) One easy way to see how flawed GDP is as a measure is to understand that the second government spending increases, GDP increases. So it’s elementary for a government to goose GDP with increased defense spending. The main uses of GDP: - A measure of economic growth - The standard for international comparisons - An indicator of living standards - Policy-making and economic planning - Business and investment decisions So while it’s a flawed measure, nearly every economic and financial body uses it. But it never was enough, so another measure was developed over time. So What is “Gross Output”? Gross output is the total value of all goods and services produced by an industry, sector, or entire economy within a specific period. It represents the sum of all intermediate goods and services used in the production process and the final goods and services produced for consumption, investment, or export. Gross output is a broader measure of economic activity than other commonly used indicators such as gross domestic product (GDP). While GDP focuses on the value of final goods and services, gross output sheds light on the entire production structure. It helps analyze productivity, supply chains, and the overall health of an economy. By including intermediate inputs, gross output provides a more detailed view of the production process and the interconnectedness of different industries. It helps analyze the interdependencies and linkages within an economy and understand the contribution of various sectors to overall economic activity. Who Invented Gross Output? Gross Output is a measure developed and refined by economists over time. However, Dr. Mark Skousen, an economist and financial analyst, introduced the concept of "gross output" as an alternative measure to GDP. He argued that GDP focuses primarily on final goods and services and overlooks the importance of intermediate stages of production. Dr. Skousen advocated the inclusion of intermediate inputs in measuring economic activity to provide a more comprehensive view of the production process. In 2014, the U.S. Bureau of Economic Analysis (BEA) began publishing Gross Output (GO) data on a quarterly basis, partly influenced by Dr. Skousen's work. This move recognized the value of incorporating gross output as a complementary measure to GDP in analyzing economic performance. [Biden to Replace US Dollar?]( Thanks to President Biden’s Executive Order 14067, a former advisor to the CIA and Pentagon predicts the 3rd Great Dollar Quake has begun. The first was Roosevelt confiscating private gold in 1934. The second was Nixon abandoning the gold standard in 1971. Now, Biden’s plan could pave the way for “retiring” the US dollar. Your dollars could soon be confiscated – or made worthless. [Click here to see how to save your investment and retirement accounts](. [Click Here To Learn More]( How Do You Measure GO? Gross Output (GO) can be measured by adding up the value of all stages of production within an economy. The calculation involves capturing the value of both intermediate inputs and final outputs. Using Dr. Skousen's method, here's a general overview of how to measure gross output. From [GrossOutput.com]( I’ve created the following four-stage model of the economy to demonstrate what is included and what is not included in GDP. This diagram represents how all goods and services are produced. They start out as raw commodities or resources, go through a production or manufacturing process, are then distributed through wholesale and retail outlets, and finally are sold to final users – to consumers in the form of consumer goods, to businesses in the form of capital goods (tools, equipment, machines, etc.), and to governments in the form of goods and services purchases (military, buildings, supplies, etc.). [pub] Figure 1. Universal four-stage model of the economy. As you can see from the above figure 1, GDP accounts only for the final stage (#4). It ignores the value of the supply chain, stages #1 through #3. Later in the same article, Dr. Skousen invites a comparison between his model and John Taylor’s four-stage economic model: [SJN] Source: John B. Taylor, Economics, 5th ed. (Boston: Houghton Mifflin, 2006) How Does GO Differ From GDP? Gross Output (GO) and Gross Domestic Product (GDP) are two distinct measures providing different economic activity perspectives. Here are the key differences between them: - Scope of measurement: GDP measures the final value of all goods and services produced within a country's borders during a specific period. It focuses on the value of final outputs consumed by households, businesses, government, and exports. On the other hand, GO captures both the value of intermediate inputs used in production and the value of final outputs. It provides a broader view of economic activity by including all stages of production. - Production perspective: GDP is primarily a measure of production from the demand side, meaning it focuses on the expenditures made on final goods and services. It measures the value of various entities' goods and services consumed or invested in. In contrast, GO provides a production-oriented perspective by considering the entire production process. It measures the value of all goods and services produced, both intermediate and final, highlighting the importance of supply chains and interconnectedness between industries. - Sectoral coverage: GDP typically provides a breakdown of economic activity by sectors such as agriculture, manufacturing, services, etc. It allows for analyzing the contribution of each sector to overall economic output. Conversely, GO provides a more detailed sectoral breakdown by capturing the value added at different stages of production within sectors. It helps in understanding the interdependencies and linkages between sectors. - Economic analysis: GDP is widely used as a standard measure for analyzing overall economic growth, living standards, and comparing the economic performance of different countries. It is often employed for macroeconomic policy-making and assessing business cycles. While less widely used than GDP, GO offers additional insights into the structure and dynamics of the production process. It helps analyze productivity, identify supply chain bottlenecks, and understand different industries' roles in the economy. Wrap Up And finally, it’s time to answer your question, Peter. I think economists don’t use GO because it has no predictive power. It just helps explain what’s behind the final GDP numbers. It also shifts the onus from consumers to businesses, rightfully, though no politician likes that. Imagine admitting to your constituents that businesses mattered more than they did! It’s just not happening right now. And finally, Gross Output is just not old enough for the mainstream to accept it. I’m sure it’ll become a part of the everyday lexicon as GDP did. But it takes a long time. I hope that helps. Have a great week ahead! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( In Case You Missed It… Mailbag Friday [Sean Ring] SEAN RING Happy Friday from sunny Northern Italy! I haven’t done a mailbag edition in a while, so I thought I’d give us an easier Friday read. Thanks for writing such lovely notes. And thank you for asking such relevant and intelligent questions. Before I begin, I want to acknowledge the passengers on the ill-fated Titan. I don’t care how rich, famous, stupid, intelligent, tall, short, fat, or thin you are. No one deserves to die in such a way. The vitriol coming from Leftists on Twitter is [tasteless]( [immoral]( and [beyond the pale](. But that’s why I love free speech so much: we now know who these people are and can choose to disassociate entirely from them. I wouldn’t have got on that contraption to begin with. I’d rather jump out of a plane and not have my parachute open. I’d have a heart attack, give up the ghost, and not feel the splat. But just because I wouldn’t get in a little sub doesn’t mean no one should explore the deep. [James Cameron, the great filmmaker, probed the Challenger Deep of the Marianas Trench over a decade ago.]( If you get the engineering right and don’t ignore safety protocols, souls far braver than mine can and should discover more about the 70% of the planet we’ve barely explored. As for the five souls who lost their lives attempting to explore the Titanic, may God bless them and keep them. And now, to happier times in the mailbag. Lovely Sentiments Good morning, Since opting in for several subscriptions at Paradigm, I receive - seemingly - countless emails. Rude Awakening is one of the daily articles that I genuinely look forward to as I drink my Diet Pepsi (I don't drink coffee) first thing in the morning. Sean's article on 6/6/23 left me in stitches. I love his writing style, but most of all, his insight. Keep it coming! Kindly, Rob G ------- I enjoy and look forward to Sean's writing about anything in the Rude Awakening. He gives colorful side info about the world, politics, finances, world travel illustrations, etc but never gets lost in these stories. He makes them relevant to financial and/or political issues to illustrate his points which I love because, as an old lady and novel investor, sometimes straight technical info hurts my brain and loses me somewhere along the way. I remember and can understand issues when they are relevant to everyday life issues, inflation, Biden et al trashing this country and our economy. His wit, knowledge, and insight are evident and enjoyable. Linda L. ------- Hi Sean. I've loved maps from an early age--as you probably did also. The John Wesley Powell map of arid regions of the USA had some good insight. Next time you are in Fredericksburg with your parents, you'll be at 98.9 degrees longitude--very close to Wesley's arid border. Being that close to the border must mean wet and dry periods alternate. We're emerging from a few years with 5 to 10" of annual rainfall into a wetter time. The dry times kill off plants we didn't realize were non-native. Natives adapt and come back when the rains return. Thanks for the thought-provoking map. Y'all be well. Gary H. Thanks for the kind words, Rob, Linda, and Gary. It makes the work worth doing. I will endeavor to exceed your expectations over the coming years. [Urgent Notice From Paradigm CIO Zach Scheidt!]( Hi, Zach Scheidt here… I’m the Chief Income Officer at Paradigm Press. With inflation raging (and showing no signs of coming to an end any time soon), almost everyone in America is feeling the pain in a big way. Which is why, several months ago, I set out on a big mission… my goal was to create a [complete, step-by-step plan to surviving and beating inflation]( one that anyone could take advantage of. Today, after hundreds of hours of research, I’m revealing all of my findings. [Simply click here now to see how to survive America’s deadly inflation crisis](. [Click Here To Learn More]( Eating My Own Cooking Dear Sean, I’ve always thought that the rule that advisors can’t invest in their own recommendations is the dumbest thing I have ever heard (after globalism, climate change, and woke, of course! Best regards, Martin Thanks for writing, Martin. To be fair, advisors used to “front run” their picks. That means advisors would buy ABC stock and then recommend it in their newsletters. The bidding onslaught would come upon publication, and the advisor would make more money than his subscribers. So the SEC banned it altogether. Now, it’s ok to “eat your own cooking” as a publisher, as long as you give your subscribers enough time to get in first. Jim T.’s Big Three Sean, Not sure why, but your charts spoke to me today for the first time. Now that I am on board and am understanding the relevance of the 50-day and 200-day MA as well as your selection of securities/assets, it occurs to me that you probably know what most of those other chart terms mean, e.g., Bollinger Bands. So, as a suggestion, it would be a bonus for at least one of your readers, if you would add a bonus chart each month and explain one of the other technical chart terms for us novices. Also, the more I buy into JR’s dystopian future (I’m re-reading his books and just got onto The Big Drop again), I’m curious if you think you will fare better in Italy as opposed to those in other countries, particularly USA. Further, are there better places to be than Italy or USA? First, I’m so glad about the charts. An old friend of mine once said, “You need to read 1,000 charts before you start to get it.” Repetition is critical to seeing things. And, yes, I’ll try to explain technical, fundamental, and sentiment indicators every so often in the Rude. I usually avoid such things because I don’t want anyone to fall asleep in their coffee! Second, I wouldn’t live here unless I thought I’d be better off. Please read this [Morning Reckoning]( piece I wrote in January. I follow all the advice I give to you. For instance, thanks to prudent accountancy and Italy’s laws, I lowered my effective tax rate to 7.35% for 2022. (If I were more careful about my receipts, it’d probably even be lower.) As far as I’m concerned, that’s a 32% gain over what I’d be paying in the States. Also, I’m currently bidding for a house that, while big, is not more than [three times my annual income](. So my mortgage - which will be tiny anyway - is no more costly than an extravagant dinner. Those two linked articles above got some of the best feedback I’ve ever received. I hope you enjoy them and get immediately actionable information from them. Are there better places? I’m sure there are, but it would depend on your circumstances. (But there’s no better cuisine than Italian cuisine. Sorry about that!) Is there any way of knowing if the USG is currently buying more gold? Seems to be a common belief that China and Russia are or have been in the last 20 years or so. What about the US? This may be tough to see on a cellphone, but central bank gold buying is way up (the maroon tops of the columns). [SJN] Credit: [GoldHub]( By country, it looks like this: [SJN] Credit: [GoldHub]( If that’s difficult to read, Singapore, China, Turkey, and India were the four largest buyers. Kazakhstan, Uzbekistan, Cambodia, and Russia were the four largest sellers. As for the US, it doesn’t need to buy much. This is the official reserve count according to [gold.org]( [SJN] I have been looking at BLS CPI-U historical adjustments/factors and wondering how inflation adjusts prices of different assets such as gold, soybeans, and home prices. While I can easily compute current and future values using CPl-U, I have a nagging feeling that there must be something better that I should use rather than CPI-U to get results for comparing past and future. Question: Are there more specific or better indices that I might use to perform inflation adjustment calculations? In general, I tend to view inflation from my birthday or from my wedding date as that is what I can best relate to. Thanks, Jim T. Jim, thanks for your questions. I love to read them and look forward to answering them. As for this last one, I’d check out [ShadowStats]( by John Williams. He uses the old methodology for calculating inflation. I bet it’ll be closer to what you’re calculating than the official statistics. Bernie Made Off With the Money… Sean, I was passing on to my wife the information of how and when the debt ceiling was created, and how none of it has ever been actually paid off, just rolled over and over when it occurred to me. The US Government makes Bernie Madoff and Charles Ponzi look like a couple of pikers! Richard S. Richard, thanks for writing in. You’re in good company! I think that thought is occurring to many Americans right now. And Finally… First, thank you for all you do!!! I have a question: When discussing the economy, whether as to where it is and/or where it is going….. Why is the metric GO not mentioned in the discussions put forth? Regards Peter A. Peter, thank you for reading! This is a great question. GO, or Gross Output, is Mark Skousen’s favorite economy-measuring metric. I will elaborate on it in Monday’s Rude. I hope you don’t mind waiting for the weekend, but I must research first. Wrap Up I love reading your stuff. Please write to feedback@rudeawakening.info whenever you feel like it. I believe I’ve answered all your questions so far. If I’ve missed you, it’s entirely by accident. So please resend your question, comment, or issue, and I’ll get to it right away. In the meantime, have a wonderful and restful weekend! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. 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