The U.S. Economy Surges Behind the Scenes

Our GO is going good! [Gilder's Daily Prophecy] August 29, 2022 [WEBSITE]( | [UNSUBSCRIBE]( Pelosi: Trader of the Year [Click here to learn more]( Could you live on a yearly salary of $223,000? Speaker of the House Nancy Pelosi can’t. In between her mansion in San Francisco… Her vineyard in Napa Valley… And her condo in Washington D.C… She’s got bills to pay. Maybe that explains why she turned to the financial market… …and made a whopping $16,300,000 from trading stocks in 2021. The secret to her success? We can’t say for sure, but here’s what we can say: There’s a rather unusual source of financial intelligence that can help you find stocks going up next – just like her. [And you can see the full details for yourself right here](. The U.S. Economy Surges Behind the Scenes [RICHARD VIGILANTE] RICHARD VIGILANTE Dear Reader, The U.S. economy is doing a pretty good job of hurtling the extraordinary obstacles the world’s governments are posing to prosperity. That’s the message from one of my favorite economists, Mark Skousen, who among many other remarkable accomplishments is the inventor of an official U.S. government economic statistic. “Gross Output” ([www.grossoutput.com]( aka “GO” is a leading indicator of near-term economic growth. Long-term it is decisive. If your GO ain’t goin’, you goin’ nowhere. GO often leads GDP because GDP counts only final transactions in long chains of production. If I buy a pencil from the supermarket, that adds to GDP. What GDP doesn’t count are most of the steps that come before, laid out in Leonard Read’s brilliant 1958 essay “[I Pencil]( The pencil starts as “a cedar of straight grain” itself useless without “the saws and trucks and rope” to cut and cart the cedar logs. Those tools required “the mining of the ore, the making of steel and its refinement into saws, axes, motors.” Without the “flat cars and rails and railroad engines,” the cedar would never make it to the mill. The mill could not make pencils without those who supply “the heat, the light and power, the belts, motors, the sweepers” of the mill floor or without the graphite from Ceylon mined by workers with “their many tools” or without those who load the graphite “aboard ships and those who make the ships…” None of the business-to-business transactions leading to the pencil are counted in GDP, though capital investment—building a new mill—is. The imported graphite is subtracted from it. These things are left out because economists, using GDP to measure the size of the economy at a point in time, don’t want to double count. They assume all the things that go into the pencil are captured in the pencil’s final price. GDP Myths That’s fine for a snapshot. If, however, your goal is to understand how an economy works and what’s likely to happen next GDP is more deceiving than helpful. It leads to myths like “consumers drive the economy” or “consumer spending accounts for 70% of the economy.” No, consumer spending accounts for 70% of GDP. Since GDP counts only final transactions it would be surprising if most of the GDP were not consumer spending. Here is the GDP view of the economy: (Net Export Expenditure is typically negative.) [Click here to learn more] Illustrating what GDP misses is the Skousen B2B Index. It captures the business transactions Skousen adds back to GDP to come up with GO. At around $33 trillion today it’s roughly twice the size of consumer spending. [Click here to learn more] As the graph (from [www.grossoutput.com]( above shows, one great strength of the Skousen index is that it is more volatile than consumer spending. That volatility in turn feeds into GO, making it more volatile than GDP. The more volatile the better when you are trying to predict the future. If you want to see how things are changing you are better off looking at things that, because they are highly reactive to their environment, change a lot. Businesses, to a far greater extent than households, are in the business of change, reading multiple sources of information— including vendors, workers, and customers—and adjusting accordingly. Production is upstream of consumption. To augur whether the economy is expanding or contracting, it’s best to use measures preceding the final transactions that dominate GDP. Ok, Vigilante, we know you love this stuff, but could you get to the point, assuming you have one? - Adjusted Gross Output is currently heading up not down. (See graph below). Since GDP generally lags GO this suggests GDP if not growing explosively is not about to collapse either. [Click here to learn more] As Mark argues on [GrossOutput.com]( B2B “spending continues to expand at a faster pace than consumer spending, which is one good indicator for the longer-term economic outlook.” - A look at the components of the Skousen index suggests many current drivers of price increases, such as supply chain problems, are being resolved. [Click here to learn more]( [4 Ways to Help Protect Your Money As Biden Tries to DESTROY the Dollar]( Big Gains in Oil and Gas, and Agriculture I was particularly interested in two results: mining, including oil and gas extraction, and agriculture. Mining was up circa 40% annualized across Q4’21 and Q1’22. (Q2 figures will not be released until late September.) Because the mining “sector represents one of the earliest stages of production” it can be an early indicator of what “sectors further down the supply chain might do in subsequent periods.” Fuel prices have been big drivers of what the media calls “inflation” though supply chain constrictions are hardly a monetary phenomenon. This sector is expanding suggesting supply chain problems will ease, which may be why gasoline prices have been falling. Agriculture, like mining, comes early in the production cycle, and food prices have been another driver of “inflation.” “After contracting 1.3% in the last period of 2021, the Agriculture sector expanded 36.4% to begin 2022.” These increases include the impact of rising prices, not just increases in production. Still, the numbers suggest the economy is not being utterly daunted by price increases. Companies in the early stages of production are doing brisk business which augurs well both for their own expansion and for companies further down the line. They also make the very strong July jobs report, which came in twice as high as analyst predictions, less surprising. Ok, just remember, we’re still voting Republican in the fall. Every significant thing the Biden administration has done so far has been bad for the economy, and what they want to do is even worse. Still, for now, don’t sell off your portfolio and do look for bargains. Regards, [richard-vigilante] Richard Vigilante 1992 Book Reveals: The Next Big Tech Obsession [James Altucher]( Silicon Valley insiders have spent the last 30 years passing a “secret playbook” around their inner circles. This “secret playbook” ([which I reveal right here]( has pointed the world’s biggest tech moguls to major breakthroughs that have helped disrupt entire industries... 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