Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Don Lloyd who wrote (16426)	3/7/2002 8:55:37 AM
From: Mike M2	Read Replies (1) of 74559

Don, to clarify Jay's post on March issue of The Richebacher letter "....What was behind the paltry upturn, amounting to $5.2 Billion? The main item was government spending, in particular at the state and local level. It soared by $36.1 billion and contributed 1.59 percentage points to real GDP growth. The other main contributor was business spending on computers. As prices declines of IT equipment accelerated, the hedonic deflator worked another wonder. Measured in current dollars, spending on computers increased a paltry $1.9 billion. But hedonic treatment turned this trivial amount into a capital-spending boost of $23.5 billion. Had it not been for government spending and the hedonic deflator, US real GDP growth would have been down in the fourth quarter at an annual rate of more than $50 billion or more than 2%-- far worse than expected. ..." The Richebacher Letter 808 St. Paul S Baltimore, MD 21202 it is worth pointing out that companies report their results in current dollars and that the hedonic multiplier creates phantom revenue that benefits nobody. It does help create the illusion of strong GDP growth and productivity. mike

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