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To: Skeeter Bug who wrote (177824)	1/19/2009 8:53:34 AM
From: Mike M2	Respond to of 306849

Skeeter, the productivity numbers were also increased by understating inflation- Nominal GDP less inflation gives us REAL GDP. To the extent you understate inflation you overstate real GDP resulting in the illusion of higher productivity.

To: Skeeter Bug who wrote (177824)	1/19/2009 11:33:51 AM
From: Lizzie Tudor	Read Replies (4) \| Respond to of 306849

I didn't know we were talking about GDP, although in theory GDP is supposed to represent the efficiencies we are talking about. GDP is supposed to be able to calculate the fact that building an airplane used to take 4 interim warehouses and tons of staff and now that overhead is eliminated. In this decade GDP is really whacked though. Our GDP is artificially high by a few points. The GDP calculation takes companies like Applied Materials that used to house 10K US staff, and when AMAT decides to offshore 8K of those workers, GDP assigns the productivity from the offshored staff to the remaining 2K workers. Thats bogus and has been going on for years. There was once this GDP figure in 2002 that assigned US GDP growth at 9% while at the same time we were losing 300K jobs/month. The labor secretary at the time Elaine Chow was such an idiot on CNBC obviously with no clue what was going on. If an economy of this size really had 9% GDP, we would need to create 2K jobs/mo just to calculate all the cash. Here is a business week article on how screwed up the GDP figures are as a result of offshoring. BusinessWeek's analysis of the import price data reveals offshoring to low-cost countries is in fact creating "phantom GDP"--reported gains in GDP that don't correspond to any actual domestic production. businessweek.com Having said all this, GDP is actually meaningless other than as a way to judge US competitiveness against other countries. And as it turns out the other countries' GDPs are wrong too. China for example, doesn't really have double digit GDP growth, because if they did they would not be in the kind of serious recession they are in just due to the US catching a cold. In the beginning of this recession there was some talk of China and India being able to carry the world economy now, and that was WAY OFF. The minute the US sneezed china practically collapsed and that means their GDP figures are overstated.