Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: GuinnessGuy who wrote (122685)	5/18/2010 9:51:00 AM
From: Freedom Fighter	Respond to of 132070

GG, >Seems to me that real wealth is created by innovation and/or perhaps exploitation of raw materials in new lands...which in turn feed the requirements of innovation.< IMO, GDP type measurements are flawed for two reasons. 1. The government isn't competent or trustworthy enough to calculate what's going on in the economy (perhaps no one is) 2. GDP measures what we are producing, but if we are producing tons of things by borrowing from overseas, printing money, and leveraging up the new money via new bank credit, we are actually slowly committing suicide even though GDP will look great in the short term. It is savings and investment that leads to the innovation that increases productivity which in turn raises standards of living and the accumulation of wealth over time. This the problem. When people raise their savings level and lower consumption, economic activity falls temporarily and we get a painful adjustment period. So people associate consumption with being "good" and too much savings with being "bad". But the reality is that the downturn is simply an adjustment to new levels of each. Once it's done, growth and wealth accumulation will be more rapid with a higher savings rate. We have twisted everything on its head. At the first sign of a downturn we lower interest rates, print money, run huge deficits etc... and encourage consumption. That avoids the short term adjustment period, but digs us deeper into a long term hole from which the adjustment would be a total economic disaster. IMO, Keynes was a moron (at least the types of Keynesian policies we practice now)