Crossposted from Confounded Interest
The Case-Shiller 20 city index sparked hope for the housing market recovery. It was actually UP for the first time in months (+0.7 NSA, but -0.1% SA). Of course, one good month doesn’t make a rally – we need at least 3-6 consecutive months for there to be a sustainable recovery. But before we get all excited, let’s look at GDP growth.
Y = C + I + G + (X − M)
which is GDP = Consumption + Investment + Government Expenditures and Investment + (Exports – Imports)
Break it down.
First, let’s look at Real Consumption Expenditures. Downward trend and it is now negative in terms of growth. Not a good sign, particularly since it is about 70% of GDP. We are going to turn around 70% of the economy over the next 6 months?
Second, Real Gross Private Domestic Investment.Well, at least this segment of GDP is increasing (as of Q1 2011). That is good news, but what is the breakdown?
We know it can’t be real private RESIDENTIAL fixed investment since home builders have been pretty quiet the last few years.
Is it real private NONRESIDENTIAL fixed investment? No, that market has been quiet as well.
So, the big ticket items in Real Gross Private Domestic Investment are fairly flat. Equipment and software, on the other hand, grew at almost 10%. But they are a small percentage of investment (7.5%).
Three, how about Uncle Sam’s Real Consumption Expenditures and Gross Investment? Well, that’s declining too.
Fourth, all we have left is real net exports. And that has taken a big hit.
I have examined each of the components of GDP. ALL are declining but Real Gross Private Domestic Investment. But can we rely on continued growth in equipment and software to drive Q3 and Q4 GDP?
This is why I am less than optimistic about a recovery in the housing market this year. We need real growth and it has to be above 1.9%.
Dr. Anthony B. Sanders, Distinguished Professor of Real Estate Finance, George Mason University
Dr. Sanders–
Interesting stuff, but I have a couple of questions. First, how can Government expenditures be declining with all the trillion$ being spend on “stimulus”? Secondly, it would be interesting to know exactly what categories of “equipment and software” are driving the Private Domestic Investment. Any idea?
Dr. Sanders,
Great article. Unfortunately as I have said in other posts, the majority of the electorate and especially the mind numb morons being turned out by our schools the last 2 generations have absolutely no idea what “central planning” is or was as in context with the failed experiment called Communism. They don’t teach it anymore as they did when I was young because it would go against the very grain of their indoctrination of our children!
My oldest daughter informed me I was a victim of hate and a closed mind as to this. When I explained to her we were taught not only what pure Communism was meant to be ( a Utopian ideal, one that could never be due to human nature, but Utopian none the less), but also what it was basterdized into by the Lenins and so forth of the world, she explained that her professors (USF) had made it clear that the main reason for the fear of Socialism here was due to the “Red Scare” fear mongering instilled into my generation by the McCarthys of the world and augmented by Rush and others.
Look no further than our President and his openly Anti-American pro Soviet Style Socialist wife! They were open about this but an indoctrinated, hands-out electorate with the help of the co-opted press chose to hear and act on the lies rather than the truth.
Dr. Sanders, very good (and well supported) article. I must agree with you – central planning NEVER works. Please take a look at this article for another take on central planning.
Dr. Sanders,
I’d like to expound just a bit as to “being taught” Marxism or whatever when I was young.
In the 60’s as is well documented, we were coming out of the “hard Red Scare” era. That did not change the fact that there was in fact a cancer out there called the USSR that in fact ended up being a dictatorship that had nothing to do with “Pure Communism” as envisioned by people like Marx and Engels. (I apologize here as I’m going so much on memories of over 40 years ago!)
It was a requirement for graduation (High School) that one took a 12 week course as to Soviet Style communism and it’s effects. I’m not going to pretend I’m an expert here., however, life experience, a close friend from the USSR and what I have learned from reading ( I love history of any kind and try to read all views) all I can are in fact my basis.
I distinctly remember it consisted of the following. First we were given the basics of Communism or Marxism or whatever. As I said above, the ideals that it was based on were Utopian to say the least. But in many ways, if one can take out human nature and the drive one usually has to excel, on paper it was in theory a good thing. The second part of the course was how the USSR and other Soviet style countries took a premise that on paper was a good thing and twisted it into the aberration the world has come to know! Part of the screw up in the USSR was in fact Central Planning which is something we looked into.
I had great teachers at the time. I do not remember them in any way giving us the “Red Scare” angle. They only tried to show what could have been and what turned out to be. History has taught us that those policies are and were an abject failure as you easily point out above.
The point I was really trying to make is that as in the case of my daughter, I’m afraid today’s electorate do not have the faintest idea as to what is if fact occurring. I’m not saying teaching Marxism is needed or not needed. I’m just saying that I was lucky enough to have had a school system that did in fact try to show as many angles to something as possible.
In a ”free” enterprise system (Even our partly-free one) millions of minds are deciding for themselves what might be the best way to succeed.
Lots of their decisions are blind alleys and failures.
Some are so-so successes.
A few are rousing successes.
But when central planning makes the one decision on how everybody has to go, if it isn’t a good decision, everybody fails.
That’s why we have to fight central planning at every stage.
Sure, it might look like it is working while it eats through all of the money it inherited to start with, but once it is standing alone, its inevitable failure will take too many people down with it.
And all that seed money, everyone’s, is gone.
I don’t see why even people who ANY society’s safety net would assist don’t understand that.
I CAN understand why those who should not be propped up by a safety foundation might pretend not to see it…they, the malingerers and hangers’-on, are the ones who will have to change their ways.
An easier explanation of why ‘central planning’ for an economy does not work:
I know better than the federal government what my needs are, hence, I know better where to spend my money to help myself. And this goes for all consumers. Businesses know better than the federal government what their needs are concerning their businesses, hence, they know better where to spend their money to help themselves. This is true of all businesses. Communities(towns and cities), know better than the federal government what their needs are, hence, they know better where to spend their tax revenues to benefit their communities. States know better than the federal government what their needs are, hence, they know better where to spend their money to help their state’s citizens.
It starts with the smallest sovereignty possible, the individual citizen, who best knows where their money should be spent, and works, ever decreasingly, upwards, to the least knowledgeable of entities, the federal government, as to how best to spend people’s money.
And this doesn’t even touch upon the Constitutionality of several hundreds to thousands of government programs and their spending of our money.
The Constitution, quote:
I don’t see the word “democratic,” “communist” or “socialist” in there anywhere. The Founders knew full well about the problems and yes, dangers inherent with pure democracies. Nor has the word guarantee changed it’s meaning in the time that has elapsed since these words were written and made the law of the land.
DR SANDERS, you made it easyer to understand at least the basics of a complicate area,
it seems that GOVERNMENT doesn’t , and should be the one to realy get it,
OR should be removed at the next election, for failing AMERICA,and lying
as to their ability to do the right thing, and that goes for those who sold them to the PEOPLE; THE elected have swore to OBEY THE CONSTITUTION
and work accordinly, to keep the many phases of governing clean of corruption from those with corrupt minds with intent to load their own pockets using the money that doesn’t belong to them, or becoming BEGGAR TO ACQUIRE MONEY FROM THOSE WHO NEED CONTRACTS AND SETTELMENTS that would otherwise be slowed by uninterested elects official; in other words the people are paying taxes and more to get in the wrong pockets,
and companies are paying the GOVERNMENT FOR BEING LEFT TO KEEP THEIR COMPANIES, AND CLIENTS, INSTEAD OF RECUPARATING THEIR MONEYS TO INCREASE THEIR PRODUCTIVITY AND HIRE MORE EMPLOYEES,
THIS HAS BECOME AN ABUSING SCAM, TO NOW EVEN NOT HIDING IT, BUT ARRANGE GATHERING OF COMPANIES OR UNIONS BOSS TAKING THEIR MEMBERS INTO A FUND RAISING UGE ASSEMBLY TO GET AS MUCH MONEY THEY CAN SUCK OUT OF THE AMERICANS WORKING HARD TO FEED THE FAMILY
the speechs full of lies coming from the one who need the money to pay the faithfull to spread their lies ,be it in MEDIA SOLD TO THEM, OR IN PUBLIC PLACE BEING PAID TO MAKE THOSE LIES LOOK GOOD TO EAT
BY THE PEOPLE,BEING SO CONFUSED THAT THEY ARE READY TO PLAY THEIR GAME and vote carelously,for them incompetents; TO CONTINIUE THEIR JOB IN LEADING A NATION INTO DESPAIR AND DOWN SLOPE OF NO RETURN,
The essential problem is that IT IS OUR MONEY, not their’s. We know how to best spend our money, but the government feels they have a license to spend it as THEY see fit.
What we are seeing with the national debt, deficit and lobbying for increased taxes is end result of politicians giving away goodies in order to stay in power. It won’t end until there are no more goodies to give away (as Thatcher articulated). But they will then start seizing private property in the name of “The Greater Good.”
In order to achieve the goals of wealth redistribution and cronyism, they must have Central Planning by government. And the more powerful it is , the harder it is to stop.
No where in The Constitution does it give them the right to do these things. And because the Roosevelt Administration screwed up the interpretation of the Commerce Clause, we now have unlimited reach by the Federal government.
Snakeeyes, yes, and that would good to be repeated by a GOP CANDIDAT
when they meet with the journalists some asking stupid questions like the FLAKE FACE,
AND THE OTHER ONE SO EAGER TO KNOW ABOUT GAIS POLICY,AS IF IT WAS A GOVERNMENT AFFAIR OF THE MOST IMPORTANCE!!!! STRANGE ARE THEY?
i CAN SEE BACKMAN USING YOUR EXPOSY ON THOSE, OR the HERMANATER CAIN SHOOTING IT TO ONE OF THEM LIBS INCOMPETANTS,
IT IS A GOOD PUNCH LINE
BYE
Dr. Anthony B. Sanders
thank you SR.
WELL RECEIVE
Not to wander OT here… but who the heck are those guys in the picture at the bottom? Because neither of them is Bernanke. I know Ben’s trimmed down his walrus mustache of late.. thank heavens. Watching that thing twitch, along with his nose, during hearings made it tough to concentrate on what he was saying…
And if that’s Krugman to the left, he’s sure done some major altering to himself of late. Eyebrow work, hair coloring and straightening…
Actually both look familiar, but can’t place them. Below are the real culprits… Krugman and Bernanke
MATA, the two faces above ,would have fit perfectly
JOHN STEWART’S VIDEO about the HALPERIN,
ON HIS SHOW,
we will make a collection of LIBS, they all have the same expression,
of a disaster coming soon,
It’s time to send someone with a smile that is genuine, in the WHITE HOUSE,
the AMERICANS WILL BE MORE INCLINE TO SMILE THAN WORRY.