Friday, January 29, 2010

Economy grows at 5.7%: Good news?

(Yahoo Finance)

Not when nearly half the GDP is government spending...not when a one percent increase in government spending as a percent of GDP raises the unemployment rate by approximately .36 of one percent. Shhhh...they don't want you to know that.

Government spending is directly related to weaker economic performance. For example:

  • An article in the Journal of Monetary Economics found: “[T]here is substantial crowding out of private spending by government spending.…[P]ermanent changes in government spending lead to a negative wealth effect.”

  • A study from the Federal Reserve Bank of Dal­las also noted: “[G]rowth in government stunts general economic growth. Increases in govern­ment spending or taxes lead to persistent decreases in the rate of job growth.”

  • An article in the European Journal of Political Economy found: “We find a tendency towards a more robust negative growth effect of large public expenditures.”

  • A study in Public Finance Review reported: “[H]igher total government expenditure, no matter how financed, is associated with a lower growth rate of real per capita gross state product.”

  • An article in the Quarterly Journal of Economics reported: “[T]he ratio of real government con­sumption expenditure to real GDP had a neg­ative association with growth and investment,” and “Growth is inversely related to the share of government consumption in GDP, but insignificantly related to the share of public investment.”

And on and on and on. This is why there's no such thing as a jobless recovery. Government cannot create anything. It doesn't own anything. It only takes from from the wealth of some and gives it to others. Even when it's creating "wealth" from its printing presses, it's really destroying it, except for the very privileged few who receive the wealth before it's had the chance to devalue the money already in circulation. Government destroys. That's all it does. That's all it can do. Perhaps that's why Wall Street yawned at the new economic numbers.