Now, the measurement of GDP, as it’s called, has many problems inherent in it.
Yes, true.
When are you going to talk about the growth in our well being, Rachel Reeves and not just the growth in the bank balances of some within the UK?
It also doesn’t measure bank balances nor the change in them. It’s the value added, at market prices, within the economy that year. A useful but not complete thing to measure. But when critiquing it it helps to know what it is.
Sorry, old fruit, but I cannot approve of the verbification of “critique”.
Still, it’s wonderful to know that the bloody fool believes he has a wellbeingometer.
Today’s cartoon on Saturday Morning Breakfast Cereal is right in the bullseye.
https://www.smbc-comics.com/index.php?db=comics
When are you going to talk about the growth in our well being, Rachel Reeves and not just the growth in the bank balances of some within the UK?
Yes, when is that retarded-looking tranny going to talk about my wellbeing?
He is a prat but be fair. He is really only expressing the general idea that there are other things worth considering apart from money.
But strictly speaking, KJP, GDP isn’t money. It’s the added value of goods & services. Money is just the metric used. And it’s goods & services consumers benefit from. It’s him that sees it all about money
Spud seems to have a belief in the concept of a Total Minister.
One who is charge of public finances, economic growth, and also religion, environment, reading to children, laughter at weddings, benefits, inequality, arts, wellbeing and interest rates.
There’s a reason almost every country has a Finance Minister with a remit.
I have a bank account that gets a modest monthly injection of cash. Every so often I use it to buy nice things for myself. Just over a year ago I bought a nice thing and said account went from having several thousand pounds in it to having about one pound fifty. Was my wellbeing harmed by the diminished bank account or enhanced by me having the nice thing? Maybe it stayed exactly the same as it all balanced out?
GDP and bank balances must reasonable well correlated though, surely? I can’t see GDP going up while bank accounts are going down.
He is really only expressing the general idea that there are other things worth considering apart from money.
Doesn’t matter. He holds himself out as an economist. The expectation is that an economist will use the terminology of economics correctly when attempting to discuss economics.
I’ve just seen an allusion to Biden as POTATOTUS.
@PiP: I think its POTATUS
GDP and bank balances must reasonable well correlated though, surely? I can’t see GDP going up while bank accounts are going down.
The total deposits across all bank accounts should be unchanged. If the results of production are purchased by consumers, the price paid must end up with the producers, no? So the specific bank accounts of consumers must be lighter. (Complicated of course by most consumers being, at the same time, producers)
Don’t make Spud’s continuing error by only looking at the money. Money’s only the token of value used in commerce. It’s actually irrelevant. Look at what’s happening in the commerce. Where the value added is created & who captures it.
“The total deposits across all bank accounts should be unchanged.”
I’d be prepared to bet there’s more money in bank accounts across the entire banking system today that there was 10 years ago, and so on every 10 years back. Or are you suggesting that 50 years ago when UK GDP was about $200bn there was the same amount of money in bank accounts that there is today when its $3000bn?
GDP is the total cost, not value added. For example, if my neighbour walks his dog, that adds nothing to GDP. if he switches to paying a dog-walker £100 to walk the dog, then GDP goes up by £100. If I then offer to do it for £40, GDP counts that as £40, even though it is obvious that the value of the service exceeds £100 (otherwise my neighbour would not have ever paid that amount).
@Stonyground – “Was my wellbeing harmed by the diminished bank account or enhanced by me having the nice thing?”
It’s impossible to be certain, but very likely enhanced. That’s where value is created – swapping something for something of greater value. It is possible, of course, that in any particular transaction a participant got something of lesser value. This may be through mistake, fraud, or coercion.
@bloke in spain – “The total deposits across all bank accounts should be unchanged.”
That is possible, but (very) undesireable, which is why we no are no longer on the gold standard (or, indeed, use gold directly as money). Total money needs to be able to expand as value is created.
Have you noticed that QE was a deliberate expansion of the money supply?
And, in fact, the BoE deliberately increases the money supply as the economy increases. But that increase in hte amount of money is an act by hte BoE, not a function of expanded GDP.
GDP is the total cost, not value added. For example, if my neighbour walks his dog, that adds nothing to GDP. if he switches to paying a dog-walker £100 to walk the dog, then GDP goes up by £100. If I then offer to do it for £40, GDP counts that as £40, even though it is obvious that the value of the service exceeds £100 (otherwise my neighbour would not have ever paid that amount).
I’d say you need to do an economics course, Charles.
On the particular matter of the dog walking, the value created is the dog walked. The money paid is price & is correct in both cases. As price always is.
To add, Tim has regularly dealt with GDP not always capturing value added. For instance Whatsapp creates a lot of value for its users. But if it shows up on GDP at all it’s a negative number. The cost of providing the service. Ditto Google Search, Google Maps. GDP these days is a POS. But the POS that is government still uses it.
GDP has always been a POS: “When a man marries his housekeeper …” It’s main advantage is that it’s (a) quickly calculated; and (b) somewhat internationally comparable (with the caveats that have been pointed out). There are undoubtedly better measures of activity within an economy, but if they take 6 months to calculate, you can’t use them to find out how your economy performed last month.
And, in fact, the BoE deliberately increases the money supply as the economy increases.
Let’s not presume there’s a connection between the two, eh, Tim? They were targeting 2% more until it ran away from them. For no other reason than government likes stealing from savers to give to debtors. Itself being a major debtor.
As for GDP, a sage former governor of Hong Kong had it right. “If you let them collect economic statistics, they’ll only want to do something with them.”
To return to Charles’ post.
@bloke in spain – “The total deposits across all bank accounts should be unchanged.”
That is possible, but (very) undesireable
It’s hard to believe anyone could be so cretinous. It’s no wonder Labour get elected.
It s very simple book-keeping even the Sage of Ely could understand. A producer sells goods or services to a consumer. So money comes out of the consumer’s bank account & goes in the producer’s bank account. The money has switched from one place to another. There is no more & no less. And the total of all transactions in commerce are the same. There is no money being created. It’s not only possible, it’s inevitable.
There is however value being created. Because each buyer must value what he bought higher than what he paid for it Or he wouldn’t have been party to the transaction. Why we do commerce.
Jim said:
“GDP and bank balances must reasonable well correlated though, surely? I can’t see GDP going up while bank accounts are going down.”
Isn’t GDP closer to bank balances times velocity (the number of times that money passes from one person to another)? So even if total bank balances stay the same, GDP can go up or down as the velocity goes up and down.
If I keep £1,000 in my bank account for the year, GDP from that is zero. If I spend it on something, and the recipient spends it on something, GDP from that is £2,000. But the total bank balance is still only £1,000.
@bloke in spain – “On the particular matter of the dog walking, the value created is the dog walked”
How does that differ from what I said?
– “The money paid is price & is correct in both cases. As price always is.”
A price can be what a supplier is asking, even if they do not receive it. The word for the sum of money that someone actually pays is “cost”.
– “Tim has regularly dealt with GDP not always capturing value added”
GDP never captures value added. It captures total cost.
– “There is no money being created. It’s not only possible, it’s inevitable.”
https://en.wikipedia.org/wiki/Money_supply
@RichardT – “Isn’t GDP closer to bank balances times velocity”
Yes. Remember the famous MV = PQ. The velocity is money is very important.