GDP Insights
Evaluating Economic Trends That May Effect Your Business
and Wealth Preservation
Basic Economic Equation for Growth in the EconomyC + I + G + (E - I) = GDP
Consumption + Investment + Government Spending +
(Exports - Imports) = Gross Domestic Product
GDP Since 1973Despite Other Recessions, the only Major Contraction
was Evident During The Great Recession of 2008/2009
GDP THEN AND NOW - 38Yr Span
1973 - 1974
GDP was $1.4 Trillion
Consumption $876.5 - 61%Investment $257.6 - 18%Government $288.8 - 20%Net Exports $ 9.0 - 1%
2010 - 2011
GDP is now $14.7 Trillion
Consumption $10,417 - 71%Investment $ 1,818 - 12%Government $ 3,020 - 20%Net Exports ($ 560) - (3%)
Government expenditures have generally been at a consistent 19-20% level throughout the 37-years, but fell to 17.5% during the Clinton's GDP Surplus years.
Components of GDP At-A-Glance
Percent of Total GDP
Reasons For Change
• The U.S. has become a Debtor Nation and has consumed more than we earn, accounting for the 10 point increase.
• Private Investment rises and falls with GDP, but lost 6 points as compared to 1973/74 Recession.
• Imports have consistently been higher than Exports because of our thirst for cheaper goods.
• U.S. Jobs have contracted simply because Business sought cheap labor overseas to earn record profits for investors.
The Booming Rise of Corporate Profits
Recessions Clearly Affect Business Results and are a Leading Indicator for the Next Recession
LIMITED IMPACT ON GDPBusiness Continues to Earn Profits Despite Negative
Trends
• Consumers are restricting their spending and savings have increased dramatically since The Great Recession.
• Consumer and Business Confidence Levels in the Economy have been at the lowest levels in their history, although now slowly improving.
• Businesses are finding ways to do more with less, and are hiring Temporary workers to meet any increase in demand, rather than create permanent jobs.
• Unemployment continues to remain at high levels during the slow economic recovery
What is the Task Ahead for U.S.
The Tough Climb Back to Full Employment
The U.S. Dilemma - More DebtBush Years - Two Wars
& Tax ReductionsObama Years - Health Care & Financial Bail-
Outs
WHAT PARTY IS AT FAULT?
Cause and Effect• Banks Sub-Prime Loans
& Relaxed Lending Stds
• Bursting of the Housing Bubble, Bank Insolvency
• Central Banks flood Money Supply/Bailouts
• Repeal of Glass-Steagall Act caused Financial Institutions' Price Wars
* Consumers upgrade Housing and Refinance Mortgages
* Damaged Invest Confidence & impact on Global Markets
* Debt to GDP Ratios rise dramatically worldwide
* Sale of High Risk, Complex Mtg-related Products under relaxed credit standards
Golden Years - The Last Government Surplus
Clinton Years - The Beginning of the Rise Then Slowdown
Getting Back to a Balanced Budget
• It is not about Government Cutbacks Everywhere
• It is about eliminating Government Waste
• Tax Reductions are at an all-time low; fair tax is needed
• Incentives are needed for the "I" in Investment
• Where does it come from - - - Stay Tuned!