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Monday, January 30, 2012

Economic growth measure revision: GUOP (Gross Upper One Percent Product)

A salient quote from CATHERINE RAMPELL in “Growth Accelerates, but U.S. Has Lots of Ground to Make Up” NYT, January 27, 2012

"Corporate success has not translated into big benefits for American workers and consumers so far in this recovery. Today, the nation produces more than it did when the recession began in 2007, but it manages to do so with six million fewer jobs. Companies seem reluctant to use their mounting profits to invest in new workers. “Businesses have been holding much higher levels of cash than they have in past,”

Comment: That’s 6 million less consumers with the remaining experiencing declining real income. No surprise that the engine of the US economy-Consumption is not increasing fast enough to drive an acceptable GDP growth rate of 5-6% compared to the current 2-3%. Failure of banks to lend their obscene level of excess reserves that is retarding investment is no small factor in this anemic growth (slowest recovery out of the last 14), but policy makers seem in denial of the role of the banking system is dragging down the recovery or are scared of bank lobbyists. Time to make the 99% exponentially more scary than bank lobbyists.


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