My two posts on Real GDP Growth has Been Negligible Since 1990 and Real Annual Income is Decreasing have been popular in Google Analytics.
Now that I can easily import Excel files to Blogger, I'll make an updated version of my post with data included. Since my original post, official GDP data for 2006 is available. Official GDP statistics for 2007 aren't available yet, so my analysis ends in 2006.
Contrary to official government statistics, the US economy is shrinking at an alarming rate.
The official inflation-adjusted GDP numbers are calculated using the CPI. The CPI is biased and understates the true inflation rate. If you adjust GDP using an unbiased inflation measure, the US economy is shrinking rapidly.
A common myth is "The US economy is dependent on continuous growth to survive!" This is false. The US economy is dependent on continuous money supply growth. Due to biased inflation measures, money supply growth is misreported as economic growth.
Source Data
Here is the raw data that I use as a source for my calculations.
Raw GDP
I use this page as my source for GDP data. That page has different numbers that the official US government page, but they're approximately the same.
I use GDP not adjusted for inflation. I'm going to adjust for inflation correctly, instead of using the CPI.
The GDP value is in billions of dollars. The population is in thousands. "Per cap GDP" is GDP divided by Population.
| Year | GDP ($B) | Pop (k) | Per Cap GDP |
| 1990 | 5803 | 250181 | 23195 |
| 1991 | 5996 | 253530 | 23650 |
| 1992 | 6338 | 256922 | 24668 |
| 1993 | 6657 | 260282 | 25578 |
| 1994 | 7072 | 263455 | 26844 |
| 1995 | 7398 | 266588 | 27749 |
| 1996 | 7817 | 269714 | 28982 |
| 1997 | 8304 | 272958 | 30424 |
| 1998 | 8747 | 276154 | 31674 |
| 1999 | 9268 | 279328 | 33181 |
| 2000 | 9817 | 282433 | 34759 |
| 2001 | 10128 | 285372 | 35490 |
| 2002 | 10470 | 288215 | 36326 |
| 2003 | 10961 | 290964 | 37671 |
| 2004 | 11686 | 293644 | 39796 |
| 2005 | 12434 | 296373 | 41954 |
| 2006 | 13195 | 299199 | 44100 |
Median Annual Income
In addition to GDP, I'm going to look at median annual income. I use this government report of median income.
I use median income not adjusted for inflation.
| Year | Households | Med Inc |
| 1990 | 94312 | 29943 |
| 1991 | 95669 | 30126 |
| 1992 | 96426 | 30636 |
| 1993 | 97107 | 31241 |
| 1994 | 98990 | 32264 |
| 1995 | 99627 | 34076 |
| 1996 | 101018 | 35492 |
| 1997 | 102528 | 37005 |
| 1998 | 103874 | 38885 |
| 1999 | 106434 | 40696 |
| 2000 | 108209 | 41990 |
| 2001 | 109297 | 42228 |
| 2002 | 111278 | 42409 |
| 2003 | 112000 | 43318 |
| 2004 | 113343 | 44334 |
| 2005 | 114384 | 46326 |
| 2006 | 116011 | 48201 |
M2
Instead of using the CPI as my index of inflation, I use M2. The Federal Reserve publishes M2 statistics.
| Year | Raw M2 |
| 1990-Jan. | 3176.6 |
| 1991-Jan. | 3296 |
| 1992-Jan. | 3389.7 |
| 1993-Jan. | 3431.5 |
| 1994-Jan. | 3489.6 |
| 1995-Jan. | 3508.7 |
| 1996-Jan. | 3665 |
| 1997-Jan. | 3842.5 |
| 1998-Jan. | 4068.2 |
| 1999-Jan. | 4416.9 |
| 2000-Jan. | 4680.5 |
| 2001-Jan. | 4981.6 |
| 2002-Jan. | 5458.5 |
| 2003-Jan. | 5798.2 |
| 2004-Jan. | 6058.6 |
| 2005-Jan. | 6408.4 |
| 2006-Jan. | 6705.8 |
| 2007-Jan. | 7056.3 |
| 2008-Jan. | 7484.4 |
M2 is the broadest money supply measure still published by the Federal Reserve. Compare to M3, M2 excludes accounts over $100,000 and dollars held outside the USA.
M3
The Federal Reserve ceased publishing M3 in 2006, so I can't use M3. Superficially, the Federal Reserve says it stopped publishing M3 because the data was too hard to collect. That reason is invalid. Instead of publishing M3 weekly, the Federal Reserve could have published M3 quarterly or annually.
The Federal Reserve stopped publishing M3 because they wanted to cover up how bad inflation really is.
When the Federal Reserve stopped publishing M3, it was growing at a rate of 15%/year. Some people have reconstructed M3 from other available statistics.
Even though M3 is no longer available, there's another unbiased measure of inflation.
Gold
The increase in the price of gold should track the growth of M3.
Unlike Federal Reserve Points, gold is real money. The purchasing power of an ounce of gold has remained mostly constant for 100+ years. Some people say the purchasing power of gold has been constant for thousands of years. I don't know any reliable source for the price of a loaf of bread 1000 years ago.
For example, the price of a Model T car, quoted in gold, is approximately the same as the price of a car in the present. A modern car has more features than a Model T, but the total price is the same. When comparing goods available now to goods available 100 years ago, the price quoted in gold is usually similar. Of course, no amount of gold would have bought you a computer or cellular phone 100 years ago.
The gold price is the least biased measure of inflation.
I used these three sources for the price of gold.
The price is the price on January 1 of that year.
| Year | Price |
| 1990 | $386.20 |
| 1991 | $353.15 |
| 1992 | $333.00 |
| 1993 | $391.75 |
| 1994 | $383.25 |
| 1995 | $387.00 |
| 1996 | $369.00 |
| 1997 | $287.05 |
| 1998 | $288.70 |
| 1999 | $290.25 |
| 2000 | $279.11 |
| 2001 | $271.04 |
| 2002 | $309.73 |
| 2003 | $363.38 |
| 2004 | $409.72 |
| 2005 | $444.74 |
| 2006 | $530.00 |
| 2007 | $639.75 |
| 2008 | $846.75 |
Gold's price has risen substantially so far in 2008. Gold is currently over $1000/ounce.
There has been extensive manipulation of the gold price. Central banks have nearly exhausted their gold reserves. They are losing their ability to suppress the gold price.
The bad guys really want gold to be discredited as an investment. I am seriously considering the possibility that physical gold is a better investment than stocks! Even though corporations receive massive government subsidies, there also is a massive amount of fraud and waste. Corporate management is more concerned with lining their pockets than creating value for shareholders.
Some people are saying "gold is experiencing an asset bubble". The price of gold/$ is skyrocketing. Compared to other commodities, the price of gold is relatively constant. The price of gold/silver or gold/oil is mostly unchanged. It is inaccurate to say "the price of gold is skyrocketing". It is more accurate to say "the value of the dollar is crashing".
If you believe "gold is money", then the price of gold is the least biased measure of inflation.
Calculations
Here, I share the result of my calculations.
Per Capita M2
Using M2 as my measure of inflation is somewhat inaccurate. If the population increases by 1%, then 1% more money can be printed without causing inflation. Of course, the financial industry still prints this new money and recognizes seignorage profit. If the population grows and the money supply remains constant, then people would naturally experience deflation. This would be an extra incentive to savers. Instead, this benefit is stolen by the financial industry.
Per capita M2 is a more honest measure of price inflation than M2.
| Year | Raw M2 ($B) | Pop (k) | Per Cap M2 |
| 1990-Jan. | 3177 | 250181 | 12697 |
| 1991-Jan. | 3296 | 253530 | 13000 |
| 1992-Jan. | 3390 | 256922 | 13193 |
| 1993-Jan. | 3432 | 260282 | 13184 |
| 1994-Jan. | 3490 | 263455 | 13246 |
| 1995-Jan. | 3509 | 266588 | 13162 |
| 1996-Jan. | 3665 | 269714 | 13588 |
| 1997-Jan. | 3843 | 272958 | 14077 |
| 1998-Jan. | 4068 | 276154 | 14732 |
| 1999-Jan. | 4417 | 279328 | 15813 |
| 2000-Jan. | 4681 | 282433 | 16572 |
| 2001-Jan. | 4982 | 285372 | 17457 |
| 2002-Jan. | 5459 | 288215 | 18939 |
| 2003-Jan. | 5798 | 290964 | 19928 |
| 2004-Jan. | 6059 | 293644 | 20632 |
| 2005-Jan. | 6408 | 296373 | 21623 |
| 2006-Jan. | 6706 | 299199 | 22413 |
Inflation Adjusted GDP
Now, I'm going to calculate inflation adjusted GDP. I'm going to adjust for inflation correctly, instead of using the CPI.
Per capita GDP and per capita M2 are copied from my previous tables. "GDP/M2" is my index for how much the US economy is growing or shrinking. "% gain" is the % gain relative to the previous year. "Cum % gain" is the cumulative percentage gain from that year-1 to 2006. For example, in the row for the year 2000, the "Cum % gain" is -6.23%. This means that the US economy shrunk by 6.23% from 1999 to 2006. "Ann %" is the "Cum % gain" converted to an annualized percentage.
| Year | Per Cap GDP | Per Cap M2 | GDP/M2 | % gain | Cum % gain | Ann % |
| 1990 | 23195 | 12697 | 1.827 | |||
| 1991 | 23650 | 13000 | 1.819 | -0.42% | 7.71% | 0.465% |
| 1992 | 24668 | 13193 | 1.870 | 2.78% | 8.16% | 0.524% |
| 1993 | 25578 | 13184 | 1.940 | 3.77% | 5.24% | 0.365% |
| 1994 | 26844 | 13246 | 2.027 | 4.46% | 1.42% | 0.108% |
| 1995 | 27749 | 13162 | 2.108 | 4.03% | -2.91% | -0.246% |
| 1996 | 28982 | 13588 | 2.133 | 1.16% | -6.67% | -0.626% |
| 1997 | 30424 | 14077 | 2.161 | 1.33% | -7.74% | -0.803% |
| 1998 | 31674 | 14732 | 2.150 | -0.52% | -8.96% | -1.037% |
| 1999 | 33181 | 15813 | 2.098 | -2.40% | -8.48% | -1.102% |
| 2000 | 34759 | 16572 | 2.097 | -0.05% | -6.23% | -0.915% |
| 2001 | 35490 | 17457 | 2.033 | -3.07% | -6.19% | -1.059% |
| 2002 | 36326 | 18939 | 1.918 | -5.66% | -3.22% | -0.652% |
| 2003 | 37671 | 19928 | 1.890 | -1.44% | 2.59% | 0.640% |
| 2004 | 39796 | 20632 | 1.929 | 2.03% | 4.09% | 1.344% |
| 2005 | 41954 | 21623 | 1.940 | 0.59% | 2.01% | 1.002% |
| 2006 | 44100 | 22413 | 1.968 | 1.41% | 1.41% | 1.411% |
The data in this table is really disturbing. From 1998-2006, the US economy was shrinking at an annualized rate of 1.1%. The cumulative growth from 1990 to 2006 was less than 0.5% per year.
If you use M3 instead of M2, the results are really depressing. When you use gold as your inflation index, the results are also depressing.
This table has the same format as the previous table. "GDP/Gold" is the per-capita GDP in ounces of gold. "% gain" is the 1 year gain in the size of the economy. "Cum % gain" is the cumulative gain/loss for the time period. "Ann %" is "Cum % gain" converted to an annualized value.
| Year | Per Cap GDP | Gold | GDP/Gold | % gain | Cum % gain | Ann % |
| 1990 | 23195 | 386 | 60 | |||
| 1991 | 23650 | 353 | 67 | 11.50% | 38.54% | 2.058% |
| 1992 | 24668 | 333 | 74 | 10.62% | 24.25% | 1.458% |
| 1993 | 25578 | 392 | 65 | -11.86% | 12.32% | 0.834% |
| 1994 | 26844 | 383 | 70 | 7.28% | 27.44% | 1.883% |
| 1995 | 27749 | 387 | 72 | 2.37% | 18.79% | 1.446% |
| 1996 | 28982 | 369 | 79 | 9.54% | 16.04% | 1.362% |
| 1997 | 30424 | 287 | 106 | 34.94% | 5.94% | 0.579% |
| 1998 | 31674 | 289 | 110 | 3.51% | -21.49% | -2.653% |
| 1999 | 33181 | 290 | 114 | 4.20% | -24.16% | -3.398% |
| 2000 | 34759 | 279 | 125 | 8.94% | -27.21% | -4.436% |
| 2001 | 35490 | 271 | 131 | 5.14% | -33.19% | -6.500% |
| 2002 | 36326 | 310 | 117 | -10.43% | -36.45% | -8.669% |
| 2003 | 37671 | 363 | 104 | -11.61% | -29.05% | -8.223% |
| 2004 | 39796 | 410 | 97 | -6.31% | -19.74% | -7.067% |
| 2005 | 41954 | 445 | 94 | -2.88% | -14.33% | -7.444% |
| 2006 | 44100 | 530 | 83 | -11.79% | -11.79% | -11.795% |
There has been substantial manipulation of the gold price. Even so, the conclusions are surprising.
If you use gold as the index of inflation, the US economy has been in severe recession/depression every year since 2001. The US economy has shrunk a total of 36% in that time! The US economy is shrinking at an annualized rate of more than 8% per year!
This chart only goes to 2006! I didn't include the substantial run-up in the price of gold in 2006, 2007, and so far in 2008! If you extend this chart to the present, the US economy is in a severe depression!
Median Annual Income
I perform the same calculation for median annual income.
"Med Inc" is the median annual income, copied from the above table. I again use per capita M2 as my inflation index. "Inc/M2" is an index measuring M2-adjusted median income. "% gain", "Cum % gain" and "Ann %" are the same as in the above tables.
| Year | Med Inc | Per Cap M2 | Inc/M2 | % gain | Cum % gain | Ann % |
| 1990 | 29943 | 12697 | 2.358 | |||
| 1991 | 30126 | 13000 | 2.317 | -1.74% | -8.80% | -0.57% |
| 1992 | 30636 | 13193 | 2.322 | 0.20% | -7.19% | -0.50% |
| 1993 | 31241 | 13184 | 2.37 | 2.05% | -7.38% | -0.55% |
| 1994 | 32264 | 13246 | 2.436 | 2.79% | -9.24% | -0.74% |
| 1995 | 34076 | 13162 | 2.589 | 6.29% | -11.71% | -1.03% |
| 1996 | 35492 | 13588 | 2.612 | 0.88% | -16.93% | -1.67% |
| 1997 | 37005 | 14077 | 2.629 | 0.64% | -17.66% | -1.92% |
| 1998 | 38885 | 14732 | 2.64 | 0.41% | -18.19% | -2.21% |
| 1999 | 40696 | 15813 | 2.574 | -2.50% | -18.52% | -2.53% |
| 2000 | 41990 | 16572 | 2.534 | -1.55% | -16.44% | -2.53% |
| 2001 | 42228 | 17457 | 2.419 | -4.53% | -15.12% | -2.70% |
| 2002 | 42409 | 18939 | 2.239 | -7.43% | -11.10% | -2.33% |
| 2003 | 43318 | 19928 | 2.174 | -2.92% | -3.96% | -1.00% |
| 2004 | 44334 | 20632 | 2.149 | -1.15% | -1.06% | -0.36% |
| 2005 | 46326 | 21623 | 2.142 | -0.29% | 0.09% | 0.04% |
| 2006 | 48201 | 22413 | 2.151 | 0.38% | 0.38% | 0.38% |
If you use M2 as your index of inflation, median annual income has decreased 18% since 1999, an annualized decline of 2.5%/year. If you go back to 1990, the decline is at a rate of 0.57%/year.
Notice that "median income" has fared worse than "total GDP". This reflects the increasing disparity of wealth in the USA. The median income reflects the average person more than the mean income or total GDP.
Here's the most depressing calculation. This is median income adjusted for inflation using the price of gold.
In this table, "Inc/Gold" is the median annual income in ounces of gold. "% gain", "Cum % gain" and "Ann %" are the same as in the above tables.
| Year | Med Inc | Gold | Inc/Gold | % gain | Cum % gain | Ann % |
| 1990 | 29943 | 386 | 78 | |||
| 1991 | 30126 | 353 | 85 | 10.03% | 17.30% | 1.002% |
| 1992 | 30636 | 333 | 92 | 7.85% | 6.61% | 0.428% |
| 1993 | 31241 | 392 | 80 | -13.32% | -1.15% | -0.082% |
| 1994 | 32264 | 383 | 84 | 5.57% | 14.04% | 1.016% |
| 1995 | 34076 | 387 | 88 | 4.59% | 8.03% | 0.646% |
| 1996 | 35492 | 369 | 96 | 9.24% | 3.29% | 0.294% |
| 1997 | 37005 | 287 | 129 | 34.03% | -5.45% | -0.559% |
| 1998 | 38885 | 289 | 135 | 4.48% | -29.45% | -3.802% |
| 1999 | 40696 | 290 | 140 | 4.10% | -32.48% | -4.790% |
| 2000 | 41990 | 279 | 150 | 7.30% | -35.14% | -5.997% |
| 2001 | 42228 | 271 | 156 | 3.56% | -39.55% | -8.046% |
| 2002 | 42409 | 310 | 137 | -12.12% | -41.63% | -10.207% |
| 2003 | 43318 | 363 | 119 | -12.94% | -33.58% | -9.723% |
| 2004 | 44334 | 410 | 108 | -9.23% | -23.71% | -8.626% |
| 2005 | 46326 | 445 | 104 | -3.73% | -15.95% | -8.322% |
| 2006 | 48201 | 530 | 91 | -12.69% | -12.69% | -12.690% |
From 2001-2006, the median income has declined by 41%! This is an annualized rate of decline of 10%/year!
If you go back to the 1990s, the results aren't as bad. In the 1990s, the world's central banks were selling off their gold supplies to manipulate the price of gold downward. Recently, they have nearly exhausted their gold reserves. They are no longer able to manipulate the gold price as much.
There are price variations in any given year. My analysis covers several years. Over that time, any short-term fluctuations should be smoothed out.
Summary
Contrary to official government reports, the US economy is in really bad shape. All my data comes from official sources. With just a little independent thinking, you can manipulate government data to tell the true story.
Government policymakers/terrorists use the CPI as their measure of inflation. The CPI is biased and severely understates inflation. Relying on this corrupt statistic, they see an unfairly optimistic picture of the US economy.
I only performed this calculation for the US economy. Many of my readers are located outside the USA. I suspect a similar calculation in other countries would show a similar result. The economy in Canada, the UK, the EU, and Australia is probably just as bad.
If you use M2 as your index of inflation, the US economy is barely growing and median annual income is slightly decreasing. If you use the price of gold as your index of inflation, the US economy is in a severe depression.
The results for gold-adjusted inflation are particularly depressing! I didn't even include the huge run-up in the price of gold from January 1, 2006 to the present! The price of gold has nearly doubled since January 1, 2006! If you correct for that, the picture of the US economy is truly bleak.
No comments:
Post a Comment