by Karl Denninger, Market Ticker:

Mr. President, you’re a lying ************.

Among other lies the douche-nozzle called “Trump” has said there has been a “boom” in investment under his Presidency.

No, there has not.

That’s net investment — all of it, residential and otherwise — as a percentage of GDP.  Is it “improved” since 2016?  Not to any material degree, no.

IN 2017 and 2018 IT WAS 17.28% and 17.81% respectively.  It was 17.63% in 2015, the last full year of Obama’s Presidency before the election.

In other words NO MATERIAL CHANGE despite the “Yuuuuge Tax Cuts” which allegedly were going to propel investment to new highs.  The truth is that net investment is approximately back to where it was during the trough of the 02/03 tech crash recession.

There has been NO boom in net investment of any sort — it has in fact flat-lined since roughly the last full year of Obama’s Presidency; that claim by Trump is a lie.

Now let’s look at something else, which is far more important — what’s the REAL GDP figure?

The BEA uses what they call a “deflator.”  This is just flat-out lying.  So is everyone on CommunistNoozBullCrap along with the rest of the mainslime media.  Every single one of them knows they’re lying too, including that jackwad the other day who said “central banks had eliminated recessions.”

The truth of this is trivially discernible.  Reduce, for a moment, the economy to just TWO items — one a bushel of corn containing some number of ears (typically 48, give or take a few) and one hundred $1 bills.  That’s all there is; a person can only trade some number of one of those items for some number of the other.  Note that the complexity of the economy is irrelevant; all transactions inevitably boil down to exactly this sort of transaction; that people get in the middle, that there are more choices, etc — doesn’t change the essential character.

What’s the price of an ear of corn?

That depends on many things but in a very simple economy like this it probably boils down to two variables, assuming you’re the one with the money and the other person is the one with the corn: How many ears are left and how hungry are you?

On average, however, it’ll probably take about two of your dollars to buy one ear of corn.  Maybe a bit less when the bushel is full and quite-possibly all of your remaining money when there are only a couple of ears left.

Now let’s assume that I invent this thing called a “printing press” and with it I can instantly double the number of dollars — and the person with the corn cannot distinguish the ones I printed from the ones that already existed.  That is, all the dollars are “fungible”; they spend exactly the same way and are interchangeable without anyone being able to determine which came from where.

Now how much is an ear of corn?  About four dollars, right?

Does the price being four dollars mean there is more corn — more “stuff” to buy?  No.  Does it “stimulate” more economic activity?  No.  It simply changes the price.  I did not back those dollars with anything (like another bushel of corn); I simply wished them into existence.

This is exactly what the government does when it spends in deficit; it does not “stimulate” anything.  It simply changes the price — upward.  Government produces nothing; when it taxes it takes from someone and gives to someone else.  It thus can change the mix of things that are consumed, and thus those which are produced indirectly, but it does not stimulate anything net-on-net because for each thing that it exerts a preference for something else loses.

When you borrow money against an existing thing you already produced that thing cannot be sold until you pay the loan back.  This is not inflationary because the “thing” is withdrawn from the total asset base available for sale (that is, commerce involving that item cannot take place as it’s already pledged in an equal amount of the funds out) until the loan is repaid, in whole or part.  Government issued debt is backed by nothing other than an alleged “promise” that someone will work tomorrow and pay taxes — a bet “on the come” that the people will actually do that and further, that they’ll continue to consent to the existence of said government.  Neither is an asset and neither is assured.

As such any deficit spending — that is, new government debt — is exactly the same as the above example where I invent a printing press and double the number of dollars, with you being unable to discern which of them existed before and which I produced without any backing whatsoever.

Therefore new unbacked debt, that is federal deficit spending — all federal debt is in fact unbacked — must be subtracted from nominal GDP before the percentage of gain is computed because GDP is denominated in dollars but dollars are not a constant.

In other words the formula is:

((New GDP – Old GDP) – (New Debt – Old Debt)) / Old GDP = GDP Change (in decimal)

You can’t argue with this; it’s math.  If you emit more dollars into the economy then nominal GDP expands by exactly that amount even if there is no actual expansion in the production of anything.  To fail to do so and to report said alleged “output” in a non-invariant denominator is fraud.

GDP IS NEGATIVE; last year in real terms it was -2.43%.   In 2017 it was + 1.40%, a short-term blip as a consequence of the tax cuts which had yet to hit the deficit, as the tax year for said change had yet to close and thus not yet been reconciled yet the change in policy (and thus expansion of paychecks via said inflation) had occurred.  In 2018 said deficit spending hit the deficit exactly as expected and we’re back back to negative numbers exactly as we had every single year since 2008.

The largest real GDP expansion we have seen since 2000 was 2.06% in 2006 — just before the crash.

The nominal GDP claimed for that year was nearly 6%!

We have in fact been in a “no more than 2% economy with most years deeply negative” since 2000 and in fact it is much worse than it seems because the population expands about 1% a year and thus on a per-person — that is, per-capita basis — you must subtract about another 1% from all of those numbers to get to economic activity per person.

There has been no recovery since 2008.  We have been in a factual economic recession since and the “recovery” since 2000 was essentially non-existent as well.  Period.  Likewise the “employment” numbers are gamed; they do not count you as “unemployed” if you’re not actively looking for work.  In 2007 there were 78 million people “not in the labor force” and thus not counted.  Last month there were nearly 96 million such people and not one of them counts as being “unemployed”; the employment:population ratio remains two full percent below 2007 levels and four percent below the levels of 2000.

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