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ECONOMIC GROWTH OR HAPPENSTANCE?

September 1, 2017

ECONOMIC GROWTH OR HAPPENSTANCE?

We are told by the business press in glowing terms that wages are up and consumers are spending more for August, thus stoking demand in the marketplace and setting the stage for a three percent economic growth rate with an increase in the Dow and 156,000 new hires for the preceding month.

What the reports did not tell us is more interesting than what they did tell us, like for instance, credit card debt rose to the highest levels ever (which, instead of an almost imperceptible increase in wages, and subject to usurious interest rates, stoked the demand); the increase in new hires was below that predicted by economists; unemployment inched up one tenth of one percent (back to school for seasonal workers); the percentage of workers who remain out of the workforce since Bush’s Great Recession did not diminish but rather remained stable; prices for gasoline among other inflationary effects cancelled out the miniscule increase of one-tenth of one percent in median wages (which have forty years of “catching-up” to do) and, of course, the fact that the Dow does not measure economic growth but is rather a barometer of how the moneychangers think they can make a buck on the stock exchange via capital gains, enhanced collateral for loans and other forms of leverage etc.

There is real economic growth as defined by GDP and other even more sophisticated analyses and there is economic growth as defined by Wall Street and the politicians. The two are at odds more often than not as reality collides with propaganda. I think we should look behind the numbers and that when we do we will find that the August numbers are a mere blip, and not a big one way or another at that. Equilibria at work. . .

Real economic growth is to be found in the efficiency by which producers of real goods and services perform (perhaps through new automation or other such means of producing more for less), thus increasing profits as a result of such managerial and worker insights and leaving their competitors behind while making their stock more valuable. The moneychangers’ and politicians’ pretenses that their efforts had anything to do with such true economic growth are demonstrably false, as human capital and expertise as well as private money capital (which unlike human and managerial capital, could be efficiently procured elsewhere) are involved in the process of production of goods and services in the real economy.

Such calls from the sidelines from those who profit by the prospects of economic growth, both financially and politically, are irrelevant and post mortem in any event, and their continuing attempts to propagandize the message of true economic growth to fit their selfish ends is reprehensible, as even their hero Adam Smith would agree.

A corporate enterprise or project and its financing are two very different animals. To make for the metaphor, there is a big difference between watching the Indianapolis 500 from the stands with a bet on the winner and actually driving the race cars out where the rubber truly meets the road. All of us, whether financiers, consumers, corporate workers, ecologists, producers or whatever are in the stands and have a stake of varying proportions in who wins and who loses, but the Dow merely measures the finance sector’s expectations, and the pretense that the financial sector is driving in the race is a contrived illusion fostered by Wall Street and their captive business press both print and electronic. They, like the rest of us, are mere bystanders in the race for increased corporate efficiencies and hoped for capital gains to their bets on the race while the rest of us look forward to lower prices due to such enhanced corporate efficiencies in delivery of their goods and services.

So are the August numbers indicative of true economic growth? Perhaps, perhaps not, but in any event, such a snapshot in time is just that, a snapshot, and tells us little to nothing about real economic growth, which occurs on Main Street and not Wall Street, and which is measured not by the Dow but by increased efficiencies in the real economy of production of goods and services, a measure, like the car race, that is not decided after the first or second lap of the race. Time, as our domestic corporations compete with corporate efficiencies both here and abroad, will tell.

Economic growth or happenstance? I think, truth be known, that its place on the spectrum of time is happenstance, but take your pick, because it amounts to much ado about nothing – or very little.       GERALD        E

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