Who is behind the wheel?
Alan Greenspan said in CNBC news (3:40) very interesting thing:
"The data shows that stock prices are not only a leading indicator of economic activity, they are a major cause of it.
The statistics indicate that 6% of the change in GDP, results from changes in market values of stock and homes."
Thanks to www.zerohedge.com
[Spoiler (click to open)]
Despite obvious stupidity of this claim I would argue that he is the best actor in Obama's theater now.
First of all "changes in market values of stock and homes" in fact appears in GDP and might sum up to "6% of the change in GDP".
Let's assume for fun that 94% is nothing compared to that mystical 6%, which will lead economy out!!! Lets make some calculations.
That 6% of GDP is a major cause of economic activity? WOW. Really. Every patriotic American must go Wall-Street now to save economy. :)
That can pull economy out of depression, seems like increase in 6% of GDP annually should solve every problem!
However "Change in GDP" is not a GDP itself. "Change in GDP" is about 3.2% of GDP in average, and 6% out of 3.2% is just funny 0.19% of GDP.
That 0.19% of GDP is a major cause of economic activity? WOW. Really. Every patriotic American must buy stocks now to save economy. :)
Assume that Greenspan actually mentioned 6% of GDP, not a "change in GDP".
Let me be clear: GDP growth isn't good indicator of prosperity and reasonable economic activity at all. You want prosperity? Greenspan needs just GDP numbers!
Remember "Big Deal" stupidity with FDR orders to rotten wheat and slaughter herds to raise food prices to help economy?
That raised both food prices AND a GDP numbers. And standard of living dropped due to FDR policies.
Who cares now about dramatically reduced standard of living during FDR period? (not even mention war-time)
Even despite of high innovation and invention level when productivity and efficiency in economy increased, government inefficiency wasted it.
Americans got a good chance make same errors and get new Great Deal and survive new Great Depression.