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dgul

Just how does the economy work?

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So, we're doing just great.

http://www.bbc.co.uk/news/business-40726833

Economic growth is edging ever higher.  Now, it might not be that great, but it is higher, and has been higher every quarter for the last 4 years.  Yea!

 

But the 'growth' is all in retail and services.  These have 'more than offset' reductions in manufacturing and construction.  'Motion picture activities' grew 8% (just 'watching films', nothing profound).

Is there any way in which this economy based on buying stuff (made by people elsewhere) and paying each other to have cups of coffee and watching films is an actual economy?  Is there any way the media could ever think about what is going on rather than just regurgitate the spiel from the ones that don't want us to think about it too much?

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I've just been reading some info 
https://www.ons.gov.uk/economy/nationalaccounts/satelliteaccounts/bulletins/consumertrends/quarter1jantomar2017
 

Table 1: Main positive contributions to overall household final consumption expenditure growth, chained volume measure (CVM) seasonal adjustment (SA), 4 digit classification of individual consumption by purpose (COICOP), UK, Quarter 1 (Jan to Mar) 2017

COICOP Description Contribution to growth (%)          
07.1.1 Motor cars 0.2    
12.5.1 Life insurance 0.1    
04.2.1 Imputed rental of owner occupiers 0.1    

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Manufacturing goods is not a large part of any developed economy as far as I know. Most economic activity is in services and there's no reason for that to be seen as a bad thing. All it means is that we've become a lot more efficient and making stuff (eg look at how few people it takes to grow food now vs even 40 years ago) and can now spend more time making each other cups or coffee (or selling life insurance or whatever).

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14 minutes ago, dgul said:

So, we're doing just great.

http://www.bbc.co.uk/news/business-40726833

Economic growth is edging ever higher.  Now, it might not be that great, but it is higher, and has been higher every quarter for the last 4 years.  Yea!

 

But the 'growth' is all in retail and services.  These have 'more than offset' reductions in manufacturing and construction.  'Motion picture activities' grew 8% (just 'watching films', nothing profound).

Is there any way in which this economy based on buying stuff (made by people elsewhere) and paying each other to have cups of coffee and watching films is an actual economy?  Is there any way the media could ever think about what is going on rather than just regurgitate the spiel from the ones that don't want us to think about it too much?

Even Zimbabwe manages positive growth

 

Image result for chart of zimbabwe growth

.

https://tradingeconomics.com/zimbabwe/gdp

Edited by twocents

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GDP per capita, REAL employment levels(ie the proportion of the population that is actually working full-time) and spending power figures are what count for the way things feel. None of this other crap counts. I suspect these have been on a downward curve in the UK since the early 2000s.

Plus there's the elephant in the room of borrowing to pay benefits to prop up the GDP.

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23 minutes ago, dgul said:

So, we're doing just great.

http://www.bbc.co.uk/news/business-40726833

Economic growth is edging ever higher.  Now, it might not be that great, but it is higher, and has been higher every quarter for the last 4 years.  Yea!

 

But the 'growth' is all in retail and services.  These have 'more than offset' reductions in manufacturing and construction.  'Motion picture activities' grew 8% (just 'watching films', nothing profound).

Is there any way in which this economy based on buying stuff (made by people elsewhere) and paying each other to have cups of coffee and watching films is an actual economy?  Is there any way the media could ever think about what is going on rather than just regurgitate the spiel from the ones that don't want us to think about it too much?

0.3%? I think it can be explained purely by increased government spending and massaging the GDP deflator (lying about inflation).

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1 hour ago, TheBlueCat said:

Manufacturing goods is not a large part of any developed economy as far as I know. Most economic activity is in services and there's no reason for that to be seen as a bad thing. All it means is that we've become a lot more efficient and making stuff (eg look at how few people it takes to grow food now vs even 40 years ago) and can now spend more time making each other cups or coffee (or selling life insurance or whatever).

It wanted to put something about this in but it was already tldr, so thought it was best for the discussion.

Productivity in the UK has only been going down in recent years (a specific problem highlighted by the recent reports out of the BoE), and the £ has gone down against most countries that we import from.  Yet GDP keeps on expanding.

I think it was easy to see how economies worked in the olden days, where each country was pretty much bounded within its own borders.  Sure there was manufacturing, but services were just as, if not more, important.  So the shoemaker made shoes for the baker, who sold bread to the teacher, who taught the children of the butcher, who had his roof repaired by the builder, who read books by the author, etc, etc.  But we're now living in a world where all that is still going on, and more (because production of stuff is cheaper (in terms of human labour)), but we've also now got significant contributions from international sources, both stuff (shoes, dvd players, cars) and services (including things like movies which are predominantly made overseas) and the balance of payments suggests that we don't sell enough of goods and services back to these people to even it all out.  Yet the economy keeps on getting bigger.  There doesn't seem to be any balancing force actually allowing this to happen, at least in the longer term (ie, imbalances can occur for short periods of time -- and 'economic short periods of time' can keep going for longer than you'd imagine).

My guess is that it is our own 'petrodollar' equivalent, where we import things (goods and services) from overseas and happily consume them, increasing GDP, and swap for a mix of assets and debt, which in a low interest rate environment just hang around doing nothing.  I'm not actually even particularly worried about what happens to these debts and assets if the economy turns (as they can all be made more bearable through central actions), but I do see a reason to worry about who'll fund the next lot of asset sales and debt when the economy turns, which itself would be a drag on the economy, taking us all down with it.

Still, the sun is shining, so I think I'll go and make some hay.

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I always liked the Eastenders (TV) economy. Money just kept going round and round, the market, the launderette, the cafe etc, pub etc 

This only worked so long as

a) If someone went 'up town' to buy a new pair of trainers, an outsider needed to visit to buy some that from the market and

B) No one ever pays tax - or if they do, it needs to be offset by someone receiving benefits or the money eventually runs out.

But this was 20 years ago - I would assume they have been buggered like the rest of us by now.

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2 hours ago, TheBlueCat said:

Manufacturing goods is not a large part of any developed economy as far as I know. Most economic activity is in services and there's no reason for that to be seen as a bad thing. All it means is that we've become a lot more efficient and making stuff (eg look at how few people it takes to grow food now vs even 40 years ago) and can now spend more time making each other cups or coffee (or selling life insurance or whatever).

Doesn't this fall into the broken window fallacy...why don't we all just make each other more cups of coffee then we'll be richer? If I make you a cup of coffee and you make me a vegan hot dog in a sourdough artisan bun aren't we just recycling money, not actually becoming a wealthier?

I assumed the current state of things, while printing a fuck ton money and debt. 

Edited by gibbon

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If debt is rising almost exponentially and growth is just crawling along. Then all that debt isn't being used very productively. The underlying health of the patient is in question. 

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2 hours ago, gibbon said:

Doesn't this fall into the broken window fallacy...why don't we all just make each other more cups of coffee then we'll be richer? If I make you a cup of coffee and you make me a vegan hot dog in a sourdough artisan bun aren't we just recycling money, not actually becoming a wealthier?

I assumed the current state of things, while printing a fuck ton money and debt. 

No, I don't think so other than in the hypothetical situation that the only economic activity at all is coffee selling. In the real economy Starbucks sells me coffee and I sell   them, say, banking services. Comparative advantage says we both profit from that. Standing back from the whole thing, what does actual economic growth consist of? In the past it was maybe about having enough to eat and buying your family's first fridge. These days, in the developed world at least, it's far more about the quality (in the broadest sense) of the good and services we consume very little of which comes down to more manufacturering of physical goods, just better designs and processes.

Separately, is the UK economy fucked, yeah, probably!

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3 minutes ago, Green Devil said:

The growth can be explained simply by the fact that we are importing 250k gimmigrants per quarter. Without that it would've below 0% and a fall.

Would be interesting to see per capita figures a bit more. If mass immigration was about shoring up pensions, it has failed. It has not been worth it.

A lower GDP and thus expectations should not be the end of the world.

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9 hours ago, swissy_fit said:

GDP per capita, REAL employment levels(ie the proportion of the population that is actually working full-time) and spending power figures are what count for the way things feel. None of this other crap counts. I suspect these have been on a downward curve in the UK since the early 2000s.

Plus there's the elephant in the room of borrowing to pay benefits to prop up the GDP.

The UK has continually increasing gdp but a relentless decline in living standards with real employment levels a factor along with entire household incomes being needed to buy a home when one income used to suffice and new homes already the tiniest in europe and most expensive in the world and getting tinier and tinier and more expensive with extreme levels of congestion plus severe overcrowding in some localities and then there's the general infrastructure increasingly unable to cope.  Police with machine guns in the shopping centres and concrete blocks fortifying the high streets.

Gdp is up a bit - so what.

 

Edited by twocents

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Since the nineties recession and the breaking of, pretty much, the last link between real saving and investment, by demutualising the building societies, I'm pretty sure it's been magic money tree all the way ever since.

Edited by SNACR

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1 hour ago, SNACR said:

Since the nineties recession and the breaking of, pretty much, the last link between real saving and investment, by demutualising the building societies, I'm pretty sure it's been magic money tree all the way ever since.

I know you've made some odd claims about our perception of reality, but it does seem that in recent years there has been no restraint, no consequences and no resource limitations.

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