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It appears that the U.S. economy may finally be dragging itself out of the economic doldrums. At least, that is what the third-quarter Gross Domestic Product indicates. The GDP showed that the U.S. economy grew at a 3.5% annual pace in the third quarter, snapping a four-quarter contraction streak. The growth is attributed to the massive government stimulus, which led to higher consumer spending. In addition, a reduction in inventories and robust government spending helped spur growth in the third quarter. But even excluding the influence of auto sales, production and inventories, the economy grew 1.9 percent last quarter.
At first glance, it appears that the idea of spending our way out of a recession is working, though I get a bit concerned when we feel all we have to rely on this plan to stimulate the economy. Yes, it has worked thus far, but will it continue to work?
Early indications are that investors are reacting positively to this news. Nevertheless, I would rather see sustained growth into the fourth quarter before declaring the massive government spending a success and the recovery in full swing.
However, there are reasons to be excited about the GDP in the fourth quarter. First, it comes after the positive third quarter GDP, which is much better than a repeat of the first quarter when the economy shrank 6.4%. Moreover, with the Holiday shopping season on the horizon, we could see consumer spending increase yet again. If this trend can continue, then we could see the GDP continue to push higher.
That said, I don't think there are any more government stimulus packages on the horizon, so there may not be as much money in some Americans' pockets. The upside of trying to spend your way out of a recession is that there isn't an unending supply of money to spend, right?
I'm going to sit back and enjoy the ride higher today, but let's not be surprised if this "recovery" hits a brick wall. Trust me, I am not rooting for this to happen, let's just not be surprised if it does.
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Reader Comments (Page 1 of 1)
10-29-2009 @ 1:48PM
Iridium said...
The government pumped three times the typical GDP of the United States through the financial system this year to the tune of 20-30 trillion dollars in guaranteed loans.
That is why the second quarter GDP almost became positive and the 3rd quarter is positive. However it is not real growth.
THE GOVERNMENT CAN NOT GROW THE ECONOMY THROUGH SPENDING BECAUSE THE GOVERNMENT CAN NOT CREATE ANYTHING OF VALUE!!!
Any growth paid for by the government must come from taxation or printing new money. ALL THEY HAVE BEEN DOING IS PRINTING NEW MONEY!!!
3.5% growth doesn't mean a thing when you have higher inflation because of it. Real inflation over the past two years during the recession has been over 15%. Food and energy have surged 75% and 100% in cost from the 10 year average.
It is amazing that the GDP number came in right along the estimates analysts have been saying from the spring. I wonder if the government manipulated that number at all???
10-29-2009 @ 2:42PM
Reality Hurts said...
@Iridium & mikedudical
I hate to break this to you two anarchists, but a recession ends when the GDP returns to growth... PERIOD, it is likely that next quarter may be a little worse, but almost ALL economists believe that this is for real and there is nothing that all you anti-Obama anarchists can say to make it false.
The way you get out of a recession is to spend money (the public can't do it because they are losing jobs, so the government makes up the difference) and return the country to growth, when the country returns to growth, jobs will return, when jobs return, the federal spending can slowly be pulled and paid back over the next many years to allow the economy to go by itself again, this has been done by both Democrats and Republicans over the last century.
Bush did it during the 2001 and 2008/09 recessions and Obama did it during the 2009 recession. You can not just let the economy collapse you idiots, you have to do SOMETHING about it to stop the downward spiral. If it was not for the spending by Bush and Obama, we may be in a depression right now.
The deficit comes after the economy, every economist says that. With 2 thirds of the world running a deficit, there is even alot of thought and studies that a deficit on the federal level may no longer matter.
The government did what they had to do, and it just ANGERS to the anti-government tools that it is working...
11-03-2009 @ 12:09PM
Angrywoodchuck said...
Unbelievable.
I get such a kick out of people who think government spending is the answer. Spending what? Government doesn't have any money.
They spend tax payer money (or print money which just leads to inflation). To get the money you want them to spend they have to tax us. When they run out they raise taxes. Raising taxes takes money that we could SPEND on what we want and transfers it to the government for them to spend with LESS efficiency on what THEY want to spend it on.
So if the government takes our money to "invest" it in factories or whatever else, with what money is anyone going to buy what that factory produces? We have less money because the government took it to invest in whatever. The more they take, the less we have to spend.
It is precisely the consumer BUYING a product or service that increases demand for that product or service that increases output of it that creates jobs to provide more of it that adds payroll for new employees who in turn spend their new incomes, that creates more demand for products and so on.
12-03-2009 @ 9:33AM
cobracarg said...
Its funny to see how these people that commented before me got all their information on the computer, and have not bothered to take a single economics class...
"THE GOVERNMENT CAN NOT GROW THE ECONOMY THROUGH SPENDING"
YOU ARE WRONG, whoever said that.
Study the Great Depression, where the Government spent massive amounts to create new roads, shelter etc... i mean massively spending... spending way beyond their GDP.... if we compare real GDP from the 1930s and 2009 and also compare the Real spending of the 1930s and 2009, you will see that we have barely spent anything compared to the amounts spent in the 1930s.
when you compare these figures, compare spending to GDP and figure out the percentage of spending compared to GDP... you will be shocked on how little we have spent recently.
and you say that the government cant create anything of value,,, so roads, spending on education,or housing isnt valuable???