Fiscal Cliff: The “truth” from a different angle
Five years ago a trillion dollar budget deficit would have unquestionably be considered a national drama. In today’s world not having a trillion dollar deficit is too good to be true. With the fiscal cliff dominating the news (as well as trader’s decision making) on rising fears of a US recession, it is worth looking at it form a different angle. Is it possible that the US has been in recession for far longer than one would probably suspect? Let’s focus on facts: Money printing creates the illusion of economic growth. If you cut the value of the currency in half, the economy’s size will appear to double but you have changed nothing to the fact that you are still in recession. How much GDP changes from one year to the next depends entirely on what is used to measure it. Based on data compiled by the World Bank, for example, World GDP expanded by 109% from 2012 to 2011 in USD terms but contracted by 59% in terms of gold. The only accurate way to measure changes in a nation’s economy is to do it relative to the world. The below chart will give you an idea of the unpolished truth about the US GDP “growth” since 2001.