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Where's the Productivity? |
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Written by Administrator
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Thursday, 06 March 2014 12:30 |
 Once again the CNBC talking heads (and the government pundits) are confused about the economy. We keep developing all these nifty devices to make us more productive, but productivity remains below expectations... how can that be? Productivity grew at an annual rate of 1.8% in the October-December quarter, lower than the 3.2% gain the government had previously estimated. Productivity is the amount of production per hour of output, as measured by gross domestic product (GDP). For example, if GDP is $10 trillion and people worked for an aggregate 300 billion hours, then productivity is $33/hr. If that's not growing at least as fast as inflation, then our population is becoming poorer.
Firstly, it's important to note that GDP is seriously over-estimated because inflation is tragically underestimated, because it would make the government and Federal Reserve look bad and decrease confidence in them and our economy if they reported that true inflation (using 1980 government calculation methods) is 10% and that we're still mired in a recession as real GDP is shrinking by 8% per year. The cognitive dissonance results from the fact that people both believe the government's numbers but also readily realize that prices are increasing at 10%+ per year (many sectors much faster).
So where's the productivity going? For one thing, the Federal Reserve is stealing it. When the Fed prints $1 trillion per year out of thin air, it doesn't actually make us $1 trillion richer. It just devalues everything else in the economy by $1 trillion. So everyone ultimately absorbs that loss, albeit disproportionately. The Fed balance sheet grows while our balance sheets shrink. And the Fed has been doing this since 2008 at this incredible rate, and at a slightly slower rate for decades prior. Who gets most of the stolen loot? Unproductive people like bankers and bureaucrats mostly, followed by defense contractors who make things that end up either blown up or in boneyards. The people who lose the most are those who are actually productive, building things that last and make us richer, like factories and other capital improvements.
Also, the government is stealing it and disincentivizing it. By putting onerous taxes on the most productive people and crippling regulations such as Obamacare and labor laws, the most productive among us, who pull up our overall average, just aren't all that interested in being productive anymore when they could instead be lounging on a beach somewhere or maybe move to Hong Kong or Singapore and be productive there instead.
So yeah, our smartphones, advanced production lines, online shopping, etc., are making us mildly more productive. But most of our productivity is being lost or stolen. And it's much worse than the government numbers reported because they're misrepresenting how bad inflation is. It's as if a common bank robber walked into a bank, helped himself to a million dollars, fudged the bank's balance sheet to show they never had the million, and then made a deposit of $10 and told the bank's customers and shareholders that they increased their balance sheet slightly.
Make no mistake: there is a crime occurring here, and if you're working and trying to make ends meet, you're the victim. Your salary is probably not increasing as fast as inflation is even though you're getting better at your job, and so your productivity is being stolen. Maybe let the pundits and politicians know that you know and that you're not going to take it anymore.
If you look up at that inflation graph, you can see the missing productivity. It's the difference between where inflation is reported to be and what it actually is. That's your missing productivity and why the talking heads are so confused.
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Last Updated ( Thursday, 06 March 2014 12:56 )
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