Wednesday, October 31, 2012

2% Economic Growth: Real or Apparent?

That's the question I tackle in my latest article at The piece is largely based on a previous blog post. The short answer is: more apparent than real. As I conclude:

The bottom line is that increases in GDP statistics caused by monetary and fiscal stimulus signals an economic expansion that is more apparent than real. Any economic expansion that does not result from increased voluntary saving and investment cannot be sustained. The minute the government slows the rate of government spending or the Federal Reserve slows the rate of growth in the money supply, the economic lie is exposed and economic law once again asserts its authority. Capital malinvestment and the misallocation of factors of production no longer can be covered over as the official statistics catch up with reality.

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