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stolen from investopedia: The GDP formula is commonly expressed as GDP = C + I + G + (X - M), where C is consumer spending, I is business investment, G is gover

stolen from investopedia: The GDP formula is commonly expressed as GDP = C + I + G + (X - M), where C is consumer spending, I is business investment, G is government spending, and (X - M) represents net exports (exports minus imports). This formula helps measure the total economic output of a country during a specific period. Our tariffs are tampering with the intelligent monitoring of GDP growth. When the USA expanded tariffs to 155% with China it was effectively an embargo, so imports went away (but exports didn't) and our GDP looked amazing. When the tariffs were brought back to previous rates of 55%, companies bought every import they could (or had them released from bonded warehouses) which has pumped the GDP in the other direction. And it'll likely be the same situation next month because Chinese ports are seeing record numbers as US companies try to buy every piece of inventory they can before these tariffs go back up.

axus 1y ago
That seems very strange to me that GDP is the same, when import:export is 4:3 or 3:2, but explains why someone would care more about the difference than the absolute values.
- yread 1y ago
  If you import something and immediately export it the ratio changes but the difference doesnt
- notahacker 1y ago
  They're accounting identities, not casual relationships. Exports are stuff that's part of domestic product (but not consumed domestically) so get added. Imports are stuff domestic consumers get the benefit of but aren't actually produced domestically, hence the direction of the signs in the accounting identity. The 4:3 ratio is consistent with an economy which might be more open than a 3:2 one, but it doesn't actually have a higher GDP unless there's higher consumption or investment or government spending as a result of the extra trade. The key part is that nobody should care about any values or ratios in isolation or impute causality that isn't there. Otherwise people start believing that doing crazy stuff to shrink a trade deficit results in higher GDP, as opposed to lower C+I+G. And when those people are sufficiently stubborn and sufficiently powerful, you get $economy shrank 0.5% in the first quarter headlines...
m-hodges 1y ago
Chris Clarke has a great Short on this: https://www.youtube.com/shorts/UrsRoHmXCug https://www.youtube.com/shorts/UrsRoHmXCug
- ginko 1y ago
  In a non-terrible format: https://www.youtube.com/watch?v=UrsRoHmXCug https://www.youtube.com/watch?v=UrsRoHmXCug
  - dylan604 1y ago
    how is that better? the selected background color is not better than black which is what most players will do when forced to a landscape player
    - ginko 1y ago
      You can pause and forward the video and scrolling doesn’t change to another video.
      - ulfw 1y ago
        I generally can't take anyone seriously publishing 9:16 "Shorts" when they embed horizontal powerpoint 16:9 screenshotted graphs into it
hayst4ck 1y ago
One of the most upsetting things about our current state of governance is gamed metrics and lack of a national metrics "dashboard." Metrics are gamed as marketing tools rather than assessment tools. There's a clear conflict of interest in the government presenting the metrics that it says to judge them by. Unemployment is another gamed metric. If you want to get a sense of unemployment, a graph of % employed tells you more than some gamed number like "unemployment" since "unemployment" is a direct measure of political success. Consumer spending/GDP are also directly used to measure political success, and a metric like "aggregate Visa/Mastercard purchases" is going to give a much better sense of how much people are spending. During COVID, all cause mortality is a superior metric than COVID attributed deaths because any death attributed to COVID represented a failure of public health policy. We even saw direct attacks on public health monitoring in Florida. It seems like the only ways to combat this are either states presenting their own metrics to imply national trends based on their own. I definitely wonder what kind of information we could get that is accurate and not gamed to create our own dashboards. Geohot's use of national energy consumption to estimate national productivity was sharp and the type of thing I wish journalists would do.
- rrrrrrrrrrrryan 1y ago
  Politicians brag about the U-3 unemployment (that they've gamed), but actual economists look at U-6 (unless they need to do a comparison going back a century, when U-6 didn't yet exist). During covid politicians bragged about covid attributed deaths, while public health experts were discussing all cause mortality. This is the case everywhere. Quality metrics are absolutely out there - you just have to give enough of a shit to look at them.
- randomNumber7 1y ago
  So you are in favor of temporally changing the GDP formula to fit your mindset better?
- kasey_junk 1y ago
  GDP, consumer spending, unemployment are some of the most inspected numbers in the world. Not only are they rigorously defined and tested by the government and academia there are whole swaths of finance attuned to them. And no one who uses them seriously doesn’t understand their weaknesses. At a macro level all signals have flaws, knowing what they are and how to deal with them is the whole job of many people. You can find huge swaths of research comparing and contrasting the ADP number vs the official bls stat but no one serious thinks ADP is _better_ than the the headline unemployment number because it can’t be gamed.
deleted 1y ago
[deleted]
czhu12 1y ago
From what I understand from Econ 101, this is not true. The only reason you subtract imports is to avoid double counting because presumably the import was done by C, G or I. The point of subtracting imports is so that it doesn't count as domestic production, and effectively zeros out the portion of C + G + I that was not produced domestically, but thats independent of how much is in exports.
- digitalPhonix 1y ago
  That’s true (analogy - you can find out how much the clothes you’re wearing weigh by weighing each piece individually or weighing yourself wearing them and subtracting your weight). But you can’t change the process mid way through your measurement. We don’t have a way of measuring “consumption of domestic products” so we just measure consumption and subtract the imports afterwards. X-M is an accounting trick, but when you’re using this model you have to stick with it. The idea that imports were deferred causes this accounting trick to show its weakness. (Presumably, looking at the data for all of 2025 when it’s available will “low pass” the deferred imports)
  - Aloisius 1y ago
    I'm not sure I understand. What process is changing? The "accounting trick" doesn't stop working. Let's try a very simple example of buying all our inventory in one quarter and selling it in another - what is supposedly behind our GDP woes. Let's say in Q1, the only spending was on $1 trillion of imports into private inventories, thus: I=$1 trillion, C=$0, G=$0, X=$0, M=$1 trillion. That gives us a GDP of $0. Next quarter, flush with product there's no need to import anymore and the entire inventory is somehow sold domestically, thus: I=-$1 trillion, C=$1 trillion, G=$0, X=$0, M=$0. That gives us again, a GDP of $0. Yet articles claim that the GDP in Q2 would be higher due to the drop in imports and was reduced in Q1 due to an increase in imports.
    - lesuorac 1y ago
      Don't you always measure GDP using spending (for convince / accuracy of price) so if you import $1 trillion and don't sell it then the GDP is $-1 trillion? So Q1 is $-1 trillion and Q2 is $1 trillion? IIRC, Investment is more of I bought machinery to make socks not I have 100 nintendo switches.
gowld 1y ago
Quarterly GDP, since it's measured via global approximation, isn't meaningful in quarters when the economy is rapidly changing. The numbers only make sense over time periods where behavior is relatively steady.
Aurornis 1y ago
> The GDP formula is commonly expressed as GDP = C + I + G + (X - M), where C is consumer spending, I is business investment, G is government spending, and (X - M) represents net exports (exports minus imports). Imports don't actually subtract from GDP. They are subtracted inside the GDP formula to make sure they aren't counted toward the country's production, basically. Logically it makes sense: If you import something, it was not produced within the country. Therefore you need to make sure it's not counted in GDP. However, the starting values for GDP calculation are sum total type numbers, so you have to manually subtract out imports. This proves endlessly confusing for journalists and even politicians who see the subtraction sign and conclude that "imports subtract from GDP"

axus 1y ago

That seems very strange to me that GDP is the same, when import:export is 4:3 or 3:2, but explains why someone would care more about the difference than the absolute values.

yread 1y ago
If you import something and immediately export it the ratio changes but the difference doesnt
notahacker 1y ago
They're accounting identities, not casual relationships. Exports are stuff that's part of domestic product (but not consumed domestically) so get added. Imports are stuff domestic consumers get the benefit of but aren't actually produced domestically, hence the direction of the signs in the accounting identity. The 4:3 ratio is consistent with an economy which might be more open than a 3:2 one, but it doesn't actually have a higher GDP unless there's higher consumption or investment or government spending as a result of the extra trade. The key part is that nobody should care about any values or ratios in isolation or impute causality that isn't there. Otherwise people start believing that doing crazy stuff to shrink a trade deficit results in higher GDP, as opposed to lower C+I+G. And when those people are sufficiently stubborn and sufficiently powerful, you get $economy shrank 0.5% in the first quarter headlines...

m-hodges 1y ago

Chris Clarke has a great Short on this: https://www.youtube.com/shorts/UrsRoHmXCug https://www.youtube.com/shorts/UrsRoHmXCug

ginko 1y ago
In a non-terrible format: https://www.youtube.com/watch?v=UrsRoHmXCug https://www.youtube.com/watch?v=UrsRoHmXCug
- dylan604 1y ago
  how is that better? the selected background color is not better than black which is what most players will do when forced to a landscape player
  - ginko 1y ago
    You can pause and forward the video and scrolling doesn’t change to another video.
    - ulfw 1y ago
      I generally can't take anyone seriously publishing 9:16 "Shorts" when they embed horizontal powerpoint 16:9 screenshotted graphs into it

hayst4ck 1y ago

One of the most upsetting things about our current state of governance is gamed metrics and lack of a national metrics "dashboard." Metrics are gamed as marketing tools rather than assessment tools. There's a clear conflict of interest in the government presenting the metrics that it says to judge them by. Unemployment is another gamed metric. If you want to get a sense of unemployment, a graph of % employed tells you more than some gamed number like "unemployment" since "unemployment" is a direct measure of political success. Consumer spending/GDP are also directly used to measure political success, and a metric like "aggregate Visa/Mastercard purchases" is going to give a much better sense of how much people are spending. During COVID, all cause mortality is a superior metric than COVID attributed deaths because any death attributed to COVID represented a failure of public health policy. We even saw direct attacks on public health monitoring in Florida. It seems like the only ways to combat this are either states presenting their own metrics to imply national trends based on their own. I definitely wonder what kind of information we could get that is accurate and not gamed to create our own dashboards. Geohot's use of national energy consumption to estimate national productivity was sharp and the type of thing I wish journalists would do.

rrrrrrrrrrrryan 1y ago
Politicians brag about the U-3 unemployment (that they've gamed), but actual economists look at U-6 (unless they need to do a comparison going back a century, when U-6 didn't yet exist). During covid politicians bragged about covid attributed deaths, while public health experts were discussing all cause mortality. This is the case everywhere. Quality metrics are absolutely out there - you just have to give enough of a shit to look at them.
randomNumber7 1y ago
So you are in favor of temporally changing the GDP formula to fit your mindset better?
kasey_junk 1y ago
GDP, consumer spending, unemployment are some of the most inspected numbers in the world. Not only are they rigorously defined and tested by the government and academia there are whole swaths of finance attuned to them. And no one who uses them seriously doesn’t understand their weaknesses. At a macro level all signals have flaws, knowing what they are and how to deal with them is the whole job of many people. You can find huge swaths of research comparing and contrasting the ADP number vs the official bls stat but no one serious thinks ADP is _better_ than the the headline unemployment number because it can’t be gamed.

deleted 1y ago

[deleted]

czhu12 1y ago

From what I understand from Econ 101, this is not true. The only reason you subtract imports is to avoid double counting because presumably the import was done by C, G or I. The point of subtracting imports is so that it doesn't count as domestic production, and effectively zeros out the portion of C + G + I that was not produced domestically, but thats independent of how much is in exports.

digitalPhonix 1y ago
That’s true (analogy - you can find out how much the clothes you’re wearing weigh by weighing each piece individually or weighing yourself wearing them and subtracting your weight). But you can’t change the process mid way through your measurement. We don’t have a way of measuring “consumption of domestic products” so we just measure consumption and subtract the imports afterwards. X-M is an accounting trick, but when you’re using this model you have to stick with it. The idea that imports were deferred causes this accounting trick to show its weakness. (Presumably, looking at the data for all of 2025 when it’s available will “low pass” the deferred imports)
- Aloisius 1y ago
  I'm not sure I understand. What process is changing? The "accounting trick" doesn't stop working. Let's try a very simple example of buying all our inventory in one quarter and selling it in another - what is supposedly behind our GDP woes. Let's say in Q1, the only spending was on $1 trillion of imports into private inventories, thus: I=$1 trillion, C=$0, G=$0, X=$0, M=$1 trillion. That gives us a GDP of $0. Next quarter, flush with product there's no need to import anymore and the entire inventory is somehow sold domestically, thus: I=-$1 trillion, C=$1 trillion, G=$0, X=$0, M=$0. That gives us again, a GDP of $0. Yet articles claim that the GDP in Q2 would be higher due to the drop in imports and was reduced in Q1 due to an increase in imports.
  - lesuorac 1y ago
    Don't you always measure GDP using spending (for convince / accuracy of price) so if you import $1 trillion and don't sell it then the GDP is $-1 trillion? So Q1 is $-1 trillion and Q2 is $1 trillion? IIRC, Investment is more of I bought machinery to make socks not I have 100 nintendo switches.

gowld 1y ago

Quarterly GDP, since it's measured via global approximation, isn't meaningful in quarters when the economy is rapidly changing. The numbers only make sense over time periods where behavior is relatively steady.

Aurornis 1y ago

> The GDP formula is commonly expressed as GDP = C + I + G + (X - M), where C is consumer spending, I is business investment, G is government spending, and (X - M) represents net exports (exports minus imports). Imports don't actually subtract from GDP. They are subtracted inside the GDP formula to make sure they aren't counted toward the country's production, basically. Logically it makes sense: If you import something, it was not produced within the country. Therefore you need to make sure it's not counted in GDP. However, the starting values for GDP calculation are sum total type numbers, so you have to manually subtract out imports. This proves endlessly confusing for journalists and even politicians who see the subtraction sign and conclude that "imports subtract from GDP"