Twilight For The-Economy-Of-Things Or Why Today’s GDP Isn’t What It’s Cracked-Up To Be

This is getting pretty monotonous. The industrial production index for June posted this morning at 102.25, which is neither here nor there except for this spot of historical comparison: To wit, this same index posted at 102.26 way back on the eve of the Great Financial Crisis in December 2007.

That’s right. After 15.5 years of the greatest burst of continuous fiscal and monetary “stimulus” the world has ever seen, US industrial production has changed by zero, nichts, nada, nothing. And to the second decimal point.

Moreover, the industrial production index is no johnny-come-lately, marginal data dump based on dubious inflation-adjustments, imputations and modeled guesstimates. To the contrary, it is probably the oldest, consistent US time-series and is based on physical measures which don’t change—barrels of oil, kilowatt hours of electricity, tons of steel, units of assembled autos etc.

Stated differently, this index encompasses the entirety of the US industrial economy—manufacturing, utilities, energy and mining—and it hasn’t gone anywhere for a decade-and-one-half. Yet we have Joe Biden’s puppet-masters patting themselves on the back via his teleprompter reads; the Fed claiming a macroeconomic management job well done; and Wall Street buying stocks hand-over-fist-again based on another alleged soft-landing.

The again, what’s so bullish about an economic aircraft that takes-off and lands over and over, but never leaves the vicinity of the airfield? The purpose of a capitalist economy is to grow its output and generate rising wealth and living standards. But when it comes to the economy-of-things, this one gave up the ghost years and years ag0.

Industrial Production Index, December 2007 to June 2023

To be sure, the so-called GDP computations do include other sectors from the economy-of-services which appear to be growing, even robustly. For instance, real output for health care and social services is up by 45% since Q4 2007. So that sector has grown at just under 2.5% per annum—if you buy the deflators and output measures that are used to compute the “real gross output” of the health and social services sectors.