[quote=poorgradstudent][quote=FlyerInHi][quote=CA renter]
How much of our “growth” in recent years is simply due to the Fed’s machinations? I would argue that most of it is, in one way or another. And, yes, it is scary.[/quote]

What does it matter where the growth comes from? It’s people actually working, trading, doing commerce, exchanging money,… all productive activities.[/quote]

The main area where GDP can be a bit misleading is military spending and activities. Some military spending is stimulative, but waging war is pretty costly. $1m spent on roads has more of a long term boost to an economy than $1m spent on tanks, although both contribute to the GDP equally.

Of course GDP is more of a snapshot than a picture of long term health or investment.[/quote]

Very true, poorgradstudent.

It matters very much where growth comes from, how it’s financed, and what the long-term effects of this growth will be. Saying that it doesn’t matter is like saying that taking on debt for consumption is equal to taking on debt for productive uses, like capital expenditures. One paves the way for true growth going forward , and the other almost guarantees lower growth going forward as that debt has to be paid off and there is no income stream to support it.

It’s like saying that speculative investment (buying up existing assets in the hope that prices will rise) is as valuable as investing in start-ups or companies that want to expand. They are NOT the same thing; one is zero-sum, and the other expands the economy. Too few people know this distinction, and we call both of these things “investing,” even though one can be very destructive because it causes damaging booms and busts.