Economic growth rate for the fourth quarter of 2009

James Garrett

February 19 2010

The government and Oboma boast a 5.7% Economic growth rate for the fourth quarter of 2009. This was a mirage. Let’s do the math and find out the real state of the US economy. First there are a few items we need to know. One would be the size of our economy in dollars as that is how it is measured and reported. The economy was at about 14 trillion a year in economic activity as of September in 2009. Then we need to know the inflation rate for the same time period and that number was 4.3% inflation for the fourth quarter of 2009. Inflation means it cost more to purchase the same amount of products. Then we need to know the amount of money that came from the $787 billion that became an $867 stimulus package. That amount rounded off was about $60 billion spent in the fourth quarter of 2009. By the way inflation is figured cumulative and added up over the period of a year that 4.3% if it continues means an inflation rate of 17.2% on a yearly base.

Now we have the necessary numbers to work with to find the true state of the private sector economy. Let’s do it. The economic growth rate as reported is not adjusted for inflation it is the total number of dollars spent in the economy. The inflation of 4.3% has to be multiplied by the yearly economic activity because that’s exactly the way the growth rate is reported. We take the $14 Trillion base size of the economy figure; multiply the inflation rate of 4.3%. The total is $60 billion dollars in additional money just to keep up with current inflation. Then the second calculation is to take away the 60 Billion from inflation and the rounded of additional 60 billion spent by the government from the economic stimulus spent into the economy by the government gives us a total of $120 Billion. To find the true economic growth rate and the state of the economy we have to take away the artificial government stimulus and the inflation which is not economic growth. We are just spending more to buy the same amount of products. That’s what inflation is.

Now we have to figure the economic growth rate of 5.7% multiply that by 14 trillion on a yearly base. That figures to be 798 billion if it continues for a year divide that by 4 quarters and you get $199.5 billion in growth for the fourth quarter of 2009. Now we take away the inflation and the government stimulus spent in the fourth quarter that’s 120 billion which leaves the true number of dollar of private sector growth at only 79.5 Billion and that by percentage is a very sluggish 2.1% growth rate. That’s not the boom times are here again 5.7% claimed by the government and Oboma. In order to know where we are going we have to know where we really are and where we have already been to understand where we are headed in the future. Now I know the government figures are not accurate and they are always revised or corrected 2 times as the months go forward.

Now that the inflation number has come out for January 2010 of 1.4% we now have a full quarter of very high inflation. We have just had the third month in a row of very high inflation as reported by the government. In November 2009 the monthly inflation came out at 1.8% Then in December the headline number came out at 2.7% now we have the latest number for January of 2010 that’s 1.4%. This added up gives us the quarter total of 5.9% inflation in a 3 month period. To get the yearly projected total we just multiple 5.9% times 4 quarters that make up a full year. This gives us a projected inflation of 23.6% a year. This is what we can expect to be the inflation trend for 2010. As the economic growth numbers come out over the next two quarters it will be interesting to see how much of it is real private sector economic growth and how much is government stimulus and inflation.

Economic growth rate