GDP Insights - Economic Trends

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GDP Insights Evaluating Economic Trends That May Effect Your Business and Wealth Preservation

description

Where are we headed?Looking at the causes and effects of the Debt to GDP ratio and de-leveraging trends.

Transcript of GDP Insights - Economic Trends

Page 1: GDP Insights - Economic Trends

GDP Insights

Evaluating Economic Trends That May Effect Your Business

and Wealth Preservation

Page 2: GDP Insights - Economic Trends

Basic Economic Equation for Growth in the EconomyC + I + G + (E - I) = GDP

Consumption + Investment + Government Spending +            

(Exports - Imports)                                        = Gross Domestic Product

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GDP Since 1973Despite Other Recessions, the only Major Contraction

was Evident During The Great Recession of 2008/2009

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GDP THEN AND NOW - 38Yr Span

1973 - 1974

GDP was $1.4 Trillion

Consumption $876.5  - 61%Investment   $257.6  - 18%Government  $288.8  - 20%Net Exports $    9.0   -   1%

2010 - 2011

GDP is now $14.7 Trillion

Consumption $10,417  - 71%Investment   $  1,818  - 12%Government  $  3,020 - 20%Net Exports ($   560) - (3%)

Government expenditures have generally been at a consistent 19-20% level throughout the 37-years, but fell to 17.5% during the Clinton's GDP Surplus years.

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Components of GDP At-A-Glance

Percent of Total GDP

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Reasons For Change

• The U.S. has become a Debtor Nation and has consumed more than we earn, accounting for the 10 point increase.

• Private Investment rises and falls with GDP, but lost 6 points as compared to 1973/74 Recession.

• Imports have consistently been higher than Exports because of our thirst for cheaper goods.

• U.S. Jobs have contracted simply because Business sought cheap labor overseas to earn record profits for investors.

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The Booming Rise of Corporate Profits

Recessions Clearly Affect Business Results and are a Leading Indicator for the Next Recession

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LIMITED IMPACT ON GDPBusiness Continues to Earn Profits Despite Negative

Trends

• Consumers are restricting their spending and savings have increased dramatically since The Great Recession.

• Consumer and Business Confidence Levels in the Economy have been at the lowest levels in their history, although now slowly improving.

• Businesses are finding ways to do more with less, and are hiring Temporary workers to meet any increase in demand, rather than create permanent jobs.

• Unemployment continues to remain at high levels during the slow economic recovery

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What is the Task Ahead for U.S.

The Tough Climb Back to Full Employment

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The U.S. Dilemma - More DebtBush Years - Two Wars        

   & Tax ReductionsObama Years - Health Care & Financial Bail-

Outs

WHAT PARTY IS AT FAULT?

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Cause and Effect• Banks Sub-Prime Loans

& Relaxed Lending Stds

• Bursting of the Housing Bubble, Bank Insolvency

• Central Banks flood Money Supply/Bailouts

•  Repeal of Glass-Steagall Act caused Financial Institutions' Price Wars 

* Consumers upgrade Housing and Refinance Mortgages

* Damaged Invest Confidence & impact on Global Markets

* Debt to GDP Ratios rise dramatically worldwide

 * Sale of High Risk, Complex Mtg-related Products under relaxed credit standards

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Golden Years - The Last Government Surplus

Clinton Years - The Beginning of the Rise Then Slowdown

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Getting Back to a Balanced Budget

• It is not about Government Cutbacks Everywhere

• It is about eliminating Government Waste 

• Tax Reductions are at an all-time low; fair tax is needed

• Incentives are needed for the "I" in Investment

• Where does it come from - - - Stay Tuned!