Bazz
I take your point about energy and its importance to the costs of purchases, but for me the reason for the slow rise in the GDP figures is more to do with the lack of access to sufficient liquidity, of an increasingly larger percentage of the world’s population. You would also realize that a 125% rise of anything over 20 years is not that large. You are right shale oil going broke, but that is more to do with poor assumptions on the part of management.

I also agree with your example of a car crash; however as a consumer good its demise is almost inevitable, but the timing is variable.
As for real GDP being a better focus, I am of the opinion that the populations well being would be a better place to start. Otherwise we are little more than mark a 3 CBU’s (carbon based unit) likely to be replaced soon by a mark 4 robot
Chris

Aidan
I can’t find the info for Australia , but one item in the US GDP that does not fit your definition GDP , is that they include the amount that home owners would have paid in rent had they not purchased it first.

Also I am not sure whether they include the sale of land or property when it sold second hand etc.

Another issue is how many times a base product would be counted. An example would be trees, when cut down, turned into paper, then into books, papers, or hard copy.

To boil down your answer to my question I got the following.
Deficit spending is not a problem.
Land should be taxed.
Shift the tax burden to the wealthy
Float all currencies
High unemployment can’t control inflation.
Please correct if I miss analysed.

I think demand comes in two forms. That is needs, as opposed to advertising driven wants.
They are both part of the economy, however it is likely that the wants percentage of demand will reduce with the decline of the mark 3 CBU's (see post to Bazz) participation in the economy.
Chris

Bazz,
GDP is a measure of economic activity.
GDP is NOT a measure of wealth, though it tends to have quite a good correlation.

"Real GDP" just means GDP adjusted for inflation.
Economists may have a new measure which counts the most productive costs and
expenditures, but they wouldn't call it "Real GDP".

Competent economists know why interest rate reductions no longer work: interest rates are already too low for them to make much difference. They liken it to pushing on a string.

They also know that austerity works well for what it's designed to do: stabilising collapsing currencies. It's also effective for rebuilding countries that are short of resources, and for keeping interest rates and inflation low in the boom. It can even raise the value of a currency when applied lightly. But only the economically illiterate would regard it as a good policy when the private sector is weak.

Energy is a declining proportion of our economy's value, and the sun is supplying us with plenty of it. It's a shortage of money being spent, not a shortage of energy, that's the problem.

_____________________________________________________________________________

Chris,

Are you sure the USA actually includes that in GDP (rather than just measuring it relative to GDP)?

B2B sales themselves are not included in GDP, though the profit on them is.

"Deficit spending is not a problem."
Correct in the current economic circumstances. It can be a problem in the boom, but not because of debt levels.

"Land should be taxed."
Yes, on unimproved value. Just think how much wealthier we'd all be if Costello had introduced an LVT instead of a GST!

"Shift the tax burden to the wealthy"
Not strictly necessary, but they're most able to pay it.

"Float all currencies"
Obviously it's a country's own business whether its currency floats or is fixed, but no country would be worse off with a floating currency, and it would avoid the most serious economic problems.

"High unemployment can’t control inflation."
It's more that high unemployment isn't necessary to control inflation.

OK Lefty, 125% increase is the figure of today but the price was
$147 in 2008 then down to $25 in 2009 then $110 in $2010 finishing at
$100 to $35 in 2015.
The shale companies started folding up then.
The price is low now because demand is low.
The main problem is Goldilocks is dead !
There is no just right price.
The highest price the economy can afford is lower than the break even
price for the shale companies, the Canadian oil sands and deep ocean drillers.
Even Saudi Arabia is in a bind because their economy needs a price
around $90 to $100 even though much of their oil is $10 at the well head.
The whole world economy is in a bind over energy, people are freezing
in the UK, they say the poorer people are dying because they cannot
afford the heating.
Certainly the reports are complaining about the cost.
There is no easy answer and it will get worse because the ERoEI of
the oil companies search and production has fallen very significantly.
The halt in investment will have a large affect by 2020.

Aidan

I think constant increase of liquidity only helps one segment of the population, and that is those who have accesses to that extra liquidity. Many of the rest have only access to payday loans.

Yes, and a high level if it is not being used productively.

The level of wealth among a small, but growing segment of the population is coursing the country the fracture. So it may not be necessary in the economic sense, but I believe it is if we are talking about social cohesion it could help. Maybe a twelve step course,( like alcoholics anonymous) for anyone who has assets over 10 million dollars.

You may be right about that, but the sharks in the financial world need to have laws that prevent their destructive behavior.

High unemployment can and does control high inflation. If people have less money spend, then suppliers of goods and services, lower their prices to encourage people spend what they have in their shop as opposed to the one up the street.

My finale point is with all this liquidity that at the present is sitting on the sidelines like a dragster revving its engine. When the Christmas tree turns green we are going to see the mother of all inflation spikes when those trillions hit the real economy. You may not be aware that the liquidity in the finance industry in now 10 times the real economy that has to do with stuff. So I am not sure how creating more liquidity is going to help.
Chris

Bazz
It all depends where you start and finish your graph. If your start point is 1972 and your finish is 2008 , then you would have a pretty spectacular piece of evidence. On the other hand if you went from 2008 to 2015, then you are clearly incorrect regarding the price of energy. Your point is correct that the price of energy is growing faster than other price inputs. Part of the reason is that the production of electricity is now profit driven , instead of a profit neutral service provided by the government.

So what can be done? First the electricity companies should be regulated that their profits cant exceeded the underlying inflation rate. Next start to use some of the excess liquidity on insulating the homes of the most vulnerable with double glazing and pink bates. Both tasks can be carried out by the unemployed with a small amount of training.

What will happen, nothing as the level of concern for your neighbor is at its lowest level in a very long time.

As you say things are only going to get worse, which is why I left the UK more than forty years ago. I saw the writing on the wall then regarding the likely future of an ordinary factory worker.
Chris

Chris,

Creditworthiness is certainly a problem, but liquidity isn't the limiting factor – profitability is.

The use of land should generally not affect the rate at which it's taxed. An exception is when it's set aside for conservation purposes; in that case it should probably be exempt from the tax.

There is certainly a link between unemployment and inflation. It's much more inflationary when there's more competition between firms for workers, and people are less likely to demand a pay rise when unemployment's high. But the relationship is far more complicated than it first appears. If a thousand people in Alice Springs lost their jobs tomorrow, it wouldn't make any difference to the nation's inflation rate. It wouldn't even make much difference to the local inflation rate, as the price of goods depends more on what's happening in the big cities.

And don't forget, low prices can be attractive even for high earners, and competition is far better than unemployment at reducing prices. We heard last year that McDonalds had deregulated its prices and they were expected to rise in lower income areas where people had fewer alternatives.

Your final point is wrong. All that extra liquidity sums to zero. It's a relatively trivial factor. Which brings me to two more (closely related) important things that economists are likely to fail to understand:
BANK LENDING DOES NOT DEPEND ON RESERVES. It depends mainly on finding people and companies that they can lend to profitably. It also depends on the Basel capital requirements.
THE MONETARY BASE DEPENDS ON THE TOTAL MONEY SUPPLY, not the other way round.