How much has GDP really increased since 1970 ?

Discussion in 'Economics & Trade' started by kazenatsu, Sep 14, 2017.

  1. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    I've been thinking about this. Is the U.S. really a richer country today than it was in 1970 ?
    How much richer?

    I know the official GDP amount is much higher today than it was back then, but that may be mostly accounted for by inflation.

    So although this is a very inexact and imperfect estimate, I believe we can get some proper idea of what level of inflation there's actually been by comparing the cost of cars and housing today with the cost of cars and housing back then.

    Average cost of car in 1970:
    3,542

    Average cost of car today:
    33,560

    Average cost of housing in 1970:
    23,600

    Average cost of housing today:
    188,900

    So the average cost of a car has gone up by a factor of 9.5, and the average cost of housing has gone up by a factor of 8.

    Now let's look at the GDP.
    Per capita GDP in 1970 was 5,246.
    Per capita GDP today is 57,466.
    So that's an increase by a factor of 10.95

    So what can we conclude from this quick little calculation?
    Per capita GDP, adjusted for real purchasing power, has gone up by about 20 percent.

    Now that alone isn't enough to indicate real wealth has gone up, but it does show there haven't been any gigantic changes in per capita GDP.
     
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  2. Ndividual

    Ndividual Well-Known Member

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    Quite true, while the dollars attributed to the value of something may increase it does not necessarily indicate an increase of wealth.

    Two persons with $10,000 each in 1971 invest their money.
    A purchases 18,779.34 lbs of copper at $0.5325/lb while B purchases 238.095 oz of gold at $42/oz.

    They both retire today and cash in their investments
    A sells the copper at the current price of $2.928/lb for $54,985.91, recognizing an average gain of 3.77% per year on the investment.
    While B sells the gold at the current price of $1,321.69 for $314,687.78 recognizing an average gain of 7.79% per year on the investment.

    The same amount invested in a savings account which averaged a 5.77% return over the same period of time would have resulted in a $10,000 investment being worth $132,030.78 today.

    $10,000 in 1971 had about the same purchasing power as $60,621.98 does today.
    Based on that, A's wealth has diminished by about 10% and B's has grown about 5.2 times greater.
    A savings account would have resulted in a wealth increase of about 2.2 times greater.
     
  3. james M

    james M Banned

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    • inflation adjusted GDP from US Bureau of Economic Analysis

    • By Year
    • By Month
    Date Value
    Jun 30, 2017 17.01 trillion
    Dec 31, 2016 16.85 trillion
    Dec 31, 2015 16.55 trillion
    Dec 31, 2014 16.22 trillion
    Dec 31, 2013 15.79 trillion
    Dec 31, 2012 15.38 trillion
    Dec 31, 2011 15.19 trillion
    Dec 31, 2010 14.94 trillion
    Dec 31, 2009 14.54 trillion
    Dec 31, 2008 14.58 trillion
    Dec 31, 2007 14.99 trillion
    Dec 31, 2006 14.72 trillion
    Dec 31, 2005 14.37 trillion
    Dec 31, 2004 13.95 trillion
    Dec 31, 2003 13.53 trillion
    Dec 31, 2002 12.96 trillion
    Dec 31, 2001 12.71 trillion
    Dec 31, 2000 12.68 trillion
    Dec 31, 1999 12.32 trillion
    Dec 31, 1998 11.77 trillion
    Dec 31, 1997 11.21 trillion
    Dec 31, 1996 10.74 trillion
    Dec 31, 1995 10.28 trillion
    Dec 31, 1994 10.05 trillion
    Dec 31, 1993 9.65 trillion
    Dec 31, 1992 9.41 trillion
    Dec 31, 1991 9.02 trillion
    Dec 31, 1990 8.91 trillion
    Dec 31, 1989 8.85 trillion
    Dec 31, 1988 8.61 trillion
    Dec 31, 1987 8.29 trillion
    Dec 31, 1986 7.94 trillion
    Dec 31, 1985 7.71 trillion
    Dec 31, 1984 7.40 trillion
    Dec 31, 1983 7.00 trillion
    Dec 31, 1982 6.49 trillion
    Dec 31, 1981 6.59 trillion
    Dec 31, 1980 6.50 trillion
    Dec 31, 1979 6.50 trillion
    Dec 31, 1978 6.42 trillion
    Dec 31, 1977 6.02 trillion
    Dec 31, 1976 5.73 trillion
    Dec 31, 1975 5.49 trillion
    Dec 31, 1974 5.36 trillion
    Dec 31, 1973 5.46 trillion
    Dec 31, 1972 5.25 trillion
    Dec 31, 1971 4.91 trillion
    Dec 31, 1970 4.71 trillion
    Dec 31, 1969 4.72 trillion
    Dec 31, 1968 4.62 trillion
    Dec 31, 1967 4.40 trillion
    Dec 31, 1966 4.29 trillion
    Dec 31, 1965 4.10 trillion
    Dec 31, 1964 3.78 trillion
    Dec 31, 1963 3.60 trillion
    Dec 31, 1962 3.42 trillion
    Dec 31, 1961 3.28 trillion
    Dec 31, 1960 3.08 trillion
    Dec 31, 1959 3.06 trillion
    Dec 31, 1958 2.92 trillion
    Dec 31, 1957 2.85 trillion
    Dec 31, 1956 2.84 trillion
    Dec 31, 1955 2.78 trillion
    Dec 31, 1954 2.61 trillion
    Dec 31, 1953 2.54 trillion
    Dec 31, 1952 2.53 trillion
    Dec 31, 1951 2.40 trillion
    Dec 31, 1950 2.27 trillio
     
  4. kazenatsu

    kazenatsu Well-Known Member Past Donor

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    Overall GDP adjusted for official inflation is not the same thing as per capita GDP adjusted for purchasing power, the latter tells us how rich we are.

    Economists and policymakers like to use "real GDP" but there are two problems with that. First, the population of the country has increased by more than 57% since 1970. More people, more GDP. Second, the "official inflation" numbers in all likelihood do not accurately reflect the actual increase in costs of expensive things like cars and housing well. To arrive at their inflation numbers, government economists use a basket full of other things, like bread and milk, that make up only a small fraction of consumer spending. Measuring how much inflation there's been is actually an extremely difficult thing to do, because there's no exact objective definition other than arbitrary price measurement points we make for it.

    As yet another example, let's look at gold. Price per ounce in 1970 was $38.90
    Price as of January 2017 was $1210.45
    If the cost of gold had remained unchanged, that would mean an inflation rate of 3111% since then.
    I'm not saying this to say that a dollar is worth 31 times less than it was in 1970, but it does help show official inflation numbers are far from being accurate.
    If we had a 4% inflation rate per year for 47 years, the dollar would only be worth 6.3 times less.
     
    Last edited: Sep 19, 2017
  5. james M

    james M Banned

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    absurd!!! housing and cars reflect 56% of consumer price index and are relatively easy to measure and as likely to be under measured as over measured
     
  6. james M

    james M Banned

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    BS of course. Why so afraid to tell us what they leave out if they stupidly leave anything out?
     
  7. james M

    james M Banned

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    do you really imagine that PH.D economists don't know that???
     

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