I will be happy to explain. If you will recall, we went through four punishing years of Jimmy Carter when inflation skyrockets. So as you know, GDP is the value of all goods produced as measured in dollars. If inflation is causing prices to skyrocket, then it will appear as if the GDP is larger than reality. For simplicity. If my company sells widgets at $1.00 each this year and we sell one million units, we will have added $1 million to the GDP. Now the next year, if inflation has increased 20% and forced us to increase our prices 20%, then next year all things being equal, we will sell another 1 million units and have sales of $1.2 million or a 20% increase to the GDP. The reality is that there was no real increase in what we produced and sold. And to keep it simple, if everyone's business stagnated, but all had to increase their prices by 20%, the GDP would increase by 20%. Wow that looks good doesn't it. But no jobs were added.
So we had the punishing interest rates, as I recall mortgage rates in some cases got up around 18%, which slowed the economy, so the fact that Reagan did what he did with high interest rates at the beginning of his term, is remarkable. Ultimately the real unemployment rate was below 5%. Today we have a REAL unemployment rate around 10%. But the government is reporting 5.3% - reason is they stop counting the unemployed when they become hopeless and give up looking for work. They still need a job, they just cannot find one and therefore the government says, well OK then, we're not counting you.
Those of us who lived through the Reagan years and before that the Carter years, know the difference. Looking at raw numbers or statistics without all the background information is useless. This is why our schools need to teach economics and how capitalism works because today so many have no idea how the economy works and how it works best and are therefore easily duped by the politicians.
I get a kick out of people who say how good it is that Obama's budget deficit is shrinking. They think that means the country's entire debt. They don't even understand the difference between debt and budget deficit.
So frankly, this is all so off topic. Time to end it. Back to the TenTec discussion where I still hold that TenTec's woes are self inflicted and have nothing to do with tax selling of current inventory.