Chart you want to see (the entire Bush economy was a sham)

[Kurt_and_Hunter]

This chart is from 2006. (Back before we even took over congress)

The blue bars are GDP (Gross Domestic Product)

The red bars are GDP minus the contribution of money borrowed against mortgaged property and spent on stuff

As you can see, most of our post-2000 economy was people taking money from second mortgages, cash-out re-fis and home equity lines and spending it.

The entire rebound after the tech bubble was f-a-k-e. George Bush got elected in 2004 presiding over an economy that hadn't seen legit GDP over 1.5% the whole time he was in office!

Ahem... that's not much of an economy, mostly because the only way it works is if houses keep going up.

Which they didn't. D'oh!

If anyone has a chart of this data past 2006 I'd love to see it. Thanks.



http://www.calculatedriskblog.com/2006/09/gdp-growth-with-and-without-mortgage.html

[leftofthedial]

1. I get no chart, only the little red dot in a box. :-(

I'd like to see it though.

[Kurt_and_Hunter]

2. Link Fixed

[Kurt_and_Hunter]

3. ...

[DrToast]

4. The chart is misleading

I'm not going to defend George Bush's economy, but that chart is misleading.

It assumes that 50% of MEW goes to consumption. That may be true, but the "GDP wtithout MEW" assumes that if MEW wasn't available the consumption wouldn't have occurred. Certainly MEW increased purchasing power with its favorable terms, but if it wasn't available consumers could have used other less favorable means of financing.

[Kurt_and_Hunter]

5. I agree with you, but not intentionally so (Blame Greenspan... it's his metric)

Almost any two data GDP vs. GDP segment chart will imply all sorts of things. And I admit that I added th Bush stuff just so people would look at a very interesting chart.

But it shows that most of GDP post 1999 was of a different character than previous growth which is noteworthy, particularly given the subsequent collapse.

Of course some MEW activity would have expressed itself through different financing, but not at the same levels unless a valuation bubble developed in some other class of collateral, which is hard to imagine. (Our standards for lending against real estate were much friendlier than standards for lending against $300 shares of ebay.)

I do not think it is an exaggeration to say that the entire Bush presidency would have been Japan-style stagnation were it not for the fact that the asset bubble did not really burst in 2000, but merely fled into seemingly safer real estate.

(I don't blame Bush for that. He actually oversaw a rather amazing defiance of the collapse that was baked in the cake once people abandoned the tech bubble.)

And since the underlying driver was home appreciation that was ultimately unsupportable I think it is correct to call most of the growth illusory--just as the latest stage of the Clinton economy was built on absurd stock valuation.

[denem]

6. I'm not sure if there is any relationship, but post 2000

there has been a net zero jobs growth, excising the health care sector, and a significant net negative in median wages, once health insurance premiums are subtracted.