GDP is a bullshit metric for industrial production in financialized, neoliberalized countries like the US and Europe.

Michael Hudson: Understanding America’s Post-Industrial Economy

Often the analysis we’re presented with in the media is often limited to GDP, which doesn’t really help us to understand why the US, for example, have lost its competitiveness, its industrial strength, its ability to compete, especially with the Chinese.

The idea of American economic growth from the 1990s on was, instead of producing manufactured goods, we will develop intellectual property monopolies, especially in information technology, in pharmaceuticals. And America will make its economic growth in GDP, not by making profits to employ labor to produce more and more goods and services, but to have monopoly rents for our pharmaceuticals. So we can make pills that cost 10 cents each and sell them for $500 each. We can make computer programs for automatic artificial intelligence and for computer chips and for all of the information technology we have at enormous markups. And we can live on our economic rents, live off the fat of the land, as they used to say. We don’t have to have blue-collar jobs. Everybody can work in an office and make money that way.

You have today, as the election for 2024 is being prepared, the bewilderment of the Democratic Party here. If you look at the GDP, President Biden says, you’re doing so well, look at GDP. And the vast majority of Americans, according to every poll in every part of the country says, we’re not doing well at all. We’re doing awful. And it turns out that when you look at what is the American GDP, well, almost all of it is the growth in prosperity, the growth in financial benefits for the 1%, maybe for the 10% of the population. And the 1% and the 10% has increased its wealth so much since 2008 led the Federal Reserve to slash interest rates that the 1% and the 10% gain is larger than the loss for the 90%. So all that the President Biden can say is, who are you going to believe? Are you going to look at the statistics or are you going to look at your own life and what you have to spend at the grocery store and what you have to spend on rent and housing as America turns away from a homeowner’s economy into a rental economy?

Michael Hudson: Asset-Price Inflation and Rent Seeking

The main culprit for the economy’s falling growth rate and the general middle-class economic squeeze is debt – or more specifically, the burden of having to pay it back, with penalties, fees and lower credit ratings. The mainstream press depicts the rising market price of homes as a benefit to homeowners, a capital gain as if they almost were real estate speculators or capitalists in miniature, not wage-earners running up debt. GDP statisticians include the rise in valuation of owner-occupied real estate and the rising rents it saves homeowners from having to pay as adding to GDP. But homeowners do not receive a corresponding income for living in their homes, even if rents rise in their neighborhood. And debt-financed home-price inflation has become a major factor squeezing family budgets in today’s world.

When they fall behind in their payments and are subject to late fees and higher interest rates, these payments are treated as an addition to GDP (“financial services”), as if the economy is getting richer. So when the specific components of what seems to be empirical statistical evidence of affluence are analyzed, they consist not of real product and prosperity but transfer payments from the economy at large to the Finance, Insurance and Real Estate (FIRE) sector.

Payments on the economy’s rising debt should rightly be viewed as a subtrahend from national income. But the GDP accounting format treats this rising debt as a necessary cost of production. In this line of theorizing, creditors provide a productive service whose value is reflected in the rate of interest and the magnitude of fees and penalties. Ultra-low interest rates, resulting from financial lobbying pressures, have held down the cost of carrying this debt, but these low official rates mask the reality that many debtors fall behind and have to pay penalty fees and high penalty interest rates.

These payments are added to today’s GDP measure, even as they leave less family income available to be spent on products. The result is a statistical confusion concerning how much GDP growth is actual income and product growth, and how much is rent extracted from disposable personal and corporate income. That is the basic conceptual issue addressed in this paper.

The key to understanding the U.S. economy is not so much GDP as capital (asset-price) gains and the offsetting debt burden financing these gains. This financialized overhead is not real growth. It does not make the economy richer. This paper explains why, and provides a statistical format to measure the magnitude of rent extraction or the FIRE sector on the “product” side of the economy, deflating disposable personal income available to spend on goods and services, and capital gains on the “total returns” side, so as to show how most wealth is achieved not by actual production but by increasingly debt-financed asset-price inflation.

Well let’s just see what people who actually have a clue have to say muffin https://rusi.org/explore-our-research/publications/commentary/attritional-art-war-lessons-russian-war-ukraine

And the fact that you don’t even understand why using nominal GDP is nonsensical really does add to the comedy.