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FreedomFest 2018: My Favorite Sessions to Attend This Year

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by Mark Skousen
Editor, Forecasts & Strategies

Dear FreedomFest friends,

Welcome to another great FreedomFest, “the world’s largest gathering of free minds.”

Every FreedomFest, the first thing I do is get the printed program and circle all the breakout sessions I want to attend.  You should do the same.  You can get started now by going online to “agenda” at www.freedomfest.com and see the entire up-to-date program.

Here are the sessions I have chosen to attend this year:

WEDNESDAY, JULY 11 — PRE-CONFERENCE EVENTS

1-1:50 pm. Champagne 1.   “Antonio Gramsci and the Cultural Revolution:  How Marxists Took Over Higher Education, and How to Take it Back,” with Daniele Struppa, president of Chapman University.  I’ll be introducing him.

2 – 2:50 pm.  Champagne 4.  “Freedom Festschrift:  Murray Rothbard, Pro and Con.”  I’ll be telling great stories about my relationship with the dean of the American school of Austrian economics.  Other panelists include Walter Block and Jeff Tucker.  Moderated by Hunter Hastings.  Expect lots of discussion and debate.

3 – 4 pm.  Champagne 4.  “Adam Smith, Marx and Keynes:  Who’s Winning the Battle of Ideas?”  Marxism is still alive and kicking on the 200th anniversary of Karl Marx’s birth — the same year that Mary Shelly wrote “Frankenstein” — when two monsters were born!  I’ll compare Marx’s influence with Adam Smith and Keynes.  Ken Schoolland will introduce me, and Steve Forbes will participate in an historic ceremony at the end.  Don’t miss it!

WEDNESDAY — OPENING CEREMONIES AND COCKTAIL RECEPTION

4:45 – 6:40 pm.  Rivoli Main Ballroom.  Lots of fireworks with Steve Forbes on “The Voice of Reason in the Age of Trump”; Dr. Keith Ablow on “What Gives the Human Brain the Ability to Reason”; a debate/panel on “A World Gone Mad…” with Larry Elder (moderator), David Boaz (Cato), Deneen Borelli (Fox News contributor), Jennifer Grossman (Atlas), and Ross Douthat (NYTimes columnist).

Then we have Patrick Byrne, CEO of Overstock, Inc., on the revolutionary block chain and digital currency revolution.

And last but not least, George Will on “Discord?  Nonsense.  America’s Biggest Problem is Consensus.”  After his talk, Alex Green and I will interview him on “The Most Predictable Crisis in American History,” and his views on Eric Hoffer’s disturbing book, “The True Believer,” and how it applies today.

The Wall Street Journal calls George Will “the most powerful journalist in America,” and he has the distinction of having worked with ABC News, Fox News, and now MSNBC.  What does he think of each network?  I plan to ask him Wednesday night.  I’ll be joined by Alex Green (Oxford Club) for an unforgettable interview.

Then I look forward to our gala opening cocktail party, a chance to mingle with each other and the exhibitors, what John Mackey calls “The Trade Show for Liberty,” and autograph sessions at the FreedomFest bookstore.  Here’s a chance to buy one or more American eagle silver dollars…and see if you can solve my daily “white mates in two” chess problem.  Hopefully you will encounter our libertarian card magician, Peter Studebaker.  What fun!

I’m always amazed at the buzz you feel entering the opening cocktail party as friends see old friends and make new ones.  There’s nothing like it.

As the late Nathaniel Brandon said at his first FreedomFest, “I feel an electricity here I haven’t felt in years.”

THURSDAY, July 12

We’re start the day’s session at 8:20 am with a welcome from Naomi Brockwell.  I will make some general announcements about this year’s FreedomFest, including our “Fast Money Summit,” and my wife Jo Ann will talk about this year’s selections in the Anthem film festival. 

8:30 – 9:00 am. Rivoli Main Ballroom.  Global Economic Summit with Steve Forbes, Rodolfo Milani, Steve Moore, Jim Rogers, Magatte Wade, and Barbara Kolm (moderator) discussing Trump trade wars, Latin America’s turning socialist/Marxist, European nationalism, China’s future, and corruption in South Africa.

10 – 10:30 am.  Rivoli Main Ballroom.  Libertarian CEO Panel, “Can Conscious Capitalism Make a Difference?” with John Mackey, CEO, Whole Foods Market, and Andy Puzder, former CEO, CKE Restaurants (Carl’s Jr., and Hardee’s) and Trump’s first choice for Labor Secretary.   I plan on a “true or false” quiz for them and the audience to keep the session lively.

11:15 am – 1 pm.  Rivoli Ballroom.  Keynote speaker:  Judge Andrew Napolitano on “What If You Lived in a Country Where the Constitution Meant Nothing?” followed by luncheon in Champagne 2 with Steve Forbes:  “The Judge Answers Your Tough Questions” about the Supreme Court, Trump, immigration, religion, civil forfeitures, etc.

Breakout sessions begin at 1 pm, and we’ve reduced the choices to 10 — but it’s still difficult to choose.  Our “Fast Money Summit” starts at this time, and I’ll be involved from time to time.  Here’s what I’m planning to attend:

1 – 1:50 pm.  Versailles 2.  “DEBATE:  Is Faith Compatible with Reason?” between BYU Professor Daniel Peterson and Scientific American columnist and Skeptic editor Michael Shermer.  I came up with the idea of this debate after reading two books that have opposite conclusions:  In “The Closing of the Western Mind,” historian Charles Freeman argues that the “rise of Christian faith resulted in the fall of reason” in the first 1,000 years after Christ; while in “The Victory of Reason,” Baylor sociologist Rodney Stark contends that “Christianity led to freedom, capitalism, and Western success.”  Who’s right?  Peterson and Shermer will battle it out.  C-SPAN coverage! 

2 – 2:50 pm. Versailles 3.  Anthem Film Festival Room.  “PANEL: 200 Years of Frankenstein:  Leviathan and the Mad Scientist.”  In 1818, Mary Shelley wrote her famous horror novel.  We will hear from top experts on the controversies and meaning of the monster in literature, film and culture:  Reason’s science editor Ron Bailey; and literary professors Socky O’Sullivan (Rollins College) and Jo Ann Skousen (Chapman University).

2:50 – 3:20 pm.  Coffee Break in exhibit hall.  I’ll be enjoying the FreedomFest bookstore, visiting exhibitors, and watching the “pop up” entertainment. And stop by our Eagle booth and say hello!  This is a great time to renew your subscription to my newsletter and trading services.

3:20-4:10 pm.  Versailles 2.  “THE PLAYBOY DEBATE:  Should We Dedicate a Room to Hugh Hefner?”  Every year we dedicate our various rooms to patriots who have died in the past year.  (They will be listed in the official program.)  Steven Watts, professor of history at Missouri U, has written the story of “Mr. Playboy:  Hugh Hefner and the American Dream,” and will argue that Hefner liberated American society from Puritanical sexual neuroses.  Taking the opposite view will be NYTimes conservative columnist Ross Douthat, who has declared Mr. Playboy to be a chauvinist pornographer who exploited women and made our culture “coarser, crueler, and more sterile.”  A timely debate in this “me too” age.  Debate will be moderated by Jennifer Grossman (Atlas Society).  C-SPAN coverage! 

4:20 – 6:30 pm.  Rivoli Main Ballroom.  General sessions include a panel on market-driven solutions to our healthcare crisis; talks by Deneen Borelli on race relations; Robert Kiyosaki on investing; and Rich Lowry (editor of National Review) on “Should We Be Afraid of the New American Nationalism?” (I am.)

I’ll be especially interested in the remarks by Robert Kiyosaki, author of “Rich Dad, Poor Dad,” the #1 financial bestseller ever (26 million copies in print).  I have mixed feelings about his advice, which tends to be doom-and-gloom.  He wrote “Rich Dad’s Prophecy” in 2002, predicting a gigantic crash in 2016.  We did have a financial panic in 2008, but since then it’s been the mother of all bull markets.  He rejects the traditional advice to “go to college, get a good job, stay out of debt, and invest long term in the stock market.”  He says this advice is obsolete.  Instead, one must be an entrepreneur in real estate and business.  But is his advice sound for everyone?

6:10 – 6:40 pm.  Rivoli Ballroom.  We have just added another big debate, “Newsmax vs New York Times!” This debate will star Wayne Allyn Root (Newsmax radio/tv host) vs Ross Douthat (NYTimes columnist).  The topic will be explosive:  “Is Trump Another Reagan — or a Mussolini?”  Our most controversial Trump debate yet.   

After 8 pm, there are lots of fun things to do.  We have a series of “conversational circles,” where attendees discuss various topics in separate rooms — on foreign policy led by Ed Rush, investments by Jim Woods, and libertarian issues by Walter Block.  Anthem film festival will also be showing “The Housing Bubble,” followed by a panel starring Doug Casey, Jim Rogers, Peter Schiff, Gene Epstein, and others.

FRIDAY, JULY 13

7:30 – 8:30 am.  Champagne 3.  Start off early with breakfast with Yeonmi Park, North Korean defector and author of the new book “In Order to Live:  A North Korean Girl’s Journey to Freedom.”  I look forward to her perspective on potential opening up of relations with North Korea.

Then we have general sessions in Rivoli Main Ballroom with Jenny Beth Martin updating us on the Tea Party Movement; Matt Kibbe (Free the People) on a new technology, “Atlas Shoved:  The 21st Century Motor!”; and the annual Pitch Tank competition with Kevin Harrington, Steve Forbes, John Mackey, Bernt Ullmann, and Greg Writer (moderator).

Breakout sessions begin after the coffee break….

11:00 – 11:50 am.  Burgundy.  Tom Palmer (Atlas Network) on “The Age of Reason: The Common Sense of Tom Paine.”  Tom is our resident philosopher, always insightful.

12:00 – 12:50 pm.  I’m going to either the Chablis for Larry Reed’s session, “Was Jesus a Socialist?” or the Rivoli Ballroom for the panel “The Assassination of Western Civilization:  What’s Causing our Society to Decline?” with Steve Forbes, Deirdre McCloskey, John Prevas, and Barry Strauss (Gary Alexander to moderate).

1 – 1:50 pm.  Lunch with hosted exhibitors or on your own.

2 – 2:50 pm.  Bordeaux.  I take on Jeff Berwick, producer of AnarchaPulco, on “The Ultimate Libertarian Debate:  Should You Vote?”  Many libertarians refuse to participate in the political process, which they say is inherently corrupt and immoral.  They have been influenced by such books as “None of the Above” by Sy Leon and “Don’t Vote–It Just Encourages the Bastards,” by P. J.  O’Rourke.  Not to be missed!

Then back to the Fast Money Summit in the Vendome A room:

3 – 3:25 pm.  Vendome A.  “What am I Missing:  The Ultimate Question for All Bears and Bulls,” where moderator Eric Gemelli will be asking this tough question to Doug Casey, Keith Fitz-Gerald, Alex Green, and Jim Rogers. 

3:25 – 3:50 pm.  Vendome A.  I’ll be interviewing Prof. Deirdre McCloskey in “The Capital Debate:  Which is More Important, Investment or Ideas?” and challenging her book title, “Bourgeois Equality:  How Ideas, Not Capital or Institutions, Enrich the World.”

4:00 – 4:30 pm.  Champagne 2.  I’ll be attending FreedomWorks reception, “Midterm Elections: Can Limited Government Make a Comeback?” with John Fund, pollster Brett Loyd, and Adam Brandon.  Brett Loyd is one of the few pollsters who predicted Trump’s victory.

Then back in the Rivoli Main Ballroom for…

4:35 – 4:55 pm.  Heather Mac Donald on “The Delusion of Diversity”

4:55-5:15 pm.  I’ll be leading a half hour panel on “Are We Making a Difference?  A Freedom Movements Progress Report” with Tom Palmer (Atlas Network), Larry Reed (FEE), Adam Brandon (FreedomWorks) and Charlie Copeland (Intercollegiate Studies Institute).

At 5:15 pm, we begin our most popular event, the mock trial.  This year we are putting the “Public School System on Trial,” starring Kennedy (Fox News) as the Judge; prosecuting attorney Bob Bowdon; Defending attorney “Tick” Segerblom; star witnesses Cory DeAngelis (Cato), Vicki Alger (Independent Institute), Julian Heilig (Sacramento State and NAACP); and Lisa Sparks (Orange County School System, California).  Naomi Brockwell will be the foreman.  And 12 jurors selected from the audience.  Let the debate begin!

There’s plenty going on after the mock trial (conversation circles, Anthem film festival, and Karaoke after dark), but I have a couple of dinners I am going to.

SATURDAY, JULY 14  

7:30 – 8:25 am.  Another breakfast, this time with a debate between me and Alex Green on “Can You Predict the Future?”  He says no, I say yes.  Lots of historical examples.  We did this debate once before at a conference, and it was electrifying.  Eric Gemelli is the moderator.

8:30 – 8:45 am.  Rivoli Main Ballroom.  A testy debate on Tesla Motors and Elon Musk.  Keith Fitz-Gerald (Money Map) defends Tesla while Rob Arnott, the godfather of smart beta, contends that Tesla is too far in debt to escape bankruptcy.  Jim Woods as moderator.

Following the debate, I’ll be announcing the winner of this year’s Leonard E. Read Book Award.  Read this book!

Afterwards, we will have a series of talks and panels:  Republican leaders Senator Mike Lee, and representatives Thomas Massie and Tom Garrett on “Republicans Gone Wild”….Magatte Wade on the future of Africa…Libertarians on winning in November with Bill Weld, Jim Gray, Ron Nielson and Ben Swann….and Reason editors Nick Gillespie, Matt Welch, and Katherine Mangu-Ward on the future of libertarianism and Reason Foundation.

After the coffee break….we have a breakout session:

10:50 – 11:15 am in Vendome A (Fast Money Summit), I interview Rob Arnott, CEO of Research Affliates, who manages over $200 billion on his formula for beating the market, what works and what doesn’t work on Wall Street.

11:15 – 11:50 am.  We show a 5 min video of Mark Mobius, long-time manager of the Templeton Emerging Markets Fund (ranked #1 over 30 years), on “Lessons of Investing in Emerging Markets,” followed by comments by financial guru Jim Rogers.

Then back in the Rivoli Main Hall for our final general session:

11:50 am – 12:20 pm.  A panel on foreign policy with Senator Mike Lee, Representative Thomas Massie, and Ed Rush. 

12:20 – 12:50 pm. I lead the closing panel, with David Boaz (Cato), Heather Mac Donald (Manhattan Institute), Steve Forbes, and Jenny Beth Martin (Tea Party Patriots) on what we have learned in answering the question, “Where is the Voice of Reason?”

At 12:40 pm I will announce the theme for next year and our big name celebrity speaker.  Don’t miss it!  Before we dismiss for lunch, I invite everyone who has a silver dollar to come forward and take a picture with Steve Forbes and members of our closing panel.

After a hosted luncheon or lunch on your own, we have our final blockbuster Saturday afternoon breakout sessions:

2 – 2:50 pm. Loire.  I plan on attending this panel:  “How to Turn a Bestseller into a Classic.”  Out of the some 120 million books that have been published in the history of the world, only 2% have become bestsellers and only 1,200 or so have become classics.  What are the criteria to determine a classic novel or non-fiction work?  Dan Peterson (BYU), Socky O’Sullivan (Rollins College), and Daniele Struppa (Chapman U) will seek to answer this question.

3-3:50 pm.  Loire.  David Boaz addresses the issue, “Leviathan and the Age of Reason:  Why Life After Locke and Hobbes is no Longer Nasty, Brutish, and Short.”  Introduction by Elizabeth Ames.

4-4:25 pm.  Vendome A (Fast Money Summit).  I introduce John Mackey, CEO of Whole Foods, who is will speak on “Investing on the Run:  How I Became a Successful Part-Time Investor Running a Full-time Business.”  This is the first time John is speaking on his life as an investor and speculator!

4:25 – 4:50 pm.  Vendome A.  Steve Forbes closing address to the Fast Money Summit:  “An Optimist’s Guide to Investing in Capitalism.”  It will be followed by reception and cash bar: An opportunity to meet Mr. Forbes and other speakers, take photographs, have them sign books, etc.

6 – 10 pm.  Rivoli Ballroom.  Get ready for the farewell reception and gala Saturday night banquet, with the Anthem Film Awards, Reason Media Awards, and the dance band The Salamanders as we celebrate the 50th anniversary of Reason Foundation.  After a long four day event, it feels great to get out on the dance floor.  See you there!

This is also my opportunity to thank everyone who has worked so hard and put in countless hours or work and creativity to make this year’s FreedomFest and Anthem Film Festival an incredible success — Valerie Durham, our conference director; Autumn Bennett, Norann Dillon, Jennifer Hunter, Harold Skousen, our registration team, and my wife Jo Ann.  

And see you next year!  Dates are July 17-20, 2019, at the Paris Resort, Las Vegas.  Details to be announced soon at www.freedomfest.com.

Yours for peace, prosperity and liberty, AEIOU,

Mark Skousen

Producer

If GDP Lags, Watch the Economy GO

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‘Gross output’ reflects the full value of the supply chain, and it portends much faster growth.

Reprinted from THE WALL STREET JOURNAL.

 By Mark Skousen

The Bureau of Economic Analysis will release its preliminary first-quarter growth figure on Friday. According to the Atlanta Fed consensus tracker, economists are predicting gross domestic product to have risen at a meager 2% annual rate. But a powerful behind-the-scenes indicator suggests the real rate may turn out to be significantly higher.

“Gross output,” or GO, reflects the full value of the supply chain—the business-to-business spending that moves all goods and services toward the final retail market. Based on my work and research by David Ranson, chief economist at HCWE & Co., changes in the supply chain are a strong leading indicator of the next quarter’s GDP.

The supply chain, which the BEA calls “intermediate inputs,” took off in the fourth quarter of 2017, growing at a 7.5% annualized rate. That’s more than double the rate of real GDP growth and the fastest pace since before the Great Recession. Real GO, which includes both GDP and the supply chain, rose at a 4.7% rate. The growth was broad-based, with strong numbers in mining, manufacturing, utilities and construction. The fourth quarter 2017 GDP growth rate of 2.9% did not reflect the dramatic increases in intermediate outputs because GDP by definition measures only spending at the end of the economic chain.

The GO model is more in keeping with the Conference Board’s list of 10 leading economic indicators, which are linked to manufacturing and capital markets. For three quarters in a row in 2017, GO accelerated, probably due to the anticipated tax breaks and deregulatory environment. The boom in intermediate business activity should translate into higher economic growth soon, barring international instability, trade wars, or tighter-than-expected monetary policy.

As I noted in these pages in 2014, measuring gross output is a breakthrough in national income accounting. By reporting GO as well as GDP, the BEA has helped economists catch up with the accounting and finance professions. Public companies have long reported the top line (revenue) and the bottom line (profit) at the same time each quarter. For a national economy, GO corresponds to the top line (total activity) and GDP to the bottom line (final product). As the economists Dale Jorgenson, J. Steven Landefeld and William Nordhaus wrote in a 2006 book: “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”

GO also dispels the popular Keynesian myth that consumer spending is the driver of economic growth. For example, the New York Times recently warned: “With personal consumption accounting for nearly 70 percent of all economic activity . . . the administration will be hard pressed to lift growth substantially if consumers remain cautious about opening their wallets.” But GDP is an incomplete measure of economic activity. It overlooks the value of all goods-in-process, which amounted to more than $14.7 trillion in 2017.

The broader-based GO highlights the reality that business spending is actually substantially larger than consumption. Consumption is 69% of GDP but just 39% of GO, while business spending is 17% of GDP but 52% of GO. This model therefore better recognizes the vital contributions of entrepreneurship, capital investment and innovative technology. As Larry Kudlow, the new director of the National Economic Council, wrote in 2006: “It is business, not consumers, that is the heart of the economy. When businesses produce profitably, they create income-producing jobs and thus consumers spend. Capital formation is the key to worker productivity and consumer prosperity.”

The first-quarter 2018 GO release won’t come until July 20, but BEA director Brian Moyer says the agency plans to release both GO and GDP at the same time within the next year or two. Hopefully by then the media will catch on to this advance in supply-side national accounting and leading indicator of robust economic performance.

This article appeared originally on wsj.com and in the April 24, 2018, print edition of the Wall Street Journal.

About the Author

Mark Skousen is a Presidential Fellow at Chapman University.  He introduced gross output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990).

Away We GO: Business Spending Accelerates in 4th quarter 2017

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Washington, DC (Thursday, April 19, 2018)

Gross output (GO), the top line of national accounting that measures spending at all stages of production, accelerated economic growth to record levels in the 4th quarter 2017.

Based on data released on Thursday, April 19, 2018 by the BEA and adjusted to include all sales throughout the production process, real adjusted GO (GO*) increased at an annualized rate of 5.6% in the fourth quarter of 2017, which is a significant improvement over the previous quarter’s increase of 2.7%[1]. Additionally, real adjusted GO for the fourth quarter of 2017 rose at nearly double the 2.9% GDP growth rate.

Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University, states, “The latest GO data indicates that business investment and spending took off in the 4th quarter, probably as a result of the business tax reductions passed by Congress in late December 2017.  The new tax breaks and deregulatory environment are likely to stimulate further economic growth in 2018, barring international tensions and trade wars.”

Real GDP, the bottom line of national income accounting, rose at an annualized rate of 2.9% in the fourth quarter 2017. During an economic expansion, real GO* generally grows at a higher rate than real GDP. In Q4 2017, real GO* grew at 5.6% ‒ 95% higher than the real GDP growth rate for the quarter ‒, which is a good indication that intermediate business activity is picking up pace and should translate into higher GDP growth in the near future.

Skousen states, “The GDP growth rate of 2.9% failed to take into account what happened behind the scenes in the booming supply chain in the 4th quarter.  By focusing solely on final spending and the end of the economic chain, GDP can sometimes be a misleading indicator of economic performance. GO is a much better, more comprehensive view of total economic activity along the entire supply chain. After two quarters of lagging behind the GDP, the GO is again growing at a dramatically faster rate and shows a strong positive outlook for the economy in 2018.”

According to a recent study by David Ranson, chief economist at HCWE & Co., GO anticipates changes in GDP by as much as 12 weeks in advance and thus serves as a reliable leading indicator: http://www.hcwe.com/guest/EW-0118.pdf

The fourth quarter Skousen B2B Index, a measure of business spending throughout the supply chain, increased at 12.2% in nominal terms, which is significantly higher than the 4.2% growth rate from the previous quarter. The substantial growth in the fourth quarter puts the business spending increase at levels we have not seen since the second quarter of 2014. In the fourth quarter of 2017, B2B transactions rose at an annual rate of 8.5% in real terms, which is more than triple the 2.7% rate form the previous quarter.

After a growth slowdown in the second quarter and a slight uptick in the third quarter, the adjusted GO grew at more than 9% in nominal terms and increased to reach $42.7 trillion. The current adjusted GO reached $42.7 trillion, more than double the size of GDP ($19.75 trillion), which measures final output only.

The overall growth of GO in the fourth quarter resulted from the growth in all but two industrial sectors. The spending increase in the early stages of production, such as manufacturing, is usually a reliable leading economic indicator that overall economic growth should continue to expand.

Supply Chain Activity Skyrockets

The mining sector growth exploded from its 4.7% growth rate last period and expanded at nearly 46% in the fourth quarter of 2017. While it is important to monitor the growth rate in the mining sector as an early indicator of economic expansion, the mining sector accounts for just 1.5% share of total GO, which minimizes the impact on the overall GO. However, the manufacturing sector accounts for nearly a fifth of total GO (18% share). Therefore, the 13% annualized growth of the manufacturing sector has a much greater positive impact on the total GO and should be an even better indicator of an accelerated economic expansion to come. Just as a reference, the manufacturing sector rose 5.6% in the previous quarter. The 10.2% growth rate for durable goods was slightly lower than the growth rate for non-durable goods, which rose 16% in the fourth quarter.

Another sector with an 18% share of GO is the finance, insurance, real estate, rental and leasing sector. This sector expanded 6% in the fourth quarter, which was more than double the expansion rate in the previous quarter when this sector grew at a 2.8% annualized rate in nominal terms. Additionally, the real estate, rental and leasing sub-segment drove this expansion by growing at 6.4% versus the Finance and insurance sub-segment, which grew at a respectable but slightly lower 5.4%.

Compared to the previous quarter, spending fell significantly only in the Arts, entertainment, recreation, accommodation, and food services sector which accounts for just 4% of the total GO and declined 3% from the previous quarter. Within this sector the Arts, entertainment and recreation sub-segment fell more than 11% from the prior quarter and the Accommodation and food services sub-segment was flat to Q3.

In addition to Mining and Manufacturing industries, two more segments posted double-digit percentage increases from the previous quarter. The Utilities segment rose 12.5% and Construction increased 12.4%. Both segments combined account for 5.5% of total GO.

Total government spending (11% share of total GO) increased its spending at a rate higher than the 3.1% two-year average for the second consecutive quarter. After a 3.6% hike in the third quarter, total government spending inched up another 4.8% in the fourth quarter. State and local governments lead the growth with a 5% increase and the federal government expanded at a slightly lower 4.4% annualized rate in nominal terms.

Gross output (GO) and GDP are complementary statistics in national income accounting. GO is an attempt to measure the “make” economy; i.e., total economic activity at all stages of production, similar to the “top line” (revenues/sales) of a financial accounting statement. In April 2014, the BEA began to measure GO on a quarterly basis along with GDP.

Gross domestic product (GDP) is an attempt to measure the “use” economy, i.e., the value of finished goods and services ready to be used by consumers, business and government. GDP is similar to the “bottom line” (gross profits) of an accounting statement, which determined the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP. During the financial crisis of 2008-09, GO fell much faster than GDP, and afterwards, recovered more quickly than GDP. Still, it wasn’t until late 2013 that GO fully recovered from its peak in 2007. Recently quarterly GO and GDP have both been growing at a similar pace.

Business Spending (B2B) Grows Faster Than Consumer Spending

Our business-to-business (B2B) index is also useful. It measures all the business spending in the supply chain and new private capital investment. Nominal B2B activity increased 12.2% in the 4th quarter to $24.6 trillion. Meanwhile, consumer spending rose to $13.7 trillion, which is equivalent to a 6.7% annualized growth rate. In real terms, B2B activity rose at an annualized rate of 8.5% and consumer spending rose 4.4%.

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain,” stated Skousen. “The business activity is heating up again in the fourth quarter of 2017, potentially because the business community saw early indications that President Trump and Congress were serious about trying to pass a tax reform bill before the end of 2017.”

About GO and B2B Index

Skousen champions Gross Output as a more comprehensive measure of economic activity. “GDP leaves out the supply chain and business to business transactions in the production of intermediate inputs,” he notes. “That’s a big part of the economy. GO includes B2B activity that is vital to the production process. No one should ignore what is going on in the supply chain of the economy.”

Skousen first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990). A new third edition was published in late 2015, and is now available on Amazon.

Click here: Structure of Production on Amazon

The BEA’s decision in 2014 to publish GO on a quarterly basis in its “GDP by Industry” data is a major achievement in national income accounting. GO is the first output statistic to be published on a quarterly basis since GDP was invented in the 1940s.

The BEA now defines GDP in terms of GO. GDP is defined as “the value of the goods and services produced by the nation’s economy [GO] less the value of the goods and services used up in production (Intermediate Inputs or II].” See definitions at https://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm

With GO and GDP being produced on a timely basis, the federal government now offers a complete system of accounts. As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in their book, A New Architecture for the U. S. National Accounts, “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”

Skousen adds, “Gross Output and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and the business cycle, and demonstrates that business spending is more significant than consumer spending,” he says. “By using GO data, we see that consumer spending is actually only about a third of economic activity, not two-thirds that is often reported by the media. As the chart above demonstrates, business spending is in fact almost twice the size of consumer spending in the US economy.”

Note: Ned Piplovic assisted in providing technical data for this release.

 

For More Information

The GO data released by the BEA can be found at www.bea.gov under “Quarterly GDP by Industry.” Click on interactive tables “GDP by Industry” and go to “Gross Output by Industry.” Or go to this link directly: BEA – Gross Output by Industry

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following:

To interview Dr. Mark Skousen on this press release, contact him at mskousen@chapman.edu, or Ned Piplovic, Media Relations at skousenpub@gmail.com.

# # #

 

[1] The BEA currently uses a limited measure of total sales of goods and services in the production process. Once products are fabricated and packaged at the manufacturing stage, the BEA’s GO only adds “net” sales at the wholesale and retail level. Its official GO for the 2017 3rd quarter is $33.8 trillion. By including gross sales at the wholesale and retail level, the adjusted GO is $41.7 trillion in Q3 2017. Thus, the BEA omits nearly $8 trillion in business-to-business (B2B) transactions in its GO statistics. We include them as a legitimate economic activity that should be accounted for in GO, which we call Adjusted GO. See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.

GO Slow: New Leading Indicator Predicted Slowdown in GDP

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by Mark Skousen
Presidential Fellow, Chapman University
Editor, Forecasts & Strategies

For the previous two quarters (Q2 and Q3, 2017) Gross Output, the new broader measure of the economy that includes the supply chain, was growing at a slower rate than GDP.  According to my research, that suggested a slowdown in GDP.

Today the Bureau of Economic Analysis released the advance estimate for Q4 2014 GDP.  After two consecutive quarters (Q2 & Q3) of 3%-plus growth in real terms, the GDP grew only 2.6% in Q4 — just as GO predicted.

For some time now, I’ve been arguing that gross output (GO), the top line in national income accounting, is a more accurate measure of total economic activity.  Because it includes business-to-business (B2B) transactions in the earlier stages of production, GO can anticipate changes in GDP (the bottom line) as much as 12 weeks in advance.

Since the first quarter of 2017, GO has been growing at slower rate than GDP.  In Q2, real GO rose at a tepid 1.7%, substantially less than 3.1% for GDP, and in Q3 2017, real GO accelerated at 2.7% growth rate, but still less than the 3.1% real GDP growth for the 3rd quarter.  I concluded in November, “Second quarter GO suggests potential slowdown in the economy, despite the currently rising GDP.”  Please reference the 2017 Q2 and 2017 Q3 press releases for more information.

The following chart provided by David Ranson, chief economist at HCWE & Co., shows the relationship between GO, II and GDP since the third quarter of 2016.

GO

Data: Quarterly seasonally-adjusted chain-type quantity indices of intermediate inputs, gross output and gross domestic product (Bureau of Economic Analysis).

 

As David Ranson comments:  “In this chart we compare the growth of gross output (GO) and intermediate output (II) with the growth of GDP over the past year (all in real terms). The chart begins with the third quarter of 2016 because, prior to that, all three variables were moving in close parallel. At that point a substantial divergence opened up, as the growth of intermediate output (and GO) raced ahead of GDP growth. That implied an acceleration in GDP growth which we have been experiencing. Now, just-released third-quarter figures for GO and II suggest that a re-convergence has begun: in the second and third quarters of 2017 growth in GO and II has fallen below the growth rate of GDP. That implies that GDP will stabilize and possibly decelerate later in 2018.”

 

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the following:

Mark Skousen, “At Last, a Better Way to Economic Measure” lead editorial, Wall Street Journal, April 23, 2014: http://on.wsj.com/PsdoLM

Steve Forbes, Forbes Magazine (April 14, 2014): “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal”: http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/

Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”: http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

Steve Hanke, Globe Asia (July 2014): “GO: J. M. Keynes Versus J.-B. Say,” http://www.cato.org/publications/commentary/go-jm-keynes-versus-j-b-say

David Ranson, “Output growth data that the economy generates months earlier than GDP,” Economic Watch, July 24, 2017. HCWE, Inc. http://www.hcwe.com/guest/EW-0717.pdf

Mark Skousen, “Linking Austrian Economics to Keynesian Economics,” Journal of Private Enterprise, Winter, 2015:  http://journal.apee.org/index.php?title=Parte7_Journal_of_Private_Enterprise_vol_30_no_4.pdf

To interview Dr. Mark Skousen on this press release, contact him at mskousen@chapman.edu, or Ned Piplovic, Media Relations at skousenpub@gmail.com.

 

THIRD QUARTER GROSS OUTPUT AND B2B SPENDING GAIN MOMENTUM

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Washington, DC (Friday, January 19, 2018): Gross output (GO), the top line of national accounting that measures spending at all stages of production, gained momentum in the 3rd quarter 2017.

Based on data released on Friday, January 19, 2018 by the BEA and adjusted to include all sales throughout the production process, nominal adjusted GO (GO*) increased at an annualized rate of 4.3% in the third quarter of 2017, which a significant improvement over the previous quarter’s increase of 2.9%[1].  However, nominal adjusted GO for the third quarter of 2017 rose at a slightly lower rate than the 5.2% nominal GDP growth.

Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University, states, “The latest GO data indicates that the economy was poised for strong expansion in 2018 even before the tax reduction bill that was passed in December 2017.”

Real GDP, the bottom line of national income accounting, rose at an annualized rate of 3.1% in the third quarter 2017.  During an economic expansion, real GO* generally grows at a higher rate than real GDP, however, in Q3 2017, real GO* grew at 2.7%.

Skousen states, “By focusing solely on final spending and the end of the economic chain, GDP can sometimes be a misleading indicator of economic performance. GO is a much better, more comprehensive view of total economic activity along the entire supply chain.  While GDP has grown faster than GO in the 2nd and 3rd quarters of 2017, both are showing a strong positive outlook for the economy.”

Furthermore, according to a recent study by David Ranson, chief economist at HCWE & Co., GO anticipates changes in GDP by as much as 12 weeks in advance and thus serves as a reliable leading indicator: http://www.hcwe.com/guest/EW-0717.pdf  However, the difference between GO and GDP in the most recent quarters has been relatively small.

The Skousen B2B Index, a measure of business spending throughout the supply chain, increased at 4.2% in Q3, which is significantly higher than the 2.6% growth rate from the previous quarter. The significant growth in the third quarter indicates that business spending might be back to its 4%-plus growth rate it had prior to the lackluster performance in the second quarter. In the third quarter, B2B transactions rose at an annual rate of 2.7% in real terms, which is nearly double the 1.4% rate form the previous quarter.

After a growth slowdown in the second quarter, the adjusted GO resumed growing at more than 4% and increased to reach $41.7 trillion. The current adjusted GO reached $41.7 trillion, more than double the size of GDP ($19.5 trillion), which measures final output only.

The overall growth of GO in the third quarter resulted from the growth in all but three industrial sectors. The spending increase in the early stages of production, such as manufacturing, is usually a reliable leading economic indicator that overall economic growth should continue to expand.

Supply Chain Activity Continues Increasing

The mining sector growth subsided a little from its 8.3% growth rate last period, but still rose at 4.7% in the third quarter of 2017. While it is important to monitor the growth rate in the mining sector as an early indicator of economic expansion, the mining sector accounts for just 1.4% share of total GO, which minimizes the impact on the overall GO. However, the manufacturing sector accounts for nearly a fifth of total GO (18% share). Therefore, the 5.6% annualized growth of the manufacturing sector has a much greater positive impact on the total GO and should be an even better indicator of an accelerated economic expansion to come. Just as a reference, the manufacturing sector rose just 1.2% in the previous quarter. The 7.5% growth rate for durable goods was more than twice the rate for non-durable goods, which rose 3.5% in the third quarter.

Another sector with an 18% share of GO is the finance, insurance, real estate, rental and leasing sector. While the sector expanded 2.8% in the third quarter, the expansion was significantly lower than it was in the second quarter when this sector grew at a 7.0% annualized rate in nominal terms. Additionally the real estate, rental and leasing sub-segment drove this expansion by growing at 3.6% versus the Finance and insurance sub-segment, which grew at 1.6%.

Compared to the previous quarter, spending fell significantly in only three sectors and the largest drop of 10.6% was in the Utilities sector. While the agriculture, forestry, fishing and hunting sector was down 3.6%, historically this sector tends to have no growth or slight downturn in the second half of the year. However, these two sectors combine to less than 3% total share of GO and did not have a significantly negative effect on the overall GO. The largest drop of 4.2% was in the Transportation and warehousing sector, which accounts for 3.3% share of GO. These three sectors combined account for a 5.6% share of the total GO. Therefore, the negative performance of these few sectors had no noticeable impact on the overall GO growth.

Total government spending (11% share of total GO) increased 3.6% in the second quarter. This growth rate is 24% higher than last quarter’s 2.9% growth rate. The federal government grew at an annualized rate of 3.2% in nominal terms and state and local government grew at a slightly higher rate of 3.8%.

gross output

(GO) and GDP are complementary statistics in national income accounting. GO is an attempt to measure the “make” economy; i.e., total economic activity at all stages of production, similar to the “top line” (revenues/sales) of a financial accounting statement. In April 2014, the BEA began to measure GO on a quarterly basis along with GDP.

Gross domestic product (GDP) is an attempt to measure the “use” economy, i.e., the value of finished goods and services ready to be used by consumers, business and government. GDP is similar to the “bottom line” (gross profits) of an accounting statement, which determined the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP. During the financial crisis of 2008-09, GO fell much faster than GDP, and afterwards, recovered more quickly than GDP. Still, it wasn’t until late 2013 that GO fully recovered from its peak in 2007.  Recently quarterly GO and GDP have both been growing at a similar pace.

Business Spending (B2B) Grows Faster Than Consumer Spending

Our business-to-business (B2B) index is also useful.  It measures all the business spending in the supply chain and new private capital investment. Nominal B2B activity increased 4.2% to $23.9 trillion. Meanwhile, consumer spending rose to $13.4 trillion in the first quarter, which is equivalent to a 3.7% annualized growth rate. In real terms, B2B activity rose at an annualized rate of 2.7% and consumer spending rose 1.6%.

gross output

“B2B spending is in fact a pretty good indicator of where the economy is headed, since it measures spending in the entire supply chain,” stated Skousen. “The business activity is heating up again in the third quarter of 2017, potentially because the business community saw early indications that President Trump and Congress were serious about trying to pass a tax reform bill before the end of 2017.”

About GO and B2B Index

Skousen champions Gross Output as a more comprehensive measure of economic activity. “GDP leaves out the supply chain and business to business transactions in the production of intermediate inputs,” he notes. “That’s a big part of the economy. GO includes B2B activity that is vital to the production process. No one should ignore what is going on in the supply chain of the economy.”

Skousen first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990). A new third edition was published in late 2015, and is now available on Amazon.

Click here: Structure of Production on Amazon

The BEA’s decision in 2014 to publish GO on a quarterly basis in its “GDP by Industry” data is a major achievement in national income accounting. GO is the first output statistic to be published on a quarterly basis since GDP was invented in the 1940s.

The BEA now defines GDP in terms of GO. GDP is defined as “the value of the goods and services produced by the nation’s economy [GO] less the value of the goods and services used up in production (Intermediate Inputs or II].” See definitions at https://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm

With GO and GDP being produced on a timely basis, the federal government now offers a complete system of accounts. As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in their book, A New Architecture for the U. S. National Accounts, “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”

Skousen adds, “Gross Output and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and the business cycle, and demonstrates that business spending is more significant than consumer spending,” he says. “By using GO data, we see that consumer spending is actually only about a third of economic activity, not two-thirds that is often reported by the media. As the chart above demonstrates, business spending is in fact almost twice the size of consumer spending in the US economy.”

Note: Ned Piplovic assisted in providing technical data for this release.

For More Information

 

This content was posted originally on grossoutput.com (https://grossoutput.com/2018/01/19/third-quarter-gross-output-and-b2b-spending-gain-momentum/)

# # #

[1] The BEA currently uses a limited measure of total sales of goods and services in the production process. Once products are fabricated and packaged at the manufacturing stage, the BEA’s GO only adds “net” sales at the wholesale and retail level. Its official GO for the 2017 3rd quarter is $33.8 trillion. By including gross sales at the wholesale and retail level, the adjusted GO is $41.7 trillion in Q3 2017. Thus, the BEA omits nearly $8 trillion in business-to-business (B2B) transactions in its GO statistics. We include them as a legitimate economic activity that should be accounted for in GO, which we call Adjusted GO. See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.

2ND QUARTER GROSS OUTPUT SHOWS SURPRISE SLOWDOWN IN ECONOMY

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Washington, DC (Thursday, November 2, 2017): Gross output (GO), the top line of national accounting and a leading economic indicator, grew at a slower pace than GDP in the second quarter 2017, indicating a sudden slowdown in economic activity.  Mark Skousen, editor of Forecasts & Strategies and a Presidential Fellow at Chapman University, states, “My research shows that whenever GO grows slower than GDP, it suggests a potential decline in economic growth and if this trend persists, a recession could follow.  While GO grew at a slower pace, there is no still no evidence of a recession.”

Based on data released on Thursday, November 2, 2017 by the BEA and adjusted to include all sales throughout the production process, nominal adjusted GO (GO*) increased at an annualized rate of 2.9% in the second quarter of 2017, which is significantly lower than the previous quarter’s increase of 6.0%[1]. Nominal adjusted GO for the second quarter of 2017 grew at slower pace than the 4.0% nominal GDP growth and the 3.6% growth of the unadjusted GO reported by the BEA.

Real GDP, the bottom line of national income accounting, rose at an annualized rate of 3.1% in the second quarter 2017.  Real GO* generally grows at a higher rate than real GDP during an economic expansion.  However, in Q2 2017, real GO* grew at only 1.7%.

Skousen states, “By focusing solely on final spending and the end of the economic chain, GDP can sometimes be a misleading indicator of economic performance.  GO is a much better, more comprehensive view of total economic activity along the entire supply chain, and indicates a less positive outlook right now.”

In fact, according to a recent study by David Ranson, chief economist at HCWE & Co., GO anticipates changes in GDP by as much as 12 weeks in advance and thus serves as a new leading indicator: http://www.hcwe.com/guest/EW-0717.pdf

Skousen B2B Index Also Slows Dramatically

The Skousen B2B Index, a measure of business spending throughout the supply chain, increased at 2.6% in Q2, which is significantly less than the 8.1% growth rate from the previous quarter. This is the first slowdown after four consecutive quarters of strong B2B growth of 5% or more. In the second quarter, B2B transactions rose at an annual rate of 1.4% in real terms.

After four quarters of strong growth, the adjusted GO rose at slower pace, but still increased to reach $41.27 trillion. The current adjusted GO is more than double the size of GDP ($19.25 trillion), which measures final output only.

Supply Chain Activity Continues Increasing, But at a Slower Pace

Out of the 29 Industries and sectors defined within GO, 26 sectors rose compared to the previous quarter. The mining sector grew 8.3% in the second quarter 2017, the most of any sector, but this was relatively small compared to the 62.7% annualized growth in the first quarter 2017. Moreover, the mining sector accounts for just 1% share of total GO, which diminishes the impact of this small increase on the overall GO.  In contrast, the manufacturing sector is almost a fifth of total GO (18% share). Therefore, the 1.2% annualized growth of the manufacturing sector has a much greater impact on the total GO. With a 2.6% annualized growth rate, durable goods outpaced non-durable goods, which fell 0.2% compared to the previous quarter.

Another sector with an 18% share of GO is the finance, insurance, real estate, rental and leasing sector. In the second quarter, this sector grew at a 7.0% annualized rate in nominal terms, which is higher than the 6.7% increase in the first quarter 2017. The finance and insurance subsector, which accounts for 8% of total GO by itself, rose 11.1%.

Compared to the previous quarter, spending fell significantly in only two sectors. The largest drop of 4.8% is in the agriculture, forestry, fishing and hunting sector. The Construction sector was down 5.7%. The aforementioned non-durables sector and the accommodation and food services sector were virtually flat with no change to the previous quarter. These four sectors combined account for a 17% share of the total GO. Therefore, the negative performance of these few sectors had a noticeable impact on the overall GO growth.

The other surprise in 2nd quarter GO was the dramatic slowdown in wholesale and retail trade. Compared to Q1, total retail trade rose only 0.3% and the Wholesale trade actually fell a marginal 0.1%.

Total government spending (11% share of total GO) increased 2.9% in the second quarter. This growth rate is marginally lower than last quarter’s 3% growth rate. The federal government grew at an annualized rate of 2.2% in nominal terms and state and local government grew at a slightly higher rate of 3.2%.

GROSS OUTPUT

GO and GDP are “Top Line” and “Bottom Line” of National Accounting

Gross output (GO) and GDP are complementary statistics in national income accounting.  GO is an attempt to measure the “make” economy; i.e., total economic activity at all stages of production, similar to the “top line” (revenues/sales) of a financial accounting statement.  In April 2014, the BEA began to measure GO on a quarterly basis along with GDP.

Gross domestic product (GDP) is an attempt to measure the “use” economy, i.e., the value of finished goods and services ready to be used by consumers, business and government.  GDP is similar to the “bottom line” (gross profits) of an accounting statement, which determined the “value added” or the value of final use.

GO tends to be more sensitive to the business cycle, and more volatile, than GDP. During the financial crisis of 2008-09, GO fell much faster than GDP, and afterwards, recovered more quickly than GDP. Still, it wasn’t until late 2013 that GO fully recovered from its peak in 2007. The fact that the adjusted GO has continued to grow faster than GDP (most of the time) is a positive sign.

Business Spending (B2B) Grows Slower Than Consumer Spending

We have also created a new business-to-business (B2B) index based on GO data.  It measures all the business spending in the supply chain and new private capital investment.  Nominal B2B activity increased 2.6% to $23.67 trillion.  Meanwhile, consumer spending rose to $13.3 trillion in the second quarter, which is equivalent to a 3.5% annualized growth rate. In real terms, B2B activity rose at an annualized rate of 1.4% and consumer spending rose 2.5%.

GROSS OUTPUT

“B2B spending is a pretty good indicator of where the economy is headed, since it measures business spending along the entire supply chain,” stated Skousen.  “The fact that business activity has slowed down in the 2nd quarter is a bit surprising, given the pro-business legislation is that expected to become law soon.”

About GO and B2B Index

Skousen champions Gross Output as a more comprehensive measure of economic activity. “GDP leaves out the supply chain and business to business transactions in the production of intermediate inputs,” he notes. “That’s a big part of the economy.  GO includes B2B activity that is vital to the production process. No one should ignore what is going on in the supply chain of the economy.”

Skousen first introduced Gross Output as a macroeconomic tool in his work The Structure of Production (New York University Press, 1990). A new third edition was published in late 2015, and is now available on Amazon.

Click here: Structure of Production on Amazon

The BEA’s decision in 2014 to publish GO on a quarterly basis in its “GDP by Industry” data is a major achievement in national income accounting. GO is the first output statistic to be published on a quarterly basis since GDP was invented in the 1940s.

The BEA now defines GDP in terms of GO. GDP is defined as “valued added,” that is, “the value of the goods and services produced by the nation’s economy [GO] less the value of the goods and services used up in production (Intermediate Inputs or II].”  See definitions at https://www.bea.gov/newsreleases/industry/gdpindustry/gdpindnewsrelease.htm

With GO and GDP being produced on a timely basis, the federal government now offers a complete system of accounts. As Dale Jorgenson, Steve Landefeld, and William Nordhaus conclude in their book, A New Architecture for the U. S. National Accounts, “Gross output [GO] is the natural measure of the production sector, while net output [GDP] is appropriate as a measure of welfare. Both are required in a complete system of accounts.”

Skousen adds, “Gross Output and GDP are complementary aspects of the economy, but GO does a better job of measuring total economic activity and the business cycle, and demonstrates that business spending is more significant than consumer spending,” he says. “By using GO data, we see that consumer spending is actually only about a third of economic activity, not two-thirds that is often reported by the media. As the chart above demonstrates, business spending is in fact almost twice the size of consumer spending in the US economy.”

Note: Ned Piplovic assisted in providing technical data for this release.

For More Information

The GO data released by the BEA can be found at www.bea.gov under “Quarterly GDP by Industry.” Click on interactive tables “GDP by Industry” and go to “Gross Output by Industry.” Or go to this link directly: http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=3&isuri=1&5102=15

For more information on Gross Output (GO), the Skousen B2B Index, and their relationship to GDP, see the new website, www.grossoutput.com (still in development), as well as the following:

Mark Skousen, “GO Beyond GDP:  Introducing Gross Output as the Top Line in National Income Accounting,” presented as the 2017 Schumpeter Lecture in Stockholm, Sweden, sponsored by the Swedish Entrepreneurship Forum:  http://entreprenorskapsforum.se/wp-content/uploads/2017/10/PS_Skousen_web.pdf

Mark Skousen, “At Last, a Better Way to Economic Measure” lead editorial, Wall Street Journal, April 23, 2014: http://on.wsj.com/PsdoLM

Steve Forbes, Forbes Magazine (April 14, 2014): “New, Revolutionary Way To Measure The Economy Is Coming — Believe Me, This Is A Big Deal”:

http://www.forbes.com/sites/steveforbes/2014/03/26/this-may-save-the-economoy-from-keynesians-and-spend-happy-pols/

Mark Skousen, Forbes Magazine (December 16, 2013): “Beyond GDP: Get Ready For A New Way To Measure The Economy”:

http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/

Steve Hanke, Globe Asia (July 2014): “GO: J. M. Keynes Versus J.-B. Say,” http://www.cato.org/publications/commentary/go-jm-keynes-versus-j-b-say

David Ranson, “Output growth data that the economy generates months earlier than GDP,” Economic Watch, July 24, 2017.  HCWE, Inc. http://www.hcwe.com/guest/EW-0717.pdf

Mark Skousen, “Linking Austrian Economics to Keynesian Economics,” Journal of Private Enterprise, Winter, 2015:  http://journal.apee.org/index.php?title=Parte7_Journal_of_Private_Enterprise_vol_30_no_4.pdf

To interview Dr. Mark Skousen on this press release, contact him at mskousen@chapman.edu, or Ned Piplovic, Media Relations at skousenpub@gmail.com.

# # #

[1] The BEA currently uses a limited measure of total sales of goods and services in the production process. Once products are fabricated and packaged at the manufacturing stage, the BEA’s GO only adds “net” sales at the wholesale and retail level. Its official GO for the 2017 2nd quarter is $33.2 trillion.  By including gross sales at the wholesale and retail level, the adjusted GO is $41.27 trillion in Q2 2017.  Thus, the BEA omits $7.8 trillion in business-to-business (B2B) transactions in its GO statistics.  We include them as a legitimate economic activity that should be accounted for in GO, which we call Adjusted GO.  See the new introduction to Mark Skousen, The Structure of Production, 3rd ed. (New York University Press, 2015), pp. xv-xvi.

2013 Global Financial Summit Report

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I just returned from the Global Financial Summit in the Bahamas, where over 200 attendees came from all over the world to learn about new investment opportunities and market solutions to the world’s problems.  We were welcomed by the cabinet members of the Bahamian government, who emphasized how the Bahamas is a first-rate financial center and investment paradise.  It has no tax on income or investments (but does impose a high 42% import duty).   I visited Albany, a new development for the superrich such as Tiger Woods.  I am not surprised they are moving there in droves, given the huge tax increases imposed in 2013.

My family and I lived in the Bahamas in the mid-1980s and I saved enough in taxes to buy a flat in London (without giving up my citizenship).  My story can be found here.

Here’s a short summary (expect more detail in the March Forecasts & Strategies newsletter): [Read more…]

Big News! Stossel Coming to FreedomFest 2013

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Big News! John Stossel Coming to FreedomFest!

Dear FreedomFest attendees,

Lots of news to report about this year’s big show.  First and foremost:

When we ask past attendees, what famous libertarian they want to speak at FreedomFest, John Stossel is their #1 choice – by far.

Your wish is our command:  We are happy to announce that John Stossel is coming to FreedomFest and will be taping a special edition of his Fox Business show, STOSSEL, at FreedomFest on the first day of the conference, Thursday, July 11, 2013 (just think 7-11). And you all are invited! [Read more…]

My First Book Review for Barrons – “Conscious Capitalism”

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Here is my first book review on Barrons — on John Mackey’s new book, “Conscious Capitalism,” which I regard as revolutionary and encourage everyone to get a copy at either a Whole Foods store (always fun to visit) or on Amazon:

BARRONS
| SATURDAY, FEBRUARY 2, 2013

The Soul of the New Capitalism

A worthy successor to The Wealth of Nations

Reviewed by Mark Skousen

We tend to regard capitalism in these cynical times as the worst economic system, except for all the others. By contrast, in Conscious Capitalism, Whole Foods Market Co-CEO John Mackey and Bentley College marketing professor Raj Sisodia put forward what could be the most ambitious, indeed revolutionary, model for capitalism ever conceived. Had their application of higher consciousness been in the boardroom a generation ago, we might have avoided the suffocating regulations of Sarbanes-Oxley and Dodd-Frank, and the dire straits of companies like General Motors, Sears, Citibank, and even Enron.

Conscious capitalism, according to Mackey and Sisodia, is “a way of thinking about business that is more conscious of its higher purpose, its impacts on the world, and the relationships it has with its various constituencies and stakeholders.”

Conscious Capitalism: Liberating the Heroic Spirit of Business

by John Mackey and Raj Sisodia
Harvard Business Press
368 pages, $27

Although they call free enterprise the source of “unprecedented prosperity for humanity,” they challenge the two celebrity philosophers of capitalism, Ayn Rand and Milton Friedman. They reject the Randian notion that “selfishness” and “greed” are virtues, and deny the Friedman view that the only responsibility of capitalism is to maximize profits for its shareholders.

“Business is not about making as much money as possible,” the authors declare. “It’s about creating value for stakeholders.” Companies must develop sterling reputations to attract loyal customers, employees and suppliers, and generate community goodwill. If they do, superior returns can be achieved in earnings and stock price as a byproduct, not as a primary goal. [Read more…]

Report from AEA Meetings in San Diego: The FED = Inflation

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I returned early this year from a productive trip to San Diego for the American Economic Association (AEA) meetings, where I met with several top economists, including Nobel Prize winners. One of the most popular sessions was a panel on the 100th anniversary of the Federal Reserve. The most shocking graph was presented by Ken Rogoff, a Harvard economist.


As the graph indicates, there was virtually no inflation prior to 1913, when the Federal Reserve was created (other than wars, which caused temporary inflation) and we went off the classical gold standard. Rogoff noted that since the Fed was created, prices have skyrocketed 30-fold, or 3,000%! This data confirms Murray Rothbard’s contention that the Fed was created to remove the barriers to inflation, not to control it.

Despite the fact that the Fed engineered all of this inflation, caused the Great Depression and failed to regulate the mortgage banks prior to the 2008 crisis, all of the panelists gave high marks to the Fed! (You can bet that won’t be the case at our special panel on the 100th anniversary of the Fed at FreedomFest!)

Another telling sign was the fact that the sessions with super Keynesian Paul Krugman were standing room only, while monetarists including Nobel laureate Bob Lucas had a small turnout.

What does this situation bode for the future? If Krugman has his way, it means greater deficits, more inflation, and higher taxes.