Why GDP Is Fake
Gross Domestic Product, or GDP, is the most commonly used measure and ranking of a nation’s economy. According to the OECD and Wikipedia, its definition is: “an aggregate measure of production equal to the sum of the gross values added of all resident and institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs).” No subtractions are included in it for debts that were undertaken in order to generate the given “gross values added.” A trillion dollars of increased assets (additional “gross values” of “production”) adds a trillion dollars to GDP, even if all of it was produced by increasing the debts by a trillion dollars: only the assets-side of the balance-sheet is relevant to GDP.
However, wealth is assets minus liabilities; it is assets minus debts; it is not assets alone. Therefore, a nation’s wealth has no necessary relationship at all to a nation’s GDP, because the nation’s wealth is its assets minus its liabilities, not its assets regardless of its liabilities (such as GDP is).
Britannica provides this definition of “GDP”: “Gross domestic product (GDP), total market value of the goods and services produced by a country’s economy during a specified period of time. It includes all final goods and services — that is, those that are produced by the economic agents located in that country regardless of their ownership and that are not resold in any form. It is used throughout the world as the main measure of output and economic activity.” In this definition, too, no subtractions are included in it for the debts. Britannica then goes on to state:
GDP = Consumption + Investment + Government Spending + Net Exports
or more succinctly
GDP = C + I + G + NX
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