Rick Santelli, CNBC’s commentator on interest rates, is the father of the "tea party” after his rant in 2009 against the government bailouts.
Now he is a new supporter of my Gross Output statistic. A few weeks ago, he said on the air that consumer spending drives the economy because “consumption is two-thirds of the economy.”
I immediately contacted Santelli, a long-time friend, to set the record straight. I pointed out that consumer spending is not two-thirds of the economy, but actually only about one-third. It is true that consumption represents around 68% of gross domestic product (GDP), but GDP leaves out a large chunk of economic activity. It ignores business-to-business transactions in the supply chain.
I told him about Gross Output, the new government statistic that I’ve advocated for years. It measures spending at all stages of production. Less than 40% of GO constitutes consumption. Business spending and private fixed investment accounts for more than 50% of GO.
Rick Santelli got it, and arranged to have me on First on CNBC “Squawk on the Street” last Tuesday, Dec. 23, to discuss the significance of GO. I debunked the Keynesian idea that "consumer spending drives the economy," and recommended the supply side view that business investment, productivity and entrepreneurship drive the economy. I also talked about GO and its ability to forecast the future. I said that GO was growing faster than GDP, which was positive for the economy and Wall Street. Watch the three-minute interview here: http://video.cnbc.com/gallery/?video=3000340429.
For more written information on GO, go to http://www.forbes.com/sites/realspin/2013/11/29/beyond-gdp-get-ready-for-a-new-way-to-measure-the-economy/.
I’ve also written a textbook, “Economic Logic,” now in its 4th edition, that explains GO in national income accounting: http://www.amazon.com/Economic-Logic-Fourth-Edition-Skousen/dp/1621572226.
Santelli wants me back on Thursday, Jan. 22, when 3rd quarter GO comes out. Stay tuned!
May you all have a wonderful Christmas day, and a happy prosperous New Year!
Good investing, AEIOU,
THE BUZZ: The Heritage Foundation hosted a conference last week in Washington, D.C., on "how to get the economy growing again," with big names Art Laffer, Larry Kudlow and former H-P CEO Carly Fiorina. Steve Moore, chief economist at Heritage, was the moderator and reported that his upcoming debate with Paul Krugman at FreedomFest "was the big topic of conversation." Krugman is the most influential and often-dangerous economist of our time, having recently induced Prime Minister Shinzo Abe to postpone raising taxes in Japan, and Sweden to cut rates and start its own quantitative easing. You won't want to miss this Dream Debate of the Century. Krugman has refused all debates -- until now. See you there! To register and get the early bird discount, go to http://freedomfest.com/register-now-2/.
I just received a letter from John Mackey, CEO of Whole Foods Market, that he finally confirmed that he will be speaking at next year’s FreedomFest, and will be one of the judges (along with Steve Forbes and Peter Thiel) for the $50,000 American Dream Award (go online to sign up). Both he and Steve Forbes attend the entire four-day event. There is something unique about this conference that would cause these busy men to attend all four days! The great thing about FreedomFest is that the speakers mingle with the attendees. We don’t have a green room. Now is the time to join us: Early bird discount ends in two weeks!