Tuesday, June 15, 2010

"Oil Spill May End Up Lifting GDP Slightly"---There is no profit in destruction--Frederic Basitat

"Society loses the value of objects unnecessarily destroyed," and at this aphorism, which will make the hair of the protectionists stand on end: "To break, to destroy, to dissipate is not to encourage national employment," or more briefly: "Destruction is not profitable."

A significant negative in the way we count Gross Domestic Product (GDP) is we don't SUBTRACT damage (natural or man-induced) to existing goods and services already provided (i.e.infrastructure).  Example: A house in hurricane Katrina is destroyed.  The value of the house is not subtracted from GDP, ONLY the value of the goods/services purchased to re-build that house is counted.  GDP is forward looking and does not take into consideration the value lost to society to "enjoy", as Bastiat puts it.  An alternative measure of GDP is available called "Gross National Happiness"--Click HERE to find out more about it...

Read more about this GREAT Frenchman..

From WSJ: Oil Spill May End Up Lifting GDP Slightly

""The continuing oil spill in the Gulf of Mexico could end up adding a bit of growth to the U.S. economy as the huge cleanup efforts in some ways outweigh negative factors, analysts at J.P. Morgan Chase said. 
Underlining that gross domestic product measures are often not a good guide to an economy’s well being, the bank said in a research note its best guess is that the impact on the U.S. economy of BP’s Gulf Coast spill would be minimal.
“The spill clearly implies a lot of economic hardship in some locations, but given what we know today, the magnitude of these setbacks looks dwarfed by the scale of the US macroeconomy,” said chief U.S. economist Michael Feroli. If anything, he added, U.S. GDP could gain slightly from it.
The six-month moratorium on deep-water drilling may cut U.S. oil production by around 3% in 2011 and cost more than 3,000 jobs, according to J.P. Morgan’s energy analysts.
Commercial fishing in the Gulf is also likely to suffer, but that’s only about 0.005% of U.S. GDP. The impact on tourism is the hardest to measure, although it’s fair to expect that many hotel workers who lose their jobs will find it hard to get new ones.
Still, cleaning up the spill will likely be enough to slightly offset the negative impact of all this on GDP, J.P. Morgan said. The bank cites estimates of 4,000 unemployed people hired for the cleanup efforts, which some reports have said could be worth between $3 and $6 billion.
“If realized, this would likely mean a near- to medium-term boost to activity that might offset the drags,” Feroli said.""
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