Warren Buffet is wrong about the U.S. economy

[Jamin2112]

A statement I often hear from Warren Buffet in interviews is (I'm paraphrasing here)

"The GDP is forecast to grow at 2% per year and the population is forecast to expand 1% per year. So, Americans will continue to get wealthier, at a rate of 1% per year."

The big point he's missing is that the cost of living is shooting up way faster than 1%, making us poorer in real terms. I could get into more reasons why his logic is faulty (e.g. the use of GDP is a measure of growth), but I'll leave it at saying I get so annoyed by permabulls like Buffet. The U.S. economy is a complete joke and our standard of living can only go down.

 

[Vanadium 50]

Because, gosh darnit, I am just so much smarter than Warren Buffet, I don't even have to check my facts to know he is wrong.

GDP growth, as it is usually reported, is already corrected for inflation. You have a bad habit of coming in with both guns blazing first, and checking your facts second. This is not a good idea in general, but especially so on a science forum.

 

[russ_watters]

Shall we discuss the wrongness of that last phrase too or has that been adequately covered in other threads (in particular, one thread that basically had that as a title)?

Edit: Oh, of course: you started the thread, so you should already know it is wrong:
https://www.physicsforums.com/threa...s-going-down-for-the-average-american.799442/

Edit2: 2014 income stats are due to come out in a month or so. We'll get an updated picture of where we stand then, but based on the drops in unemployment and rising (albeit slowly) wages, we should see a fairly healthy increase.

 

[Jamin2112]

Because, gosh darnit, I am just so much smarter than Warren Buffet, I don't even have to check my facts to know he is wrong.

GDP growth, as it is usually reported, is already corrected for inflation. You have a bad habit of coming in with both guns blazing first, and checking your facts second. This is not a good idea in general, but especially so on a science forum.

You're talking about Real GDP, and you're assuming that the government measures inflation in a reasonable way.

 

[Jamin2112]

Edit2: 2014 income stats are due to come out in a month or so. We'll get an updated picture of where we stand then, but based on the drops in unemployment and rising (albeit slowly) wages, we should see a fairly healthy increase.

Income measured in U.S. dollars is meaningless because the government prints hundreds of billions of dollars every year.

 

[Vanadium 50]

You're talking about Real GDP, and you're assuming that the government measures inflation in a reasonable way.

You're the one making the accusations. And you're shifting them. First you complained that Buffet wasn't correcting for inflation. Now you're complaining that he is not doing it right. I think you should show us the evidence you have for this - either one.

 

[russ_watters]

While we're at it, show us the evidence for this too:

Income measured in U.S. dollars is meaningless because the government prints hundreds of billions of dollars every year.

Frankly, it is too basic and already debunked in your previous thread (if not explicitly) to be worth my time to bother with it.

You need to do better than this. Even in the GD section, we have quality standards and you are falling far short of them.

 

[Czcibor]

Income measured in U.S. dollars is meaningless because the government prints hundreds of billions of dollars every year.

Actually it more or less does (there are some challenges like shifting consumption baskets, new products and product quality). I wouldn't like to spoil your rant, but you measure inflation by comparing price of a basket of goods and service, not by comparing monetary aggregates. That is supposed to be related, but recent years empirical data don't show that (at least from early '90s, times of "lost decade" in Japan, when BOJ flooded market with yens and was even unable to prevent deflation)

Because, gosh darnit, I am just so much smarter than Warren Buffet, I don't even have to check my facts to know he is wrong.

GDP growth, as it is usually reported, is already corrected for inflation. You have a bad habit of coming in with both guns blazing first, and checking your facts second. This is not a good idea in general, but especially so on a science forum.

Actually economic stuff is very lightly moderated. My guess is that if moderators had better economic knowledge they would be quite disappointed what goes on them...

 

[StatGuy2000]

Assuming for the moment the accuracy of the quote from Warren Buffett in the start of the thread, then Buffett is indeed correct -- on the average, if the real GDP, adjusted for inflation, is forecast to grow at 2% per year (which, btw, is a forecast based on currently available data, and there are a whole host of factors that could have a major impact on its accuracy), and if the population is set to grow at 1% per year, then in the overall average, Americans will be wealthier at a rate of 1% per year.

However, it is worth keeping in mind that this is an overall average, and that the benefit of the growth in the US economy is not necessarily (and in actual fact, most probably) not evenly distributed. Certain people can accrue far greater benefit in the growth of the US economy than others -- e.g. wage growth for the bulk of the workforce could still remain stagnant even with increase in GDP, while those who own much of their assets in stocks could see tremendous gains. It really depends on the nature of the growth and how broad-based the growth of the economy, as well as what government policies are in place to either promote more growth and/or distribute the wealth more equitably across different wage brackets, to the extent that is possible.

 

[Evo]

Thanks everyone for responding, I think the OP's confusion is cleared up, so the thread is closed.