Friday, November 19, 2010

Output Gap

One trouble with economic arguments is that sarcasm and tribal loyalties always come into play at which point logic goes out the window. So let me start with some data. Here is real US GDP from 2000 to present. (Saint Louis Fed Data).



Macroeconomists have elaborate models for computing the output gap, but a good approximation can be seen just by extrapolating the line from the (relatively slow growth) Bush years before the crash. Note that (a) the GDP was in free fall before TARP and the stimulus, and (b) resumed slow growth during and after. Just sayin'.