With all the talk about the pitfalls of GDP accounting (when it comes to natural disasters), I thought it might be good to dig up my article on the absurdity of the mainstream approach when it comes to inventories.
It might be hard for it to “click” at first with some of you, but if you can get what I’m saying, you will be blown away by what the mainstream guys are doing. Here’s a choice quote:
What’s really strange is that the change in inventories [in the 4th quarter of 2009] was fairly small. So the real “contribution” was not even the change in inventories, but the change in the change. In other words, we have moved the analysis one more step into absurdity by explaining the creation of real goods and services by referring to the second derivative of something (inventories) that does not have the power to create goods and services.
If you totally understand what I’m saying in that quotation, then you’ve gotten my point.