Troubling explainer on how the US economy lost 33% of its value

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Congratulations Mr. Putin…mission accomplished.


Yet the media is more concerned about TikTok.


Perhaps “Yet the White House is more concerned about TikTok?”


The end of the American empire tracks with the end of the post-war economic anomaly, which has been going on since somewhere between April of 2000 (end of the dotcom boom) and 2007 (collapse of subprime mortgage scam). Keeping up a constant growth trend is either impossible or unsustainably unhealthy – choose one.

There’s been an on-going game of trying to keep up the appearance consumer and household demand via empty consumerism and easy (but high-interest) credit, but younger people and an ever-shrinking middle class either no longer can or are no longer inclined to do that kind of spending – especially in the face of a pandemic, but in general, too.

Absent New Deal style demand stimulation (and with Status Quo Joe, the more likely post-COVID policy will be the same old neoliberal-lite austerity), wealth and opportunity will keep concentrating at the top and we’ll return not to the status ante quo of the 2000s but to that of the 1930s.

[I do take exception to the conclusion about making investing harder, because it leaves out the unearned income accruing to tens of millions of retirees (elderly ones, not just the FIRE people he mentions). There are simple fixes that can be made to address this problem, but the video’s creator doesn’t even acknowledge the problem.]

And not in the right way. They’ve glossed over Biff’s demand that the government (which this gangster likely equates with himself and his cronies) gets to wet its beak in the deal.


The US economy didn’t lose 33% of its value. Rather, the growth rate fell by 33%. Big difference.


trump promised what, 5% growth rate? He’s got a lot of catching up to do…


I swear to God we’re basically in a delayed version of the Reds! timeline

These folks don’t seem to grasp that if they keep pushing then the people will push back much harder.


GDP is not a measure of growth, it’s a measure of total economic activity. It was a 33% change in economic activity (doing things, buying things, etc), not a change in growth rate. “Losing 33% of its value” is a tough thing to evaluate. It’s much more accurate to say that 33% of the economy was lost.


Not that this is good news by any stretch, but Jerry is correct here and the “explainer” video is muddling this point in a very misleading way (as does the BB headline). NPR’s Planet Money Team covered this confusion in some detail on the Politics podcast recently, which I recommend.

GDP growth rate dropped 33%. That is very different than the economy losing one third of its value. The overall economy shrank about 10% in size. Still terrible, but not an apocalypse. It’s easy to confuse rates and sizes when talking about economic stuff, and these concepts are rarely well reported (as shown here). One is the slope of the curve, the other is the area under it.


I want to see what happened in 1918 during and after the “Spanish” flu.

Those other very real and significant drops had vert real, fundamental causes.

This drop has roots like 1918… So it’s different. Let’s compare it to what should be a similar situation.


Since the first widespread recognition the epidemic was out of control (around March), stocks plunged between 10-50% of their value. Some have recovered, most have not. Usually in times of disaster, I take cash I have and invest in the market when prices have dropped.

I put some money in industries hit hard but will recover by the end of the pandemic (entertainment, oil, hospitality, pharma, booze and the bad karma stock Service Corporation International*)

So far entertainment and booze have recovered well, the others have lost negligible amounts. All are big enough companies to weather this storm.

*Will explain to the curious


The years after 1918 had some of the largest economic growth in history, the “roaring 20’s”. Of course a lot of it was based on over-borrowing, debt securitization and securities manipulation

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Not exactly what you’ve asked for, but they do cover the economic effects of pandemics. Which are worse than those of wars, apparently.


Well aware of youtube “explainers”… And yeah, it’s good to point out the exuberant burst that was the roaring 20s.

It might just point to something to look out for

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The Economics Explainer obviously doesn’t know economics.

The actual statistic is “GDP dropped last quarter at an annual rate of 33%”.

In other words:
The US economy did not lose 33% of its value.
The GDP did not drop by 33%.
The GDP growth rate did not drop by 33%
(Which are three completely different things that the explainer claimed.)

The GDP dropped by 9.5% in a quarter. If the next 3 quarters each have the same fractional-drop in GDP, then the GDP will have dropped by 33% over a year.

There is no reason to believe that the GDP will drop by 9.5% every quarter for the next three quarters.


No, that’s still wrong. The reporting is a 33% annualized contraction. Which means that if the current quarterly rate of decline continued unchanged for one year, the economy would contract by 33%. This isn’t how much growth has dropped, it is the projected drop.

Annualized changes are used to give a more consistent way of comparing rates. But like speed, it’s a rate, not the change. To calculate the actual change, R= (1+.33)^(1/4)-1 = 7.4%.

The economy shrank 7.4% in Q2. Growth in Q2 was -7.4%. Annualized change was -33%.

That’s a serious kick in the nuts. But always be careful when using rates. A 1% drop in 1 day (which is not uncommon for stocks) would be a -3678% annualized drop. In reality, real rates over an actual year can’t exceed -100% (except in special circumstances).

Edit: Smulder below is correct. I made a sign error. It’s 9.5%, not 7.4%.


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It literally says all of this in the video. I’ve queued it up to the moment (around 6.5 minutes in)

I don’t blame you for not watching it. It’s a little weird to just assume they make this mistake without watching it, though.


I agree it’s worth watching and they get it right in the video itself. But the click-bait title very much does make this mistake. Nor are they alone in this.

…is correct and not the same as the US economy lost 33% of it’s value. It’s still extraordinarily bad and worse than anything since 1929. With Trump I suspect it could be even worse.


Yea, I heard that show as well amd I’m glad I did. They explained its actually 9%. 33% is what it would loose if the rest of the year stays the same as this quarter. I’m not surprised this is skipped over as 33% sounds way scarier. Mind you, 9% is plenty scary!