Revisions downward for GNP – What This Means For Self Directed IRAs

What is GNP

This is the broadest measure of the U.S. economy published by the BEA. Once the headline number, now it rarely is followed by the popular media. GDP is the GNP net of trade in factor income (interest and dividend payments). GNP growth usually is weaker than GDP growth for net-debtor nations. Games played with money flows between the United States and the rest of the world tend to mute that impact on the reporting of U.S. GDP growth.

The Current GNP Numbers

GNP was revised downward from 1.3% to 0.5%. This is a massive and significant decline given the basic nature and definition of GNP.

The recent relative weakness in U.S. GNP versus GDP reflects an accelerating surge in interest and dividend payments to the rest of the world from the United States, which holds net-debtor status. At the same time U.S. receipts from the rest of the world have been plummeting since second-quarter 2011.

What Does This Mean

The slowing or decline in GNP reflects the fact that GDP is not good and depending on the person you ask, may acutally be shrinking. This factor coupled with new or increased interest and dividend payments shows that the US is not growing at a fast enough rate to overcome our debt payments to the rest of the world. To put this in perspective, imagine that you were paying out more for expenses and bills than you earned in income or from your paycheck. This value reflects a very telling sign. That sign is that we have ran up the US’s credit card and we have to pay out more than we are earning or growing. This is definitely not the situation that any person or country wants to be in.

What Does This Mean For Self Directed IRAs

The GNP values show that we are not growing fast enough to overcome our debt obligations. A continued and protracted period of such deficits would spells a shrinking economy and a more heavily indebted nation. The long term implications are that we would see weakening in the US dollar. This will lead to more printing and you can guess it — inflation or hyperinflation.

The best strategy to employ in these circumstances are investing in precious metals and real estate.

The information provided is for educational purposes only and are not a solicitation or offering of an investment, investment advice, or tax advice. You should consult with your tax, legal or financial advisor to determine the suitability of any investments made with a self directed IRA account.