GDP and now GNP. Last week we talked about GDP and today we want to understand what GNP is. All the talking heads talk about it, but what does it really mean? Stay tuned.
From Philadelphia, the home of the Liberty Bell, Financial Freedom Radio starts now. Here’s your host, Raymond Jewell.
Welcome everybody to FinancialFreedomRadio.com. We’re glad you’re here and downloading. We’d love to get referrals from you. So if you have friends, please tell them to go to FinancialFreedomRadio.com or YouTube.com/FinancialFreedomRadio and download it. All we ask is that you give us 90 days. If you don’t like what you hear in 90 days, just don’t watch it again. That’s all we can ask. I almost forgot. Like, Share, and Ring the Bell. When you ring that bell you get notified when we put a new show up. You get on the preferred list. Isn’t that right, Steve?
That’s right, Ray. I’m going to go in the top corner this time. You want to be on our nice list, not on our naughty list.
Yeah, be on the good list. You started something last week and you really got me thinking. You said you’re talking about GDP, what’s GNP? So I better explain that because these two are very critical in your financial world as far as revenue, earning revenue, getting investments, that kind of thing. So I thought I’d share that with you and see where it goes.
I’m excited to learn.
How was your weekend?
It was good. It was a quiet weekend. My new fascination is lighting. I’ve been playing around with lights in the house. So I got a lot of work done around the house. I Was very happy.
It’s the joy of living in a house with a techie. I bet your family never knows what’s going to happen.
The fun part is it’s a double-edged sword.
Do you give them a warning?
We’re going down a rabbit hole, but basically, I set up so that the Christmas Tree in our living room and our big giant display window in the house. It sounds frivolous, but she wanted to be able to turn them on and off without having to unplug and replug them back in. So I automated all of that. So I had to sit there and write the code that would turn them on at certain times. So it’s nice because I get to do geek things, but on the other hand, when stuff doesn’t work, I’m in the middle of doing something and I hear the Christmas tree didn’t come on. So I have to debug everything. It’s good and bad. It is fun to live with a techie.
To give you a disclaimer folks, Steve has asked me to dumb it down. He said you’ve got to stop talking in techno-babble. Some of these topics are pretty damn dry. Before we start, I want to give you a little current event thing here. I found this on the Internet. If you’ve got a 401k or IRA due to COVID, the 10% penalty is being waved which normally applies to withdrawals. Did you know that, Steve?
I did not. So you’re telling me I can go withdraw from my 401k and not pay the penalty?
Let’s read it to be accurate. Congress made retirement funds more accessible by waving the 10% penalty fee and not by requiring tax withholding which normally applies up to 100,000 withdrawals made in 2020. These rules apply to people meeting several Corona Virus medical or economic hardships including diagnosis of the disease, a layoff, a reduction in work hours, business closure, or inability to work because of difficulty in finding childcare. Did that explain it?
It sounds to me like they basically said you can take the money out of your 401k without paying the penalty, up to $100,000.
That’s what I just said.
Haven’t you heard someone say what I heard you say is this and then the correct answer is yes, that’s what I said?
You’re right, genius.
I’m going away. Move that mic closer to your mouth.
It’s hard to hear you. You know why.
Now, before we get into our other topic, taxing workers for staying home, a policy rooted in envy. They’re thinking about taxing people that work from home. In 2018, just 5.4% of the U.S. working population work remotely. By 2020, it turned into a reality for 56% of the workforce. 56% of the people are working at home. So what do these geniuses do?
Find a way to get more money.
Yeah. Adding that the taxes could be used to help people who were struggling, the U.S. could raise an average of $48 billion by taxing remote workers. Remote workers are hanging by a thread anyway and they want to tax them. This is our new economy. You guys voted for this nitwit. The voting machines voted for him.
Before you go down that rabbit hole, is that really a Biden thing, or is that just…I’m not a big Biden fan either, but I don’t want to throw him under the bus for something that may not be his.
Oh, I do. What the hell are you talking about?
Who’s idea was this?
Biden said he wants to tax the work from home group?
No, this is a general thought. You’re right. But still, it could be stopped.
There’s nothing to stop yet, Ray. You’re going off on a tangent.
The tax itself will be paid by the employer if it does not provide a worker with a permanent desk. If it does and the staff member chooses to work from home, the employee will pay the tax out of their salary for each day they work from home. This can be audited by coordinating with company travel and technology assistance. That’s just food for thought. Beware, I warned you.
I need a breaking news graphic.
Let’s talk about GDP and GNP. Last week we talked about GDP (Gross Domestic Product). We’re going to put them together here. What’s the difference between GDP and GNP? GDP measures the value of goods and services produced within a countries borders by citizens and non-citizens alike. GNP measures the value of goods and services produced by only a country citizen, both domestically and abroad. GDP is the most commonly used by global economies. So, what is the gross national product? It’s an estimate of the total value of all the final products and services turned out in a given period by the means of production owned by a countries residence. GNP is commonly calculated by taking the sum of personal consumption, expenditures, private domestic investment, government expenditure, net exports, and any income earned by residents from overseas, investments minus income earned within the domestic economy by foreign residents. They’re segregating it. So GNP is related to another of the important stats, the GDP, which takes into account all outward produced in a countries borders regardless of who owns the means of production.
So it can be foreign and domestic manufacturers. GNP starts with GDP and then adds residents, investment income from overseas investments, and subtracts foreign residents. So GDP and GNP is the value of a nation’s finished domestic goods and services during a specific time period. A related, but different, metric, the GNP is the value of all finished goods and services owned by a countries residence over a period of time. Either foreign or domestic. If you’ve got Apple manufacturing stuff in China and they’re a U.S. resident, then that gets measured as GNP, but they don’t use it anymore. These geniuses, in 1991, stopped using GNP and started using GDP. Do you want to know why they did that, Steve?
I do want to know why, Ray.
Products were being manufactured outside of this country by foreign residents. They didn’t care to measure domestic residence. They cared about what the value was with everybody manufacturing it for the U.S. whether they’re foreign or domestic residents, it didn’t matter. So it’s important to understand that GNP, although they abandoned it, that was a measure that the foreign or the residents of this country manufactured either here or abroad. It had to be manufactured by a resident. Why is that important? Because it shows that residents are in the manufacturing business, but they don’t want to do that because they’re tricking the numbers in putting forth a number that is manufactured by citizens and non-citizens, domestic or abroad.
We don’t know whether the products are being manufactured by just citizens. A GNP value would be to let you know how productive the actual U.S. citizens are in manufacturing and selling goods and services. Does that make sense, Steve? Steve?
Yes, I’m sorry. It still seems like a little bit of wordsmithing.
Did I wake you up?
I told you don’t bring attention to my technical mistakes. I can edit them out later.
Yes, it seems like it’s wordsmithing though.
No, it’s not. It’s measuring actual numbers. So if I don’t measure what the citizen’s manufacture and I just measure what everybody manufactures whether they’re a citizen or not, then I’m giving you a number that’s extracted from other countries that are done for the U.S. I’m not letting you know what we’re doing. We don’t measure our productivity here. We’re measuring the domestic production of goods and services by all people, by all citizens and non-citizens.
The National Product is what’s manufactured in the United States by the United States and domestic product is manufactured anywhere on behalf of the United States.
So why is this important for the individual pocketbook? GDP is an important figure because it gives an idea of whether the economy is growing or contracting. When the economy grows, you make a lot of money. When the economy contracts, you don’t. Inflation goes up, taxes go up because they don’t have a lot of money. We’ve talked about this before. Taxes are paid based on the velocity of money that goes to the economy. How many times can you tax the same dollar. When you’ve got a lot of dollars circulating, your taxes go up. When you don’t, your taxes will go down and then they raise taxes to get more money. So when you have a poorly run economy, which is run by Democrats by the way, it causes a lot of problems in people’s pocketbooks and they don’t spend. We’ve even written a book about this. The book is Why the Rich are Rich. You can read that book. There it is on the screen. You can read the book and download it for free. You can download it for free and read the book. You can’t read the book before you download it.
So, I want to wrap this up. I hope this information was valuable, we’re going to try to get a little more pizzaz into it and I won’t be so boring, but that being said, some of this stuff is basically boring. That’s why they call economics the dismal science because it’s boring, but it affects your income. It affects your pocketbook.
You’re literally telling people your show is boring. Stop that.
It is boring. If somebodies listening to it, they’re getting good information.
Let’s have a dialogue and make it not boring.
What is better for me to know, the GNP or the GDP?
Both, but be aware that it’s not measuring what the citizens are manufacturing. It’s measuring what everybody in the world as it relates to the United States is manufacturing.
For the United States or just in general?
For the United States. It’s domestic. Gross Domestic Product comes in from everywhere.
So when the Chinese manufacture a chachki, when a Chinese citizen, working in China, manufactures a chacki for the United States, it’s counted in the gross domestic product, but it is not counted in the Gross National Product?
Right, unless they can trick the numbers.
Don’t go down that rabbit hole. If a U.S. citizen in the United States makes the same chacki, it’s counted for both the gross national product and the gross domestic product? So the difference between the two is how much manufacturing is being done by other countries for our behalf.
Yes and how much manufacturing is done by citizens of the United States.
No, I said the difference between the two.
Right, you’re right.
If that difference is low, then that means most of the manufacturing is being done in the United States.
No, it means we’re not buying enough stuff.
I guess what I’m trying to say is, how is this going to help my financial world?
If you start to see those numbers come down, and the gross domestic product comes down, you’re going to be in for a rocky road in the economy if it stays down. We saw it come down 30%, but then the next quarter it went back up. Remember we talked last week about having all the infrastructure in place so that if you stopped it abruptly and start it again, it’s going to go back to it’s equilibrium?
Yes, I remember that.
Okay. We’ve got it.
It makes more sense now.
Good. Thanks for clarifying that.
You want to plug the book again or wait for the outro?
Thank you for coming and watching. FinancialFreedomRadio.com. Please like, share, tell your friends, and ring the bell and get on the list. That list is envy among men and women. That is a super-duper list with everybody on it. That’s the cool kids. Have a great weekend, week, whatever you have and we’ll see you back here next week. FinancialFreedomRadio.com. Take care. God bless.
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