Also there is a way in which GDP can be rigged via rigging the Official Inflation rate.
You see, GDP is first calculated nominally (i.e. in today’s $) and then the Inflation rate is used to “deflate” it into real terms (i.e. turn it into something directly comparable with previous years because the effects of the dollar losing its value over time have been removed), thus creating what’s called the Real GDP, which is the Official one we get.
In this, the lower the official inflation rate the less the deflation and hence the higher the Official GDP that comes out of, and thus if the official inflation rate is less than the real inflation, then part of inflation (the difference between the official one and the reality) mathematically results in higher GDP numbers than reality.
Knowing this, notice how for example a 1960s salary that was enough for a house, a car and the whole living costs of a family of 5, if inflation adjusted to today’s money (i.e. converted into a supposedly equivalent amount using exactly the very inflation index we’ve been talking about) results in a amount that’s barelly enough for a single person to rent a small appartment.
Judging by how what those inflation indexes tell us is the same money today and in the 60s not buying anywhere are much now as it did back then, I would say that the inflation index has been consistently understating inflation over the years, and the reason for doing that is at the top of my post: lower official inflation => higher official GDP.
Also there is a way in which GDP can be rigged via rigging the Official Inflation rate.
You see, GDP is first calculated nominally (i.e. in today’s $) and then the Inflation rate is used to “deflate” it into real terms (i.e. turn it into something directly comparable with previous years because the effects of the dollar losing its value over time have been removed), thus creating what’s called the Real GDP, which is the Official one we get.
In this, the lower the official inflation rate the less the deflation and hence the higher the Official GDP that comes out of, and thus if the official inflation rate is less than the real inflation, then part of inflation (the difference between the official one and the reality) mathematically results in higher GDP numbers than reality.
Knowing this, notice how for example a 1960s salary that was enough for a house, a car and the whole living costs of a family of 5, if inflation adjusted to today’s money (i.e. converted into a supposedly equivalent amount using exactly the very inflation index we’ve been talking about) results in a amount that’s barelly enough for a single person to rent a small appartment.
Judging by how what those inflation indexes tell us is the same money today and in the 60s not buying anywhere are much now as it did back then, I would say that the inflation index has been consistently understating inflation over the years, and the reason for doing that is at the top of my post: lower official inflation => higher official GDP.