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[idea] Econometrics

gdp = c + i + g + (im - x)

to forecast change in gdp, fill in _change_ of each component

c = consumer spending (roughly 75% of gdp)

i = investment

g = government spending

(im - x) = imports - exports

    1. easy mode

    change in gdp == change in consumer spending

    gets most of the way there

    consumer spending == -effects of inflation - effects recession - effects of higher interest rates

    consumer spending == -5% - 5% - 5% == -15%

    change in gdp == -15%

    2. hard(er) mode

    change in gdp == change in consumer spending + change in investment + change in government spending

    change in gdp == -15% + change in investment + change in goverment spending

    change in investment == no change but may move to shorter time horizons

    government spending == no change to falling because of inflation pushing up borrowing costs and being inflationary

    change in gdp == -15% + 0% + 0% == -15%

    3. time horizons

    3 mos

    6 mos

    12 mos

    24 mos

    48 mos

    4. gdp time series

    historical sanity check

    https://fred.stlouisfed.org/series/GDP

    2008 - 2009: -3%

    2020 - 2021: - 11%

    5. stock market (sp500)

    take overlapping gdp change and stock market periods

    2008 - 2009: -38%

    2020 - 2021: +16% (money printing + government spending)

    2020-2021: -26% (3 mos pandemic)

    average: -38% - 26% = -64%/2 = -32%

    https://www.macrotrends.net/2324/sp-500-historical-chart-data

    6. hypothesis

    gdp falls 15%

    stock market (sp 500) falls 32% to 3,261

    7. effects

    safety net beneath safety net: these are the local charities that provide aid government does not - already strained, get strained some more

    8. Bayes Theorem

    new evidence updates prior probabilities

    i.e. continuous not discrete

    9. disclaimer

    mental exercise - not investment advice

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