Gross Domestic Income

Hey everyone and thanks for jumping back Into the macroverse Today we're going to talk about gross Domestic income or GDI if you guys like The content make sure you subscribe to The channel give the video a thumbs up And also check out into the cryptiverse Premium uh into the you Can of course get access to a lot of the Macro charts that we frequently discuss On the channel Let's go ahead and jump in so I imagine There are some people that are not as Familiar with gross domestic income now You've probably heard of gross domestic Product or GDP and you've probably heard Of real GDP but GDI is actually Something that's that's a bit different Now the definition of GDI is its Measures the total income generated by a Country uh and it provides an Alternative perspective to gross Domestic product by focusing on the Income earned by various entities Including individuals businesses in the Government now specifically though if we Can narrow it down to how does it differ Between to when compared to GDP GDI aims to measure what the economy Makes or takes in such as wages profits And taxes whereas GDP seeks to measure What the economy produces like good Services and Technology okay and a lot Of economists will actually use both GDP

And GDI to get a gauge on the economy And sometimes they'll average the two to Get a gauge of the economy now what's Interesting is that if you remember back To early 2022 to the first half of 2022 A lot of people used the two consecutive Quarters of negative GDP to to sort of Provide evidence as to the idea that we Were in a recession right these two Consecutive quarters of negative GDP However I've been quite vocal that I do Not think that that constitutes a Recession namely because you don't Really have a recession when the Unemployment rate is just sort of Hanging out at secular lows now it Doesn't mean that it can't eventually go Up and it doesn't mean we can't go into A recession that eventually but just Because you have two consecutive Quarters of negative real GDP in my Opinion is not sufficient to argue that The economy is in a recession in fact The U.S economy has been quite resilient For quite a long period of time Now if you go look at gross domestic Income and we look at the quarter over Quarter percentage change has it turned Negative at all You will see that it has not okay now Remember this is not real GDI this is Just GDI Again real GDP Did turn negative quarter over quarter

GDP Right not right not real GDP but just GDP Um did not turn negative So you can see that there is a Distinction here If you adjust for you know if you adjust For inflation It makes a difference doesn't make a Difference for GDI So if you look at the quarter over Quarter change here for GDI you will see That there's periods in history where it Did go negative and typically when it Goes negative it corresponds to a Recession hasn't gone negative yet right This is this is not real GDI again this Is still nominal There are a couple of instances where it Went slightly negative like in 2012 and In 2007 and in 1959 where it went Negative but it did not actually Correspond to a recession at least not Immediately although you can see that in 2007 we did get a recession not too long After so far it has not gone negative Interestingly There's a period here in the 70s where We had several recessions even though GDI was nowhere close to really being Negative but again what's similar today And the 70s we have high inflation we Also had you know High inflation back in The 1970s so if you adjust for inflation

You will in fact see that real GDI Quarter over quarter percentage change Did go negative throughout the 19 late You know for throughout the 1970s and Even early 1980s and every time it went Negative during this period with the Exception of 1979 it immediately Corresponded to a recession here is an Example where it didn't immediately Correspond to one we sort of kicked the Can down the road for a couple of Quarters and then we ended up getting a Recession right so and then we ended up Getting another recession not too long After that just to make sure that Inflation was in fact under control so There's plenty of examples in history When the quarter over quarter uh Percentage change of GDI going negative Does correspond to a recession though There are some instances as we've Discussed where it doesn't necessarily Mean you have to have it imminently it Could still be delayed by a couple of Quarters interestingly if you look at The quarter over quarter percentage Change of real GDI you will see that We've actually had two consecutive Quarters of negative GDI recently And again this was updated here May 25th So not that long ago so we also had a Negative quarter back in April of 2022. Now we can also look at the year over Year percentage change of real GDI and

If you look at it like this you will see That we just had it go negative in January of 2023 and in in October 22 it Was also negative but in July it was it Was slightly positive so when you look At it like this the year-over-year Percentage change you will see that that Typically corresponds to a downturn in The economy as well and now this has Only just begun right I mean so yes it's Gone negative but it could stay negative For quite some time right it doesn't Have to just turn back up immediately it Could stay negative for a while in fact Back in 2007 you can see that it turned Negative you know around you know sort Of halfway through the year and it Didn't really get back into positive Territory until a couple of years later So just because it's gone negative now Doesn't mean that it can't stay negative For for many quarters to come But I did think that looking at GDI as Well as GDP can be insightful into Understanding is the economy slowing Down or not and right now GDI does give Us the impression that things are really Starting to slow down especially when You adjust for inflation if you don't Adjust for inflation it doesn't really Look as bad right it doesn't really look As bad but if you know if if you really Want to get to the bottom of it right I Mean adjusting for inflation would seem

To make sense and you can also more Easily compare to Prior times where Inflation was an issue and we can make We can make easier comparisons as to as To how this metric was performing during Various periods when you sort of exclude The inflationary components of it right If you if you just say hey we're going To include inflation and just get it Nominally Um then then it can lead you to believe That the economy is doing better than it Really is but if you actually actually Incorporate inflation into the metric And say all right we're going to adjust For inflation then you can get a better A better insight into what's actually Going on in the economy you know are Things going up because the economy is Expanding or is it just going up because We have inflation right I think that's An important consideration to make I Think we'll go ahead and wrap it up There we'll make this one a shorter Video I just wanted to introduce you Guys to gross domestic income and so now You're aware that this is also a metric That you can use and you can follow and Again make sure you subscribe if you're Not subscribed give the video a thumbs Up I'll see you guys next time bye


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