7. National Income Accounting is Inadequate to Reflect the Different Stages in the Business Cycle

The statistics of gross national product (GNP), and in general, the definitions and methodology of national income accounting do not provide a reliable indication of economic fluctuations. Indeed gross national product figures systematically conceal both the artificial expansionary effects of banks’ creation of loans and the tightening effects the crisis exerts on the stages furthest from consumption.¹⁹ This phenomenon can be explained in the following manner: contrary to the very implications of the term gross, which is added to the expression “National Product,” GNP is actually a net figure that excludes the value of all intermediate capital goods which at the end of the measurement period become available as inputs for the next financial year. Hence gross national product figures exaggerate the importance of consumption²⁰ over national income, relegate to third place, after government expenditure, the production of final capital goods completed throughout the period (the only capital goods reflected in the GNP by definition) and absurdly exclude approximately half of all of society's entrepreneurial, labor and productive effort, that devoted to the manufacture of intermediate products.

The gross domestic output (GDO) of a financial year would be a much more precise indicator of the influence business cycles exert on the market and society. This measure would be calculated as described in tables from chapter 5, i.e., in truly gross terms, including all monetary spending, not merely that related to final goods and services, but all intermediate products manufactured in all stages in the production process. A measure of this sort would reveal the true effects exerted on the productive structure by credit expansion and by the economic recession it inevitably causes.²¹