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The two key elements are business margins and disposable income.

As disposable incomes shrink, demand for everything except core essentials dries up, GDP is hammered, and there's a credit crash as people default on loans and mortgages. So there's a personal tipping point that creeps up the income curve, as more and people fall off the bottom and their GDP contribution switches from positive to negative.

Likewise if margins shrink and businesses become unprofitable, businesses die, unemployment increases, demand goes down, and GDP is hammered again.

A useful exercise with real numbers would be to get some of the annual accounts posted by haulage and logistics companies at Companies House - that would show what kind of margins they're running on, and how close they are to being killed by current and future price increases.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 27th, 2008 at 12:16:25 PM EST
[ Parent ]
So there's a personal tipping point that creeps up the income curve, as more and people fall off the bottom and their GDP contribution switches from positive to negative.

Negative GDP contribution?
by Colman (colman at eurotrib.com) on Tue May 27th, 2008 at 12:26:48 PM EST
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Aka crime and benefits.
by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue May 27th, 2008 at 12:29:47 PM EST
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How do they contribute negatively to GDP? Criminals are good for GDP - think of all the police pay, prison contracts and so on. And benefits are also good for GDP.
by Colman (colman at eurotrib.com) on Tue May 27th, 2008 at 12:32:57 PM EST
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GDP may be a crappy measurement, but assuming that the state would have employed people doing other stuff if crime was not there, crime is bad for GDP. The part of the economy that is criminal is not taxable and not part of the GDP. Unless you guesstimate it.

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by A swedish kind of death on Tue May 27th, 2008 at 05:32:44 PM EST
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Say it switches from positive to zero.

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
by Migeru (migeru at eurotrib dot com) on Tue May 27th, 2008 at 02:19:52 PM EST
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