If you throw all the products we buy and the services we use in one basket, then add up the price tag, that's the Gross Domestic Product, which is the primary metric economists use to assess the economic health of a country or region.

The easy part of calculating GDP is the calculation itself: C+I+G+(X-M)=GDP. Got it? No? Well, add Consumption, Investment by companies, Government purchases, and then take the product of eXports (calling it 'E' would lack sexiness) minus iMports ('I' was taken). Viola! GDP.

Still don't get it? Well, knowing the components helps. Consumption is the biggest component, and it's a tally of the cost of all the goods and services we buy. Investment is what companies spend on the real assets they own, plus the value of the inventory that we haven't gobbled up through consumption. Government purchases are what the Feds pay money for (whether it be highways or fighter jets, though big social programs, like welfare, aren't counted). And then we calculate the difference between the goods and services we¿re sending to other countries and the stuff we're bringing in.

Good. That explains it, except there's a catch. Inflation has a habit of distorting the numbers, so economists talk about either Nominal GDP or Real GDP. In fact, Real GDP isn't necessarily "real" for most folks, since it takes any inflation out. Nominal GDP includes the effects of inflation. (There's something called the implicit price deflator which is a calculation using the two, but we'll spare you the details.)

So, now that we know GDP, why do we want to? Well, it's good to compare different markets. And watching the trend shows whether a given economy is growing (good), stagnating (not so good), or shrinking (very not so good). When GDP goes down two quarters in a row, we're officially in a recession.

For the record, GDP is released at the end of each month, with most reporting ¿preliminary¿ data for the previous month. But you won't get final GDP numbers for the fourth quarter of a year until the very end of the first quarter of the next year. After all, it's not an easy number to calculate.

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Wednesday, August 06, 2008

Four Ways To Barter Your Extra Stuff

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Jennifer Openshaw

MarketWatch

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NEW YORK--I was thinking about ways to stretch a tight budget. And then it dawned on me -- why use money at all?

Yes, I was inspired by a friend who told me of her latest money-saving idea. She bakes bread. A real simple recipe not even requiring a bread machine.

Not surprisingly, she enjoys the bread with her family. She'll bring a loaf or two to a party instead of spending $15 or $20 on a bottle of wine. And now I find out that she trades loaves for $10 yoga sessions with one neighbor and for unlimited access to a vegetable garden from another.

Small stuff, yes, but it's fun. And despite the rising cost of flour, it saves money.

Now, I'll bet you have something to trade too. If not bread, some other dish you ought to be famous for. Or maybe extra stuff in your garage, attic or basement. Or maybe some services you might perform professionally or as hobbies -- building sheds, building Web sites, you name it.

So why not give barter a try? After all, it dates from the earliest of human civilization - probably 80% or 90% of human history has been accomplished without money at all.

Here are a few tips on what to trade and how to trade it:

Trade your stuff for their stuff. It's becoming more common; now Craigslist has a large barter section. You'd be amazed at the "opportunities." According to one ad I could have traded an extra road bike (if I had one) for a 1988 Lincoln Town Car or an xBox 360 or a steel string guitar. These ideas push the limit, but lots of ads are posted daily. Other generalized barter sites include U-Exchange. Or if you want to "aim" your swaps at specific kinds of items like clothing and fashion, try Swapstyle.

Trade something you make or grow for something they make or grow. You bake bread, make pillows or grow flowers. They make wine, knit scarves or grow tomatoes. What kind of "deal" can you make?

Trade your time or labor for their time or labor. Again on Craigslist, I could get a facial in exchange for a massage. Or get a Honda repaired in exchange for a game platform. Web-based service exchanges include tradeyourservices.com. And you can probably set up a swap with a neighbor, family member or someone at work.

Trade something you live in for something they live in. It gets bigger. You have a primary or vacation home, and you're looking to do a bit of traveling. Why not offer an exchange on your home? At least two sites specialize in this idea: homeexchange.com and tradetotravel.com.

Oh yes, you may wonder about taxes. The IRS and most state taxing authorities see barter transactions just as any other, and there's the additional wrinkle of valuing the transaction. So be careful, especially if you're operating a business.

When you think about it, there's a lot you can trade. It's easy, and at least for you "dealing" types it'll be fun. Be creative -- the possibilities are endless.

Jennifer Openshaw is co-founder and president of WeSeed, a soon-to-launch site to simplify the stock market, and author of "The Millionaire Zone" You can reach her at jopenshaw@themillionairezone.com