Printing GDP: Gregor Weekly Macro Note

• Gregor Macdonald
• January 30th, 2010

Friday’s GDP report was a headline stunner. It gave cover to the more bullish and conventional street analysts. And, it helped President Obama win the weekly newscycle. I found the attempts to downplay the result, typical among perma-bears, to be tiresome although in truth their analysis is accurate. In general, macro bears of which I am one overplayed their dissection of a 5.7% GDP print essentially for the following reason: the bounce-back on inventory rebuilding doesn’t require sleuth-y analysis. It was standard, and to be expected in the wake of trillions from both the FED and from Congress.

Some of the GDP prints during the Great Depression were much stronger than 5.7%. Of course, the country deflated for nearly three full years before FDR stimulus programs kicked in, and alot of the debt and general insolvency had already found resolution by that time. In our case, while it’s true we’ve worked through losses over the past 12 month, there remains the matter of Fannie and Freddie as proxies for national negative equity, the ongoing 50% loss pattern in commercial real estate, all the unsecured credit card debt, and then the town, city, state debt in The States. At best, we have perhaps resolved a third of the private debt, pushed at least another third onto government balance sheets, and we still face the other third. In short, given the pawning off of losses to the government, the country still carries 66% of the problematic debt. And this is being both conservative, and simplistic.

More quietly on Friday however in the wake of the GDP release with its slew of attendant data was a rather important information dump from The Bureau of Labor Statistics,  around 2 o’clock in the afternoon. Each quarter…(this article continues for subscribers through the membership gateway, on the right side of this page)

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