GDP - Ainslie Bullion News

Tonight the US gives its first report of their Q2 GDP after the woeful negative 2.9% Q1 result for which they largely blamed the weather.  Our regular readers and more particularly listeners to our Weekly Wrap radio will know the much prophesised US recovery is not as clear as the equities punters would like to believe.  But we should all be reminded just what GDP reports.   Gross Domestic Product = C + G + I + NX, where simplistically C is private and public consumption, G is government outlays, I is investments and NX or Net Exports is exports less imports.  We have seen little since Q1 that indicates any sizeable turnaround and remember 2 negative quarterly results in a row is a recession.  But do you see something missing? Something topical in much of what we discuss?  Debt.  With enough easy money, enough printed money, enough debt fuelled Government spending, and an artificially deflated dollar (making your exports stronger) anyone can create a decent GDP if they ‘need to’. The IMF and the US themselves have continually downgraded their 2014 GDP estimates, the latest to only 1.7% which after -2.9% still needs some pretty good numbers for the other quarters.  The more cynical will not be surprised by a robust GDP print tonight given how it can be manipulated with debt and is nowadays so often quietly ‘corrected’ down on subsequent adjustments to the ‘final’.  

This is not just a US phenomenon by any means.  The graph below illustrates very clearly the disconnect in the world today.  Global GDP is still falling despite all the easy money fuelling the “I” in the equation above and global sharemarkets rising.  Greed, riding that never ending sharemarket rocket, too often overrules common sense.  Common sense looks at the graph below when equities are at all time highs and gold/silver, the safe haven when things collapse, at relative lows, and looks to buy low and sell high.  In the US gold has outperformed shares so far this year as more and more people are applying common sense.  Are you?