GDP Numbers (+2.5%) and Inflation (+3.9%)

The US Department of Commerce announced Gross Domestic Product (GDP) growth of 2.5% in the third quarter of 2011. These numbers are chained to 2005 dollars, or adjusted for inflation. The chained number was $13.3528 trillion or $15.1986 trillion nominal 2011 dollars. The GDP the nominal growth rate was 4.95%, adjusted for 2005 dollars the growth was 2.44% with the DOC using statistical corrections to 2.5%, the number reported to the press.

Is Wall Street the predator or victim?

The DJIA responded and has increased 11% this month making it one of the best performances in years.
But what is the real picture?
What was not reported with such enthusiastic fanfare is the official inflation rate is 3.9%.
How do the two interact?
If we look at the DJIA over a 10 year horizon we can see where the economy is and why investing in stocks instead of gold, silver, or platinum might not be a good idea.
On October 26, 2001, the DJIA was 9,545, and on October 28th, 2011 it was 12,231. One decade later the DJIA has risen 28% or 2.8% a year. The CPI index rose from 178.3 to 226.889 during the same period or 27.3%. In other words even with the 11% rise this last month over the last decade if you invested in stocks you, at best, broke even.

The New York Federal Reserve Bank is hording all the gold, not Wall Street.
During that same decade the Federal Reserve has increased the monetary base 296%. Gold has risen 541%, the federal debt has increased 150%, and federal spending 87%. It seems the Federal Reserve and Federal Government had much better decade than the “greedy capitalist” on Wall Street.
The real profit taking this last decade was the Federal Reserve Bank stealing the modest gains on Wall Street with inflation and the Federal Government stealing the rest. Theft by inflation and borrowing.
Historically before the post 1971 fiat money inflation the federal government and Federal Reserve would not be able to get away with this theft. In 1907 when the federal government printed too much money they almost went bankrupt and had to be bailed out by J.P. Morgan.
When Nixon was printing too much money before 1971 to pay for the Vietnam War European Central Banks could redeem the excess dollars for gold. This acted as a brake on printing dollars and inflation. When this brake was removed prices increased from 5.7% annually from 1913 to 1971 and 11.8% annually since 1971 to today.
What this means is that for a century we have been toiling and having our labor ripped off not by Wall Street but by a few secretive bankers at the New York Federal Reserve.
In the coming months there will be the last gasps of the government money bubble and maybe a stock market rally. What people need to be looking at is the official inflation number as well as the unofficial inflation numbers. Currently some economists calculate the inflation number at 10.4% or negative GDP growth. In Germany in the 1920s during the hyperinflation period the stock market rallied year after year but when the inflation died stocks declined 33% in real terms.
Be careful out there and do not get caught up in the hoopla.