They need a new way of deriving the Gross Domestic Product. Is debt-funded growth really growth? From Tyler Durden at zerohedge.com:
We will have much more to say on the composition of yesterday’s first estimate of Q4 GDP which as we highlighted was a very ugly print, and only another quarter of extensive government spending (the 10th quarter in a row) and a record beat of consumer spending relative to expectations, prevented the GDP print from sliding into the 1% range…
… but even if one assumes that there was nothing abnormal about the number itself, the context in which it was derived was astounding. Here’s why.
As the BEA reported, in Q4 US GDP grew at a seasonally adjusted rate of 2.3%, below the 2.6% estimate and down from the 3.1% growth pace in Q3. More specifically, the number represented the annualized increase in the 131BN change between what the BEA calculated was chained Q3 GDP ($23.400 trillion) and Q4 GDP ($23.531 trillion). In other words, to keep it simpler, in Q4 the US economy actually grew some $130.6 billion chained dollars.
So far so good. The only problem is what funded this growth, and as regular readers are well aware, in the US the source of all growth is – and for the past 100 years – has been debt, and boy was Q4 a doozy.
As the chart below shows, while the US generated $131bn in chained GDP growth in Q4, this was the result of a $711 billion increase in the US budget deficit, which in turn was funded with a $754 billion increase in debt which, as of Dec 31, 2024, stood at a record 36.218 trillion. The Q4 snapshot is shown below.
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