1Q GDP Reported Up - Is the Shock and Appall Strategy Working?

Yup!GDP was reported up today for the third consecutive quarter.The economy is apparently growing at a 3.2% clip.But, my question, when I heard this at the start of my morning was, "3.2% growth compared to what?"We just came off the worst couple years for our economy, maybe ever, and the flavor of the reports I get are that recovery is upon us.

So, I checked it out.The GDP measure is a year to year measure.1Q of 2010 is compared to 1Q of 2009.So I looked up GDP growth for 1Q 2009.GDP then was down 5.7%.(President just said 6.4%)As far as I'm concerned here's how it all shakes out.

Fiscal year 2009 ended with a $1.4 trillion deficit to our national budget.$1 trillion or so was related to bailouts, stimulus etc.In 2009 our entire GDP/Economy was estimated to be $14 trillion.If we just look at the $1 trillion we added to our deficit, that equals 7.1% of our entire GDP.We did not even grow at a rate equal to the amount of money we printed and pumped into the economy.

Government's fiscal year 2010 began October 1, 2009 and with it came more deficits of equal or greater magnitude and more stimulus.I don't think it's any surprise that numbers look better in a year to year comparison.What I think should shock and appall is just how miniscule the growth rate is compared to the massive amounts of money we spent to try and grow the economy, jobs etc.

If you are in stocks, be careful.Herein lies the truth about a "V Shaped" recovery.If we can't grow GDP at least at an equal rate to the stimulus we pump in, that means the economy is still shrinking and stimulus is not working.We may still have our noses above water but if we don't get some more air pumped into our water wings we're going under.

And what does that all add up to?From the perspective of the economic geniuses, we need inflation.Government and the Fed can talk all they want about inflation being in check but I think the reality is, they want it and they're going to get it no matter how much money they have to print to make it happen!

And what does this mean for gold demand?Inflation and gold have been holding hands for centuries.The grip is getting tighter and the Gold markets are showing signs that Gold as an investment is rising in popularity as I speak.The markets, already showing signs of returning volatility, act as if they are growing suspicious of numbers as they are spun and weaved into the emperor's invisible clothes.

If you just look at the reality of the situation, our debt is growing to unsustainable levels. You have to believe that there will come a day when the house of cards falls and the emperor grabs a towel.When we get reports that this will wipe out savings and retirement accounts, the people who report this are not just being sensational.They mean it!

I am very disturbed at how GDP growth is being used in the same sentence as recovery.And, as more and more people catch on, look for a flight from stocks into commodities.Everyday it gets easier to see $2000 gold ahead.But I stress, don't buy gold today for the outrageous gains anyone predicts.Buy gold for the consistent rate of growth that began early last decade, the same growth expected to continue for years to come.