The most important number in yesterday’s GDP revisions for Q4 was $16.20 trillion. That’s the annualized constant dollar (2009 $) value of final sales during the quarter and, naturally, it was not mentioned in any of the media reports. But its important because the final sales figures strains out the noise of quarterly inventory fluctuations, and thereby provides a reasonable benchmark for where the overall economy currently stands.
In that context, the second most important number was $14.97 trillion—the real final sales number recorded for Q4 2007 on the eve of the Great Recession. As a matter of calculation, the rate of change between those two points over the last seven years is 1.1% per annum, and it embodies the tale of how main street is lagging while Wall Street is booming.
The starting point for appreciating that proposition, therefore, is to recognize that there is no point whatsoever in comparing the Q4 figure with the prior quarter—–or even with the cumulative gain since the bottom of the recession back in June 2009. Those kinds of comparisons are the gist of the Keynesian narrative that both Wall Street and Washington assiduously peddle—-but they are designed to rationalize the status quo, not to elucidate the real condition of our national economy.
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