Watching markets roar up yesterday you have to shake your head. US Q3 GDP came in at 3.5% and within the 3 to 3.7% range that was expected; markets soared. Still on low volume; but prices soared nonetheless.

The ludicrous aspect of this response is that the likelihood that US Q3 GDP would be above 3% (annualized) has been common knowledge for several weeks now. It was known all through the past few weeks as markets sold off day after day. Yesterday’s release was not a surprise. The bulk of the reported growth came courtesy of two main components: higher exports thanks to a lower US dollar, lower imports due to less consumer spending, and government programs that helped to artificially encourage home and auto sales in Q3. After these enormous impacts, thank Ben we did see some life in GDP!

But the important question is not whether herculean Government stimulus can goose up a quarter or two, the question is how do we keep growth alive going forward? How likely is it that government kindling will be able to ignite a lasting fire under the economy in 2010? So far the flames are too weak and sputtering to warm our hands never mind spark great confidence...   more »