In 1971, the rock band The Who told us they “Won’t Get Fooled Again,” and it was considered a very prescient reminder… until their drummer, Keith Moon, drowned in his own vomit (I hate it when that happens) and they lost a bit of their credibility.

    The Who was telling us not to believe the nonsense spouted by politicians and revolutionaries alike, as all leaders and governments end up being the same once in power, as apparently power corrupts (who knew?).

    Here is a 30-second video of Keith Moon blowing up his drum set at the end of a performance and rendering a bandmate deaf in one ear for life … because, as we all know, you can never blow up too many drum sets.

    When I saw the very strong Q4 GDP numbers this morning, I thought of The Who, Keith Moon, drugs, the 1970s, football, duck-billed platypuses, warm sunny days, ping pong, green eggs, fiddleback spiders, orcas, ocean waves, guppies, redwood trees, and the Roman Empire (of course) – which mostly explains why I, and most men, get so little work done.

    But I mostly thought of The Who and how I suspect we might be getting fooled again.

    GDP or Gross National Product was up an astonishing 3.3% for Q4 – and the “soft landing” (no recession) crowd is doing victory laps.

    This is extremely good news, as nothing reflects the health of an economy overall more than GDP growth – as that is the true indication of the total wealth to be spread amongst us all.

    So – Why Didn’t Rates Go Up?

    One of the reasons is that a key inflation report came out simultaneously with GDP showing that inflation is clearly cooling off – and that is even more good news.

    We might actually have a “Goldilocks economy,” with low inflation and strong GDP growth!

    BUT… there is another reason rates did not go up. The bond market knows that our GDP growth is likely neither “real” nor sustainable.

    This post on X by E.J. Antoni reminds us that our $324 billion increase in GDP was fueled by an $834 billion increase in government debt (and related government spending).

    So, that is not a very good ROI on spending, and it is clearly not sustainable – as we can’t run deficits forever to fuel economic growth.

    Mr. Vanderpool Told Me In The 5th Grade The Soviets Would Overtake America!

    When I was in the 5th grade my communist teacher (true story), Mr. Vanderpool, loved to tell us how the Soviet Union’s economy was most definitely going to overtake America’s economy.

    This is because the Soviets had been borrowing and spending heavily for decades on huge industrial and infrastructure projects, e.g. dams, and lying about their growth statistics.

    Many economists, 5th grade teachers, and naïve 5th graders in Minnesota believed them too – but it turns out we all got fooled again.

    It is interesting that we fell for the same thing all over again with Japan in the 1980s and China in the 2010s…when those countries were subsidizing their “growth” similarly.

    Anyway – I don’t think the bond market is getting fooled again.

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