A reader asked for my take on GDP which printed a better than expected 3.3%! It probably means gray skies are gonna clear up and that all is right in the world. Ahem.

Barry Ritholtz does the heavy lifting of dissecting the report and spelling out why there is less than meets the eye. Ditto Durable Goodies so I won’t reinvent the wheel. Mish just invoked the term Occam’s Razor which means the simplest answer is the best or most likely answer. I love this idea and believe in it.

So, to the question which I’ll broaden a tad to the US economy. Well, housing prices are down a lot in many parts of the country (dare I say places that are economically very significant to the country?). This means that if you had to sell your house you could not get a price you’d be happy with and for many folks this means the proceeds wouldn’t pay it off. If you could find a buyer willing to pay a “good” price that buyer might not be able to get financing.

The housing issue is part of the asset deflation story that has unfolded for a while now. The S&P 500 first closed at 1300 (yesterday’s closing price) on March 15 1999. People worry about whether this period could turn into the 1970’s, it already has. Nine years with no gain in stock prices in nominal terms (maybe things look better if you add in the dividends but then you would need to inflation adjust the whole thing and I’m thinking it still wouldn’t look so hot).

At the same time our assets are grappling with deflation many of the things we have to pay for every week or every month have gone up a tremendous amount.

The economic policies of the gubment have left us indebted, needing more debt and needing foreigners to buy an awful lot of that new debt on top of what they are already holding. In order for this to continue it means the US must rely on several things all continuing to go right (they probably will but this reliance exists and is a risk factor).

I haven’t even touched on energy, social security or Medicare issues.

So sticking with the issues cited above what is the simplest answer? Thinking about that answer, does it really matter how GDP prints? What matters more, I submit, is that if your house was worth $400,000 a year ago–what could you get for it now if you had to sell? What matters more is whether your financial plan is on track for where it is supposed to be in 2008. What matters more is your ability to meet your obligations. What matters more is the gubment’s ability to meet its obligations.

Anyone can take anything they want from the data and probably make it sound plausible. The simple explanation spells out trouble continuing. This is not apocalyptic because certain markets have offered normal returns and people that live beneath their means can weather a poor economy and there is demand for the US’ debt.

All this takes me to the same place I have been for several years which is slower growth at home, slightly higher interest rates than we are used and the need to find normal equity returns elsewhere.

Last 5 posts by Roger Nusbaum

• The Big Picture for the Week of November 15, 2009 - November 14th, 2009
• Process Drilldown - October 23rd, 2009
• Sunday Morning Coffee 10-18-09 - October 18th, 2009
• A Little Followup From This Morning - October 8th, 2009
• Wednesday Roundup - October 7th, 2009