Did you here about the great quarter we just had? GDP grew by 1.9%. Not to bad considering banks are failing and everyone is running around like the wold is ending.

There is only one problem. The number is only believable if you think that inflation was less then the headline consumer price index.From Credit Writedowns…..

What you see above is the GDP deflator series. This is how the US government gets from nominal GDP to the GDP number we all hear on TV. What’s interesting about these numbers is the GDP deflator uses its own inflation gauge , which is entirely different than the CPI.

Look at the highlighted numbers for Q3 2007 and the last quarter. How is it that inflation was 1.5% in Q3 2007 and 1.1% in Q2 2008? Are they smoking something? Uh, fellas, inflation has been rising, not falling to 1.1%. Hmmm.

Nominal GDP only grew 3.0% in Q2, so Q2’s real GDP number of 1.9% is so obviously false that I expect it to be revised down significantly next year.

If you go to his site, you can see the numbers for yourself. (h/t Market Movers)