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Reader Shawn Mercer points to a post yesterday by Peter Schiff, a former sparring partner on CNBC's "Kudlow & Co." (hmmmm... wonder why the producer never pairs me with Peter anymore?). Shawn says, "I think our buddy Peter Schiff's head is going to explode trying to rationalize away the GDP report yesterday." Indeed. Yesterday's report showing blazing growth in the third quarter, despite a credit crisis and a housing downturn, has got to make the bears wonder what planet they've been living on. Here's Schiff's reaction. I have to say, I think in principle he makes a valid point, noting that inflation is surely underestimated in the numbers (if it were more realistically portrayed at higher levels, that would make the reported growth numbers somewhat lower). But Schiff just can't resist taking it way too far -- and being way too pompous about it.

...the government had to assume that inflation during the quarter ran at an annualized rate of .8% (that?s less than 1%). That is the lowest rate of inflation used to calculate U.S. GDP since the Eisenhower administration.

First, thanks for explaining to all the stupid people out there (perhaps he knows his audience well) that .8% is lower than 1%. But let's get our facts straight before we presume to teach the dummies what's what. It's simply not true to say it's the lowest rate since the Eisenhower administration. Let's look at the data. Lower rates occurred in the second quarters of 1962, 1997 and 1998. Data? Schiff woulud rather go with guesses. He says, "My guess is that inflation is actually running at an annualized rate closer to 10%." Such a rate applied to the GDP calculations would show the economy to be not just in a recession, but a depression. Which pretty much lines up with Schiff's prejudices, and explains his "guess."

I agree with Schiff that there is an inflation problem. And we both support Ron Paul for president. But can't he get his facts straight, and can't he tone down his end-of-the-world rhetoric a little?

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