The Dow seems to be backing off. The dollar, too. And gold.

None has moved down much. But all are looking a little peaked.

GDP numbers show the U.S. economy advancing at a surprisingly strong pace: 4.3%.  Can you believe it, dear reader? We can't. 

We don't doubt that there is a lot of economic activity taking place. We just doubt that it's “growth.” Remember, consumers' incomes have been going down for the last two years. In an economy that is 76% based on consumer spending, how can “growth” occur without an increase in the thing that has to do the most growing?

Imagine a man who inherits a mansion - left to him by his father, who made his fortune in auto parts. The man's own income is stagnant. Still, he finds his house is going up in price. So, he borrows against it in order to increase his standard of living. He goes out to restaurants. He puts in new drapes and how could he resist, new granite countertops! All around him, people feel the effects. Money is flowing. Everyone feels richer...the GDP goes up! 

But is it “growth?”

It's the sort of expansion that is likely to give “growth” a bad name.  

But who are we to argue with it? People think they are richer. They spend more. They borrow. Their houses go up, and they think they are richer still. As long as the economy is growing, people think they can grow along with it - until they go broke.

Gold is at $498, which is about where it was when Alan Greenspan first planted himself in the cushiest chair at the Fed. There has been much growth of all sorts since then.  Houses are worth at least twice as much - or more (Our house in Maryland has gone up four-fold.). Home mortgages outstanding have quadrupled. Consumer debt has tripled.  Corporate debt has more than doubled. State and local debt has more than doubled. U.S. debt in foreign hands is up about 700%. Credit market derivatives barely existed in '87.  Now, there are trillions worth of them. 

Gold is correcting. Having hit $500, it is backing off to catch its breath. We don't know how far it will eventually go. But today we move our target buying price up to meet it - to $475. We hope it falls below that level where we will buy more. Gold would have to go to about $1,000, we figure, just to catch up to all the “growth” that has happened since Alan Greenspan took over at the Fed.

If all this “growth” is as stunting as we think it is, gold will go up even more.

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.