It is becoming increasingly obvious that equating economic growth with GDP is not a reasonable thing to do.  Since 1973, nominal U.S. GDP growth has averaged 6.8 percent.  So-called “real” GDP has averaged 3 percent, but this result is achieved by applying a different measure for inflation, known as the GDP deflator, than is normally used.  The GDP deflator understates the changes in price levels that are reported for the rest of the economy by the Consumer Price Index.  Because the CPI-U has averaged 4.6 percent growth in the last 37 years, real GDP growth has been closer to 2.2 percent than the three percent reported by the BEA.  However, correcting for inflation does not account for another contributing factor which is nearly as significant, the expansion in commercial bank loans and leases.  TOTLL, as this statistic tracked on a weekly basis by the Federal Reserve is known, accounts for about half of present U.S. GDP, and more significantly, accounts for more than 100 percent of GDP growth since 1973, as it has increased at an annual rate of 8.4 percent over the same period. The chart below shows this in graphic detail; all bank credit expansion (red) and GDP growth (green) that is above the blue line indicates a real increase that is not the result of a reduction in the value of the U.S. dollar.

The 2009 decline in TOTLL, which in inflation-adjusted terms now exceeds seven percent, is a strong indication that the debt-deleveraging process expected by those who anticipate large scale economic contraction has begun.  The decline is unprecedented, as there has been no annual decline of more than one percent since the data was first tracked in 1947. This is why “getting the banks lending” has been the foremost priority of the monetary authorities in the USA, UK, and other countries.  It should also be kept in mind that at $6.7 trillion, TOTLL only accounts for 12.7 percent of total U.S. market credit debt.