America's Economy Is on a Steady Decline
.. We predict that there will be wailing and gnashing of teeth...
Young men will throw stones... old men will dream ugly dreams... and
the lamb will be devoured by the lion... when the nation goes broke ..
When Ronald Reagan was elected in 1980, U.S. government debt stood at
31% of GDP. Now, it's over 100%.
Total debt in the U.S. - public and private - was about $52 trillion
in 2007. Now, it's $73 trillion. The economy, meanwhile, rose from
about $14 trillion to $22 trillion.
In other words, total debt is now going up three times faster than GDP.
Government debt is growing almost twice as fast as GDP - from $9
trillion to $22 trillion since 2007.
As debt levels increase, growth slows. Why? Because debt is an
obligation that the future owes to the past. As it increases, there is
less left over to drive an expansion. Let's look at it in more detail.
When the Fed lends fake money at fake rates, much of it goes right into
financial speculation. Asset prices go up. The honest information
capitalism needs to flourish is distorted. Real capital investment,
productivity, and growth decline.
Then too, at ultra-low rates, corporations find it is easier to pass
out the fake money to shareholders than to do the hard work of expanding
markets and improving products.
Over the last 10 years, for example, approximately 100% of additional
corporate debt has been used to buy back shares.
New factories weren't built. New businesses weren't started. Good jobs
weren't created. Real wealth was not produced. That's why real before-tax
corporate profits have been flat for the last seven years. But during
that same time, shareholders doubled their money.
Fake-money scheme in the economy
Consumer debt is different. Households can't borrow at ultra-low rates.
And they operate on a pay-as-you-go basis; they pay their interest
expenses in time on the job. There's only so much time available;
eventually, they run out.
That is what happened in 2007; they hit their limit. It's why final
sales are so weak now. And it's part of the low-unemployment story;
desperate for income, consumers take multiple low-paying jobs just to
make ends meet. Again, the economy slows as households find it tough to
That leaves the biggest pile of debt of all - government. The feds can,
theoretically, borrow until the cows come home. But the feds don't produce
wealth. And the more they borrow, the more time and resources they take
out of the real economy and squander on boondoggles, bamboozles, and B.S.
This, too, slows the growth of the economy and makes people poorer.
Remember, the feds' fake money is a claim on real time and resources.
At first, the fake-money scheme is just a way of redistributing wealth -
from the middle classes to the rich. Wealthy asset holders become more
wealthy as the Fed boosts asset prices.and the wealthy use them to claim
houses, lawn care, automobiles, and other real-world goods and services.
Gradually, though, the economy slows, and real output declines... then,
the feds 'print' more and more money to try to keep up with soaring
But take it easy... the whole process takes time ..