This chart shows the trend from the end of the Civil War until now.
Note two things:
- There may be a general upward trend, but there are two clear aberrations: One in the 1920s and early 1930s, and one now.
- The aberration now is vastly higher than the one in the 1920s and early 1930s, which preceded the Great Depression.
Unless "it's different this time" (unlikely), the second aberration is going to end up the way the first one did--by returning to the mean.
How will it return to the mean?
One of two ways.
Either we'll have hyper-inflation with relatively little new borrowing, which will rapidly increase the size of GDP while holding the debt load steady. OR we'll have gradual growth of GDP combined with a gradual reduction in debt.
Neither will be a particularly happy outcome, though the level of unhappiness in each scenario will vary depending on your circumstances.
If you have a job and owe a boatload of money, root for hyperinflation: It will make your salary go up fast (in nominal dollars) while your debt load stays the same.
If you've saved a bunch of money, root for slow growth of GDP and gradual debt deduction: This will preserve the value of your hard-earned savings.
In either scenario, though, don't expect a strong recovery of REAL GDP (inflation adjusted). What has fueled the rapid GDP growth of the past 25 years has been the borrowing binge that began in the early 1980s (it's easy to spend and produce more when you borrow more). It's unlikely that debt-to-GDP can increase forever, especially from this level. So that particularly GDP driver is going away.
Unless it's different this time. (Pray hard.)
GDP does NOT matter.
ReplyDeleteDebt to revenues matters.
Davos you are correct. It doesn't matter if a business sells ten billion dollars worth of merchandise if it loses fifteen billion dollars.
ReplyDelete"Gross" isn't that important, it is the balance sheet bottom line.
As a corporation, we stink.
None of it matters because nobody besides the fed has an actual baseline from which to operate.
ReplyDeleteWithout a factual baseline; you can give me any sets of numbers you want & I'll make them say anything I want ( and make you believe it too).
That's what independant audits are about - and also why the gov't constantly runs 3 sets of numbers ( books) to outsmart said auditors.
The only people with numbers we can really believe are the small businesses on the front lines - they take on as much business as they
can get when times are good and shed excesses
when times are lean & they cannot lie very long about what's going on.
Small business in this country has been telling all who will listen for 2 1/2 years now that the boat left the dock & now she's sailing away. They are still sheding jobs and I'm not talking about the part time help - we are cutting DEEP by this time furloughing 14 and 15 year veteran employees you DO NOT want walking out your door as these are the people that make things happen on a daily basis and can usually perform multiple tasks within' said business.
When the company does get an order large enough to require additional employees; they are merely
outscourcing the overature; knowing full well that next week they'll be right back where they were.
meantime we have this ignorant SOB we call a president and even though almost 70% of the American people have told him different - the ONLY thing on his agenda right now is universal health care.
Oh Jolly - "we" put him there - now "we" can suffer the consequences.
And suffer we shall - starting right here; right now
both parties are corrupt and have lead us to this point of no return. its also the fault of the american people, they do not want to hear bad news and want to think things are okay. left wing right wing same birdNever, ever underestimate the stupidity of the people in power.
ReplyDeleteEverything they believe is bullshit.
I mean, look at the liberal agenda or the "conservative" one, for that matter...look at the things these talking idiots say. Look at what they believe. They exist in a state of cognitively dissonanced delusion.
Some "economist" will say that they should tax land more to get more stimulus or something. This is actually how Rome ended up paving the way to the feudal dark ages...raise those taxes, debase the currency. The lesser-wealthed had to sell themselves into serfdom to be protected from the land taxes. The policies of the empire destroyed all the weaker hands until you ended up with massive feudal duchies.
It's very clear when you argue with a liberal or conservative that you get an internally irreconcilable DOGMA. They believe things with every fiber which are very obviously and provably bullshit. Gun control or military policy, Patriot Act, Deficits don't matter, and on and on. They all want more security and they are willing to give up some of their rights for it. The people are dumb so they get dumb polticians. Obama or Bush do not scare me its the people who cannot except that we will never recover or we will collapse. thats what 60yrs of prosperity have done to you and soon we will 60 yrs of nothing. stop blaming parties. the elites want you to do this to divide us. back to the article we are heading towards a fiscal,dollar crisis in a couple of years. Listen if we just raise interest rates up to 2% 45% of taxes will be spent on the interest alone. also the CBO has projected that we will NEVER have a budget deficit ever again.We are now at a point where if the U.S. government taxed Americans 100% of their income, the tax receipts generated would not be enough to balance the budget. Likewise, if the U.S. government cut 100% of its spending including defense, but kept paying Social Security, Medicare and Medicaid, we would still have a budget deficit. Also these projections are based on a good economy and we know the next shoes to drop (alt-a,option arms,pension bubble,commercial real estate,state debt crisis). so we are entering a world of hurt coming. its coming.
The Obama debt curve has no ceiling. It grows and grows until the dimwitted fools start to build guillotines.
ReplyDeleteI'm not an ass hole. I didn't vote for Obama but I have no choice but to stick around.
ReplyDeleteIn 3 years I won't have a house, a car, a job or any savings left but I may have health insurance that I cannot afford.
Change you can believe in...ya right
Conspiracy theories?
ReplyDeleteDishonest banksters themselves for all their Ponzis did cause this economic crisis the US economy was completely parasitical and running on imported value in the form of credit and on profits from selling cheap labour goods in Wallmart. Cheap labour profits and credit.
That that was the life blood feeding the parasite . U.S. capital was making no profits from its own workers labour for all the whining on the left and at tea parties about “exploitation” of working people. When the credit supply run out the US turned to the printing press and bailouts.
According to the Economic Report of the President in 2008,
http://www.gpoaccess.gov/eop/tables08.html#erp
Net dividends paid out by corporations were $601.4 billion in 2005 Meanwhile, the trade deficit was over $700 billion. That means that the goods and services provided by foreigners to Amerikans more than created the entire margin of corporate dividends — all in exchange for a piece of paper called the dollar.
Those of more honest or leftist bent will find it interesting that corporate profits in 2006 in manufacturing were $293.4 billion and that’s counting cash kept on hand in addition to money to be sent out for dividends. In contrast, the trade deficit was $758.5 billion in 2006. So once again the surplus obtained just by the willingness of non-Amerikans to take dollars more than covered all manufacturing profits. So much for a story of exploitation of Amerikan workers and the middle class.
. The United $tates has had a trade deficit every year since 1976. In recent years, those deficits are not small considerations.So in other words, the 2006 trade deficit provided Amerikans with enough goods and services to fund the entire Pentagon operation and then some.
I want 7:48 to tell everybody here who was the president that did NO killing - ( yes- we;ll start with Obama)
ReplyDeleteWould you like to discuss how many people Cliton killed? Bush 1 ? Reagan ? Carter ? How about kennedy or LBJ ( he inherited " it" too but was just as guilty as Barry is - you pick the Pres & I'll put yopur ass in line
are all one in the same and everyone here including me is damn tired of you
saying the same immature line; over and over and over.
Either get over it or go hire a hitman - maybe that would make it all better for your muslim lovin' ass
Idiot
Anonymous 9:14 said
ReplyDeleteI want 7:48 to tell everybody here who was the president that did NO killing - ( yes- we;ll start with Obama)Muslim loving ass etc.
Actualy the comments of 7.48 only discusses strictly the economic problems of the parasitic non productive U.S. Economy and why it is collapsing into an economic Zombie as the credit supply dries up. Check the comment out above and do the simple sums in the economic report of the President.
In response, all we get in “reply” in this comment is a change of subject to a religious and racist, politically partisan, “patriotic” rave about killings and ‘your Muslim loving ass ’ etc . etc none of it at all related to the economic comment of 7:48 in any way.
Beneficiaries of parasitism , brainless zombies will have trouble understanding these basic economic facts that the U.S economy was parasitical and only have one solution for their problems getting more third world blood. Justified by The same old recycled , boring ,subject changing racist and religious commentary posing as a White American version of Christianity. The same immature line over and over an over to divide Americans and blame minorities .America is in big trouble with its dumbed down ‘patriots” their one track brainwashed minds and their divisive racist and religious war “solutions” to the economic problems of parasitism E.G. -Lets bomb Iran for starters
I wanted to have a beer with bush, that is why we elected him, how did that work out?
ReplyDelete3.48
ReplyDeleteyour right
america is screwed because it is full of people because they have been saturated propaganda based on lies an fabrications .
National and racial .
You pretend to be the national patriot type an expert on history and the propagandda
race and faith staring with sumeria but on american history you havent got a clue and only regeurgitate the same old White" race propaganda .
Which "race and faith" did the Black Americans ,Hispanics and others in the military fight and die for?
You demean many Americans and their motives reducing these motives to race and faith of those
who fought and died for America and here I am not talking about the 9/11 volunteers ;
DEATHS
World War 1 (1917-1918) 116,708
World War 2 (1941-1945) 407,316
Source
www.militaryfactory.com/american_war_deaths
As for the "millions" you find who went to their death fighting for “race an faith” are you talking about the Civil war deaths ,or overseas?
In the case of overseas how many "millions" count in american race an faith horde?