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Wednesday, April 29, 2015

So Simple Even An Economist (Or A Fed Chairman) Could Get It?!?

Some really simple charts explaining why the US (and economies worldwide) are in big, big trouble...and big trouble requires big change to avoid far worse outcomes.

What you see below is a chart showing the growth of GDP and growth of debt over periods since WWII.  Noteworthy is that for every $1 of federal debt spent in '47-'60, the economy grew nearly $9!!!  However, by the most recent '07-'14 period, not only did the economy see no net gain after subtracting the new debt...for every $1 of new debt spent, about $.30 of "growth" remained of the original new $1?!?  But all $3 dollars of new debt are still owed, and like a credit card, the US will make interest-only payments on all this new debt indefinitely. 

Noteworthy, the post-war period of '47-'60 was marked by robust growth, nearly a balanced budget, and minimal growth of GDP attributable to growth of federal debt.  Compare and contrast with the '07-'14 period where debt grew nearly $9 trillion and after subtracting new debt, GDP collapsed by nearly $6 trillion.  This trend is only accelerating...The Federal Government and the Fed may want to consider this (but won't) before they embark on spending another dollar?!?

All the Federal debt "invested" in the economy since '07 has yielded...well, nothing.  The chart below shows all GDP growth above and beyond new debt creation since WWII has been wiped out since '07!

As you'll note below, the growth in federal debt was responsible for 11% of GDP growth in the post WWII period vs. the most recent period where new federal debt growth was 300% that of GDP growth.

Times have changed.  And that is why it is time the Fed plus all the captured federal branches (including the entire Congress, Executive, and Judiciary) need to be fired.  Removed.  Retired.  Corporations and foreign money removed from US politics.  And a laundry list of activities to take back what is ours.  And an honest attempt need be made to identify and, painful as it may be, begin the long road to rebuilding an economy and a nation.


  1. Excellent analysis and conclusion. The last chart clearly shows the financial system destroying itself in the final time period. This merely means the cost of the financial system out weighs its alleged benefits. These costs are already visible but many are hidden, mainly in our pensions.

    Once bond prices collapse due to weaker demand then the hidden costs become acutely visible. Our pensions value is largely made up of bonds. I expect this portion of value to halve. Then halve again. Interest rates will rise inversely proportional to bond price collapse. This halves the price (but not the utility value) of your home.

    Next the IMF come to the 'rescue'. With SDR's. To prevent the above happening again. It will involve more centralisation. It won't work. Clever people like me, fall into two camps. Those that think they know best and the (few?) others that understand that they don't.

    The system will both collapse and continue until normal people accept responsibility for themselves, their families, the local area, their country and the planet. Cameron and Obama may be clever but they aren't gods. We ask too much of them. Yellen and the rest may be clever but they aren't gods either. Even God gave us free will. Perhaps that is why we don't value it?

    Sorry to get philosophical but our financial and political systems are a simple set of beliefs that are not in the best interests of nearly 7 billion people. We are free not to believe. Why do we choose to believe?

    Chris has noticed problems with our financial belief systems and is pointing them out with great clarity. Well done Chris. Our political belief systems are no better. Once bond prices do collapse, will we look to our governments and bankers for solutions or will we realise that they don't understand or appreciate what they are doing?

    I already know. Christine Lagarde, wearing a designer suit, will say she has a solution. We will say 'thanks' and accept it. 'What else can you do?' God will continue to be patient with us. I would rather (S)He be impressed.

    I apologise for mentioning God. Thanks for letting me rant.

  2. If government wants the economy to do well, they need to get out of the way.

    1. Yes and a fair banking system would be nice too. The exact opposite of what central planners need.

      Central planners want control and banking and government are the tools of their trade to acquire more control. Fearful and panicking humans give control away easily. Central planners believe that what they do is for our own good. I believe that they are wrong.

      The IMF are the central planners to whom we are likely to give most control over the next 5 to 10 years. As the markets crash due to boomers removing what they fully believe is actual wealth rather than simply nominal prices of financial assets. The actual wealth, would in theory, be transferred from working people investing their surplus in financial assets. Unfortunately, the boomers paper wealth exceeds the workers surplus wealth. Hence the required adjustment, or 50 - 90% market crash I keep mentioning. The IMF will have a solution, ready and waiting. It won't be a solution and it won't work. They will get more control, which is a win for them and a loss for humanity.

      Any questions?

  3. The only logical conclusion is this is all by design...

    1. Central planners expend much effort thinking. They are very creative, inventive and lots of other words we associate with great intelligence. I perceive them to have only one flaw. Their belief system appears to be based on central planning being the solution to every problem. I believe that they are wrong.

      Yes, there is a design. The central planners have increased central planning as the solution to every problem their cunning little minds can imagine. They mean well and they are intelligent, thoughtful and caring. They just lack accountability, modesty and common sense.

  4. Allowing the high risk takers to be systematically dismantled and a complete loss for all shareholders would have done wonders in bringing sanity back into the marketplace. Instead they privatized profit and publicized their losses. Trying to bend the economy to produce pleasing political numbers is as insane as using the tax collection system to pursue/enforce politically desirable social issues!

  5. this model fails to take into account use of US dollars/money supply=debt outside of the US and the growth that has occured outside. This model also fails to account for post Glass Stegal etc shadow banking/speculation. Private equity being converted to debt to avoid taxes etc. However it is true that the government wastes money and business and job formation sucks due to goverment/legal repression and removal of engineering talent etc from the productive to bogus war projects/wall street etc.

  6. US, Chinese, Japanese and ECB QE programs are making life hellish in developing countries through imported inflation, elite capture, corruption, high indebtedness and more. This aspect of QE, stimuli and bailouts is never commented upon. Nobody cares. That is until the chicken come home to roost-and that is happening now. Welcome aboard.

  7. Only a handful of nations have ever allowed the people retain the money that they have earned by their labor--and those nations prospered. History is a repetition of nations that confiscate the earnings of the people and the nations then stagnate. The U.S]. did real great until Congress allowed a central bank. The Federal Reserve embezzles $3 billion daily from the government using the FRBNY's exclusive handling of Treasury security auction accounts. 31 CFR 375.3.

  8. Please, anyone, post an alternative means to download the above document from any source other than Scribd. I refuse to pay Scribd, and so should you. They monetize distribution of documents that should be available at no charge.

    I would love to read that document. I will not pay to do so. Thank you.


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