You guys have heard me say many times before going back to at least May that we’re not just in a recession, we’re in a negative economic mega cycle and with nothing to support the start of significant growth of any kind, there is absolutely nothing positive going on right now Any spending being done by consumers has no dynamic to sustain it…none.
But the reason Krugman is a loon is because we aren’t dealing with just a “temporary mispricing” of debt. We are going to be forced to restructure not billions but trillions of dollars of debt that has been loaned and borrowed against an asset base with values that no longer exist.
OK time for some comparative facts and figures:
Let’s start with the financial sector …Obama’s and Geithners close asshole buddies on Wall Street they keep protecting when they aren’t busy bailing them out with our money.
Debt owed by the financial sector at the end of 08 was $17.2 trillion, or 121% of GDP. At the end of 07 it was $16 trillion, or only 115% of GDP.
Let me add some perspective by also telling you that at the end of 1959 the number was 21 billion which just 6% of GDP
In 1959 Government debt hovered around 59% of GDP fast fwd to today and it has been accumulating so fast it’s hard to keep track of day to day but looking at the
Total debt to GDP which has a historic average of being around 155% of GDP is now at over 349% of GDP
I have always been intrigued by these debt-to-GDP charts specially since the fall of 08 . When I went back and tried to compare what’s happening now with what happened in 19239 what really struck me was the fact that it wasn’t a run-up in debt back in the 1920’s that started the Great Depression – the spike then was caused, if anything, by the dramatic decrease in GDP (the spike doesn’t happen until 1932-3 or so). Without really drilling it down and spending time I don’t have looking at it , in our current environment, I think there is no question we’re going to see this chart go a lot higher before it starts lower. With GDP going down right now, not up, and with our overall debt levels still on the upside thanks to governments “help”, I think this could top out at 450% because we haven’t even started to truly de-leverage yet.
The problem is that the problem will never be solved because too many Americans are too stupid to know where the problem begins. All spending bills come from the House of Representatives, which for the last 4 years has been run by Nancy Pelosi and Bawney FFFFwank. The spending bill then goes to the Senate, which is run by Harry Reid and Chris Dodd. The bill is then signed into law by the President. That is the way it has been since the Constitution was ratified.
The fact that most of the comments I read here, who one would think have at least an iota of education, don’t understand the basics of our Republic, tells you that our government and economy will fall into chaos sooner rather than later. I used to be amazed when people would place all the blame for deficits on the President. Now I am numb to the level of stupidity of the average American. Only until this debt is either paid down, inflated down, defaulted on, or some combination of the three will we begin to have real economic growth. It will take years and any sense of a robust and lasting recovery is utterly foolish. Buy Gold and take delivery!