For now.
65% of our “GDP” is consumption. This is what the government says. The chart is from the St. Louis “FRED” site. The media parrots this all the time without even thinking about the ridiculousness of the basic statement wherein Product is measured in consumption! Consumption is not product! It is not output. It is not production. It is simply consumption. So the whole metric is stupid and misleading but it does tell us that consumption, not production, is keeping the GDP number high. And one of the main metrics that creditors use in determining interest rates to charge debtors is debt to GDP.
It would be one thing if we were earning that
consumption. But we aren’t and we haven’t
been for a long time. Being in debt
means you borrowed from tomorrow’s production in order to consume something
today. It means you have to earn way more tomorrow in order to consume tomorrow
at the rate you are consuming today because you not only have to pay back the
loan, but interest as well. Economic
children love to believe that you can sustainably grow the economy, which they
also measure in GDP, by growing the debt.
Well, if GDP is measured mainly by consumption then for a period of time they appear to be right. After all, can you not live in a
better house, drive a nicer car and wear nicer clothing if you are just charging
everything to a credit card that you don’t pay off each month?
So there is no doubt that using debt can grow the economy for a while, but it is absolutely childish and will ultimately prove to be self-destructive to believe that this is in some way sustainable. In fact, it works exactly like a Ponzi because it IS a Ponzi. GDP doesn’t stand for Gross Domestic Product. It stands for Global Debt Ponzi. At the start of the debt based growth scam it appears to work great. A little debt increases the GDP by a lot. Over time that flattens and then begins to reverse where adding more debt not only produces no more positive growth, but actually negative growth. But you can’t stop because without adding more debt it would get worse even faster. And that is when the trap is sprung and the debt spiral takes over.
Once we are loaded up on debt and debt stops buying growth, people stop wanting to loan more into the system at low rates. Sure they will loan more, but not at 2%. The start wanting 5, 7, 10%. Why? Because the debt:GDP ratio starts to look too high. But if they don’t loan us money to continue consuming as we have been, consumption must drop. And this is where it really gets bad. Not taking on more debt does not stop the rise of debt:GDP simply because the the debt numerator might remain constant but the GDP denominator begins to plunge. I hope you can see how this boom and bust scam of a system, like every Ponzi, has the bust built into the math of it right from day one.
We have $22 trillion in debt in this country, much of it in shorter duration paper. We could not pay the bills back when we were borrowing so nothing will allow us to pay off any debt in the future. Thus even in the unlikely case that we are not taking on new debt, we must roll over any existing debt that matures. That roll over will not happen at zero percent or 2 percent or even 5 percent. Once the growth disappears, the interest rates move up quickly. The debt pushers now know that the debt drug user is hooked and either has to pay up or default. Sovereign default is a big big deal. It can change the very structure of a country.
The USSR deunified back in 1992 when it could no longer finance the bribes needed to stay unified. The US federal government has been doing the same thing, borrowing money and then doling it out to the states like a benevolent master in order to bribe states to stick together under federal rule. When the feds lose the ability to do that we are at great risk that conservative states will want to divorce the liberal debt centers of this country. And that's how the United States of America becomes the sovereign nations of Texas and Alaska and the northern territories and the western communist alliance and the eastern seaboard socialistic democracy. You get the point.
So we will try to pay up. But how? If growth is down, how do you raise taxes? We should have been raising taxes all this time when times were good. But instead we have been cutting taxes into peak good times. But hey, the stock market is going up so that’s good, right? Well, yes, for now. But look at WHY it’s going up and it should scare the shit out of anyone with a brain. You see, corporations have been using cheap debt in order to buy back shares. That makes their earnings per share look better (i.e. fake growth) and thus deserving of a higher price. But that will certainly stop as soon as interest rates go up. Corporations are buying higher EPS using debt and when they stop doing this, EPS growth will stop and thus the shares will sell off because of lack of growth prospects. At that point all that will be left is crushing debt in a rising interest rate environment.
In 1989 the USSR had no idea that just a few short years later the country would collapse. This is the future of the USA and those debt pushers, those purveyors of fake money have brought us to it. Also, liberal thinking has begged for it. As usual, they have been the loudest beggars for "more debt" and when it all collapses they will be the loudest crybabies and the most angry disillusioned among us. Liberals will read this today and say "it's never going to happen" because in their world unicorns fart and rainbow money falls from the sky. They identify with being rich and so, damn it, they want to live like it.
But to me it is 100% obvious what is going to happen and if you want to know the "when" about it, keep your eye on the gold price. Gold is the only thing that can credibly call bullshit on the fake money supply. It's coming folks. I gave you a Christmas gift in my model for AGI in this post. That bottoming call missed the exact bottom by 3 days. Gold is likely going to be much higher 6 months from now than today. Not because I want it to but rather because the Elliott wave model is telling us so. The same model that I provided for AGI. AGI is just a junior miner whose price will trade in general with the price of gold.
So there is no doubt that using debt can grow the economy for a while, but it is absolutely childish and will ultimately prove to be self-destructive to believe that this is in some way sustainable. In fact, it works exactly like a Ponzi because it IS a Ponzi. GDP doesn’t stand for Gross Domestic Product. It stands for Global Debt Ponzi. At the start of the debt based growth scam it appears to work great. A little debt increases the GDP by a lot. Over time that flattens and then begins to reverse where adding more debt not only produces no more positive growth, but actually negative growth. But you can’t stop because without adding more debt it would get worse even faster. And that is when the trap is sprung and the debt spiral takes over.
Once we are loaded up on debt and debt stops buying growth, people stop wanting to loan more into the system at low rates. Sure they will loan more, but not at 2%. The start wanting 5, 7, 10%. Why? Because the debt:GDP ratio starts to look too high. But if they don’t loan us money to continue consuming as we have been, consumption must drop. And this is where it really gets bad. Not taking on more debt does not stop the rise of debt:GDP simply because the the debt numerator might remain constant but the GDP denominator begins to plunge. I hope you can see how this boom and bust scam of a system, like every Ponzi, has the bust built into the math of it right from day one.
We have $22 trillion in debt in this country, much of it in shorter duration paper. We could not pay the bills back when we were borrowing so nothing will allow us to pay off any debt in the future. Thus even in the unlikely case that we are not taking on new debt, we must roll over any existing debt that matures. That roll over will not happen at zero percent or 2 percent or even 5 percent. Once the growth disappears, the interest rates move up quickly. The debt pushers now know that the debt drug user is hooked and either has to pay up or default. Sovereign default is a big big deal. It can change the very structure of a country.
The USSR deunified back in 1992 when it could no longer finance the bribes needed to stay unified. The US federal government has been doing the same thing, borrowing money and then doling it out to the states like a benevolent master in order to bribe states to stick together under federal rule. When the feds lose the ability to do that we are at great risk that conservative states will want to divorce the liberal debt centers of this country. And that's how the United States of America becomes the sovereign nations of Texas and Alaska and the northern territories and the western communist alliance and the eastern seaboard socialistic democracy. You get the point.
So we will try to pay up. But how? If growth is down, how do you raise taxes? We should have been raising taxes all this time when times were good. But instead we have been cutting taxes into peak good times. But hey, the stock market is going up so that’s good, right? Well, yes, for now. But look at WHY it’s going up and it should scare the shit out of anyone with a brain. You see, corporations have been using cheap debt in order to buy back shares. That makes their earnings per share look better (i.e. fake growth) and thus deserving of a higher price. But that will certainly stop as soon as interest rates go up. Corporations are buying higher EPS using debt and when they stop doing this, EPS growth will stop and thus the shares will sell off because of lack of growth prospects. At that point all that will be left is crushing debt in a rising interest rate environment.
In 1989 the USSR had no idea that just a few short years later the country would collapse. This is the future of the USA and those debt pushers, those purveyors of fake money have brought us to it. Also, liberal thinking has begged for it. As usual, they have been the loudest beggars for "more debt" and when it all collapses they will be the loudest crybabies and the most angry disillusioned among us. Liberals will read this today and say "it's never going to happen" because in their world unicorns fart and rainbow money falls from the sky. They identify with being rich and so, damn it, they want to live like it.
But to me it is 100% obvious what is going to happen and if you want to know the "when" about it, keep your eye on the gold price. Gold is the only thing that can credibly call bullshit on the fake money supply. It's coming folks. I gave you a Christmas gift in my model for AGI in this post. That bottoming call missed the exact bottom by 3 days. Gold is likely going to be much higher 6 months from now than today. Not because I want it to but rather because the Elliott wave model is telling us so. The same model that I provided for AGI. AGI is just a junior miner whose price will trade in general with the price of gold.
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