Monday, March 1, 2010
Economic Reality Check…
Once again just perusing the latest updates from the St. Louis Fed…
Many people get all wrapped around the axle about debt to GDP statistics. This is a complete
Red Herring
as comparing our Federal Government’s debt to the productivity of the
nation is exactly the same as comparing your personal debt to the
productivity of your neighborhood. They are unrelated.
What is
completely related and totally relevant is DEBT to INCOME. In fact, in
regards to debt, income is the only thing that really matters. Our
Nation’s Income is crashing as shown in this chart expressed in year
over year (yoy) change in Billions of dollars:
Our
Current Government Receipts rose to approximately $2.5 Trillion and has
collapsed to less than $2.2 Trillion, again expressed here in yoy
change in Billions:
At
the same time that our receipts are falling, our Federal Net Outlays
are in an exponential growth phase, spiraling up in a now very
out-of-control fashion. This is THE most important chart of the modern
era! When this chart begins to roll over, and it will, it will mark the
end of the last leg of support for our debt crippled economy:
The
combination of rising outlays and falling receipts produces a negative
Government Savings rate, clearly not sustainable but on an accelerating
downward plummet into the depths of nation changing events that are
right on the nearby horizon:
You
are being told that the economy is improving, the only “improvement” is
the amount being spent by the government. Take a look at the
Consumption of Fixed Capital, one of the components of GNP:
Sales
are up, REALLY? Below is a chart of Real Final Sales of Domestic
Products yoy in Billions. Not only is it not positive, but it is still
crashing:
The
tell in regards to sales is in the tax collected on sales. State and
Local Government Sales Taxes are now down about 5% on a year over year
basis:
Here’s the same chart expressed in yoy change in Billions of dollars – no change of path, not even a wiggle or a waiver:
How
about Imports and Exports? Aren’t we being told that they are
increasing again? Absolutely not the case, again, nothing but collapse.
Take a look at Exports of Goods and Services expressed in yoy change in
Billions:
Now take a look at the yoy change in Real Imports of Goods and Services:
Historic
collapse, take a look at the magnitude of the collapse and how far back
those charts go in time. You can talk up the “recovery” all you want,
you can call it a “recession” all you want, but lip service does not
change what is occurring on those charts and to our debt saturated
economy.
We let the Central Bankers take over our money supply
and we let them back all our money with debt at their benefit and at
our expense. It is time to change that equation around!
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