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News Link • Government Debt & Financing

Debt Bondage: The Strategy That Has Never Worked

• Market-ticker.org
 
What is this chart? Why, the history of our idiocy. It's quite simple; this is the multiple that each dollar of debt (anywhere in the economy) has returned in GDP looked at on a quarter-on-quarter basis, net of the debt increase itself. That is, if the multiple is "1" then for each dollar of debt added to the economy there was one dollar of output in the form of GDP added as well during the same period of time. If it's "0" then the debt itself produced no additional output, but did fund itself. If it's negative, well, into the black hole you go. Since this is a quarterly number it's quite noisy but there's no mistaking what it tells you. If you pay attention you'll note that since 1980 this has never been positive - not even for one quarter - and it was only rarely positive before that time! Why is this important? Because it underlies the idiocy of everything we're attempting at the present time with our economic policy. It underlies every claim about "getting lending going to small businesses" and "getting lending going to consumers." Lending - that is, the increase in debt - is not additive to GDP, it is subtractive! This is the exact opposite of what is trumpeted on CNBS every day, it is the opposite of what our President has said, it is the opposite of what Congress has claimed is their goal in their regulatory zeal and it is the opposite of what is taught in our edifices of "higher education".

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