Monday, August 31, 2009



We wrote a special report in January of this year titled "Substituting Debt for Savings and Productive Investment" in which we explained why the U.S. economy historically prospered because of hard working Americans saving a substantial amount of their income which was used for productive investment. Unfortunately, all of this changed over the past few decades and got worse over the past decade. In fact, we stated in the report that it took $1.50 of debt to generate $1 of GDP in the 1960s, $1.70 to generate $1 of GDP in the '70s, $2.90 in the '80s, $3.20 in the '90s, and an unbelievable $5.40 of debt to generate $1 of GDP in the latest decade. Over the past two decades, while most investors thought this trend could continue indefinitely, we have been warning them of the catastrophic problems associated with this ballooning debt.

The attached chart of total debt relative to GDP shows exactly how much debt grew in this country relative to GDP (it is now 375% of GDP). The total debt grew to over $52 trillion relative to our current GDP of approximately $14 trillion. This is worse than the debt to GDP relationship in the great depression (even when the GDP imploded) and greater than the debt to GDP that existed in Japan in 1989. Even if you took the debt to GDP when the U.S. entered the secular bear market in early 2000 and compared that to 1929 and Japan in late 1989, our debt to GDP still exceeded both (by a substantial margin relative to 1929). The approximate numbers at that time were about 275% in the U.S. in early 2000, 190% in 1929, and about 270% in Japan in 1989.

... this explains why jobs in amerikkka are related to credit ...
... they produce the jobs to create the debt ...
... needed to prevent the economy from crashing ...
... is a ponzi scheme ...
... entrepreneurs, banks, churches and government ...
... pushing for bigger and bigger bubble expansions ...
... in order to defer the "inevitable" crash ...
... but in the mean time they spend their million bonuses ...
... and collect interest from the government ...
... for lending them their own money ...
... they are lucky people can not see the skim ...
... or there would be a revolution ...


# posted by intcoex : 11:40 PM




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