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Advisor

this piece is said to be going viral

http://www.businessinsider.com/american-dream-over-and-voters-know-it-2015-12

 

Some good points. To me, key fact isn't precisely laid out- the fact that in 1950 a dollar of total debt added several dollars of GDP, today it is less than a buck per. Meaning, you aren't going to get this rock all the way up the hill.

 

This is the most telling chart- note where the curve lifts off and where it goes almost vertical.

 

Make note that the majority of that total debt is private. The nature of extreme inequality is that a few people have managed to get themselves in a position to manufacture debt and turn it into wealth.

 

If you look at the curve like a commodity price chart you see something like the most dependable pattern there is- a parabolic blowoff. Typically when a blowoff falls out of the parabola there's a weak retest before the collapse begins. Chart says go short on the USA and I assume, the rest of the world economy.

 

I don't think any of the people running for president appear to understand this or have any idea what to do about it and that would include Bernie Sanders who is the only outlier from the pack. But at least he's decent.

 

Screen Shot 2015 12 11 at 7.45.27 AM

30 Replies
Highlighted
Advisor

Re: this piece is said to be going viral

Thinking further on the nature of the parabolic blowoff.

 

Bounces after a parabola sometimes make new highs outside the parabola although it isn't common. In this case it has albeit with a flatter slope. That's whjat I'd expect to see for a while- slowing growth of total debt as saturation has been reached and the marginal return becomes negligible.

 

You'd better hope it doesn't crash because total national net worth is approximately equal to the total debt, and most of the wealth is in fact just a debt claim on someone else, a promise to pay, if you will.

 

BTW, although US total debt growth has been weak since the crisis, China did the work by loading themselves with a huge amount of debt in a recod short time, which now appears to be running out of gas.

Highlighted
Advisor

Re: this piece is said to be going viral

Or.... an alternative interpretation of the chart is that the kenyan socialist muslim looked at the The Makers funny and they went on strike.

Highlighted
Advisor

Re: this piece is said to be going viral

The chart also explains why the dynamic scoring (showing future revenue growth due to faster economic growth) that all the GOP candidate tax plans assume ain't gonna happen.

 

Although in fairness, Cruz' radical plan would probably do the most to get that debt curve rockin' again.

 

First, you'd have huge deficits for the government portion. Second, you'd effectively remove all taxation on financial machinations and I'm sure da boyz would waste no time in getting some new forms of debt ponzi rolling.

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Honored Advisor

Re: this piece is said to be going viral

You are waking up Nox.  Gerald Celente and Peter Schiff have been saying this for years that we can`t spend ourselves rich.  The only growth we get is from defict government spending, interest rates kept at zero to keep interest portion of the national debt somewhat manageable.

 

We can argue that spending money for wars or endless entitlements, one being better or worse than the other, but the story has the same dreary ending whichever path we choose.  And truth be told, we are on both highways to hell simultaneously ..and still my brother-in-law can`t get a job, seriously, he`s smack dab in the middle of his year long severance "golden parachute".

 

The government spending requied to create one job is just poor return on investment, we are at the point that we might as well just cut everyone a $60,000/yr check and eliminate the charade.

Highlighted
Advisor

Re: this piece is said to be going viral

I'm not waking up to anything, I think you missed the point about 2/3rds of the debt being private in nature.

 

Certain forms of government spending undoubtedly return more GDP than do many of the forms of private debt. BTW, one of the current big growth areas in debt is corporations buying back their shares so that they can enrich the insiders- the "corporate cash" thing is mostly a canard, it is funded mostly by debt whether they retain higher than normal amounts of cash on the balance sheet or not (or, how to get rich while secretly liquidating your company).

 

That is totally unproductive debt except to the degree that stocks going up creates a wealth effect.

 

There are other games with debt, leveraged buyouts (past their heyday but still a feature), related private equity games etc. All largely unproductive and to some degree only made attractive by preferential tax treatment.

 

Mostly a negative to zero sum game that funnels wealth upwards.

 

That is totally unproductive debt except to the degree that stocks going up creates a wealth effect.

Highlighted
Veteran Advisor

keep everybody equal

it sucks to live in a country where people get to eat too much, have universal smart phones, free medical care for the indigent and not so poor, too....subsidized housing, subsidized birthing , etc. Even extra payments if you sign up for leaving residue on the surface, right?

 

Let's vote to totally eliminate any possibility of the guy that works harder having a wee bit more...Let's get the country back to where everyone gets a bowl of gruel and we are all miserable together. At least we will be equally poor.

 

It must suck to see virtually everyone around that you view as successful as getting there by keeping someone else down.....now it's that they have the ability to borrow more and leverage themselves. Like shifty says, maybe you just need a few more free colonscopies.

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Advisor

Re: keep everybody equal

I guess that's a response to the nod to Bernie, even though all I said was that he probably doesn't get this either but at least he's a bit more decent than the gaggle of caucasian sociopaths. Actually didn't go that far but thought I'd flesh it out a bit.

 

The diminishing marginal return on financial debt is sort of a big deal. It is in part simply the hallmark of a very mature economy but more a function of a country that has increasingly incentivized its best and brightest to engage in socially destructive behavior. A simple fact of human anture- people gravitate to where they get the best pay for the easiest work- even Great Men.

 

Taking away some of those incentives for those behaviors that we've built into the tax code would be a start. That would be more Bernie and 180 degrees and a galaxy away from where Rafeal proposes we go.

 

Da Boyz standing at the chokepoints of the economy where they siphon off vast amounts are entirely confident that the world will collapse if anyone says boo to them. I'm confident that there are competent people to do the essential elements of finance for less than a low taxed king's ransom.

 

You are confident that the system must coddle you because without your unique expertise, they'll starve. I'll continue to submit that,barring a complete disintegration of credit channels, it will get done. And in that case you're just as much of a ninth teat on a boar as everybody else.

 

 

Highlighted
Senior Advisor

Re: keep everybody equal


@hardnox wrote:

I guess that's a response to the nod to Bernie, even though all I said was that he probably doesn't get this either but at least he's a bit more decent than the gaggle of caucasian sociopaths. Actually didn't go that far but thought I'd flesh it out a bit.

 

The diminishing marginal return on financial debt is sort of a big deal. It is in part simply the hallmark of a very mature economy but more a function of a country that has increasingly incentivized its best and brightest to engage in socially destructive behavior. A simple fact of human anture- people gravitate to where they get the best pay for the easiest work- even Great Men.

 

Taking away some of those incentives for those behaviors that we've built into the tax code would be a start. That would be more Bernie and 180 degrees and a galaxy away from where Rafeal proposes we go.

 

Da Boyz standing at the chokepoints of the economy where they siphon off vast amounts are entirely confident that the world will collapse if anyone says boo to them. I'm confident that there are competent people to do the essential elements of finance for less than a low taxed king's ransom.

 

You are confident that the system must coddle you because without your unique expertise, they'll starve. I'll continue to submit that,barring a complete disintegration of credit channels, it will get done. And in that case you're just as much of a ninth teat on a boar as everybody else.

 

 


The fact you need to wake up to is the total debt each American citizen is born to, their share of the national debt. For the most part used to fund the very thing you rant against. Bernie is not going to change any of that except for the worse.

Highlighted
Advisor

Re: keep everybody equal

I've been talking for more than a decade about the out of control growth of financial debt and the potential deflationary implications. If anyone would like to make an ad hominem attack on my hominem they can ask why that hasn't happened, yet.

 

Here's the first exhibit I'd offer in my defense although it requires a lot more context than is generally worth going into here.

 

http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=dbc&insttype=&freq=2&show=&time=20  ...

 

BTW, this will have people either running from the room with their hands over their eyes or sharpening their knives, but anyway. The biggest takeaway from the US financial crisis and the EU soveriegn crisis is that the thing that will really blow deficits out is a severe recession as you won't cut spending near fast enough to account for collapsing revenues.

 

And while it is a discussion not worth going into here, you really don't want to, believe me.