Karl Denniger at Market Ticker – The fact of the matter is that you have been lied to for the last decade about our economic state, and if we do not divert from the road we are on our economy, our monetary system and our government WILL COLLAPSE.
The correct action to take in 2000 was to force the bad credit from the system and accept the impact on GDP. It would have caused about a 10% contraction in GDP at that time – a mild Depression (or a really nasty recession, depending on how you count it.) Now, having instead blown another credit bubble, we essentially doubled the debt in the system over the last ten years, while GDP grew by about 40%. The result of this was a horrible stock market crash, 6.7 million jobs lost (and underreported), personal income tax receipts are down 21%, corporate tax receipts are down 58%, the deficit is tracking at $1.8 trillion this year alone (and $9 trillion more predicted over the next decade), government is now spending nearly 200% of taxes taken in, 13% of mortgages are either delinquent or in foreclosure, more than 20% of all FHA loans are delinquent or in foreclosure, home prices have fallen by half in many places and are not done declining and the rest of the world is wondering if we’re going to try to hyperinflate and destroy our currency. If we try to double our debt once again over the next ten years we won’t make it there. The available free cash flow cannot support the interest payments now, and won’t be able to if we add more debt to the system.
For a clear and patient explanation of the results of this widening gulf between slow-growing GDP and rapidly-growing compound debt interest see Chris Martenson’s Crash Course (chapter transcripts beneath each video)
