The Cost Of Kidding Yourself

Tyler Durden's picture

Authored by Mark McHugh via Across The Street blog,

Five years ago, every American would have considered a trillion-dollar budget deficit a national tragedy.  If you believe the CNBC parrot show, NOT having a trillion-dollar deficit is now a sure sign of the Apocalypse.  I speak of course of the cleverly dubbed “Fiscal Cliff,” which panicked CNBC apologists are required to mention no less than 5,000 times a day.  We’re told ad nauseam that going over the cliff will drag the US into recession.  Here’s what we’re not told: The US has been in recession 9 of the last 10 years.  It’s in recession this year, and no matter what CNBC’s financial terrorists say or the idiots on Capital Hill decide, it will most certainly be in recession in 2013.

Creating the illusion of economic growth is easy if you can print money.  It’s a prank you can play on an entire country.  Cut the value of the currency in half and the economy’s size will appear to double.  If it doesn’t, you’re in recession (whether you know it or not).   Cavemen probably understood this concept better than America’s best economic minds.

The only way to accurately measure changes in a nation’s economy is to do so relative to the world (see Notes for non-nerds below before protesting).  According to the World Bank, the U.S. represented 31.8% of the world’s economic activity in 2001.  By the end of 2011, that share had dropped to 21.6%, meaning America’s slice of the world economy is 32% smaller than it was a decade ago, and getting smaller every day.  Note that America’s housing bubble did nothing to boost the U.S. on the global stage.

As horrific as these results are, they’re better than Japan’s, whose “lost decade” proved only to be prologue for its “lost-er decade.”  Japan’s share of the world economy fell more than 35% from 2001 to 2011 (literally worse than Zimbabwe) and has now shriveled 54% from its peak.  But Japan’s real collapse did not coincide with the bursting of its stock and real estate bubbles in 1990 and 1991 respectively.  The decline actually began in 1995 when policymakers allowed government debt to exceed 90% of GDP (a milestone the U.S. quietly passed in 2010). 

The more they “fixed” it, the more it broke.  17 years later, the only thing Japan has proved is that smart Japanese economists are about as real as Godzilla.  Time and time again, the country has chosen collapse over admitting failure. On November 19, 2012, Bloomberg reported, “The Japanese government will spend 1 trillion yen ($12.3B) on a second round of fiscal stimulus as it tries to revive an economy at risk of sliding into recession.”  It would be funny if it wasn’t so tragic.

The United Kingdom gets third place in the 2001-2011 major economies’ “Race to Oblivion”, although with a less than 3.5% share of world GDP it’s hard to call this a major economy with a straight face anymore.  While the U.K. printed its way to 24% loss in world GDP, France and Brazil both passed the nation where an actual troy pound of sterling silver now costs about 235 “pounds sterling”.  With government debt expected to reach 88.7% of GDP in 2012, once-Great Britain will soon be seated at the kids’ table at economic summits, if it gets invited at all.

All three of these countries are in death spirals for the same reason:  They believe that they have the ability to avoid recession by simply printing their own money.  As America’s 100-year numbskull (and current Federal Reserve Chairman) Ben Bernanke once mused:

“…the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”

True dat, Ben….unless there’s “cost” associated with turning the nation’s currency into the world’s laughing stock….

Oh wait, there is.  So just for fun, let’s project the last ten years growth rates forward another ten years:

And there you have the real New World Order (sorry Freemasons).  In ten years China’s economy will be bigger than those of the U.S., Japan, and the U.K. combined.  What are the chances they will drink the same kool-aid we are presently guzzling?  Will they need, or even tolerate, the opinions spewed by our pundits and politicians?  And more importantly, will the U.S. dollar still be the world’s reserve currency?

Being a war-mongering banana republic isn’t all it’s cracked up to be, and despite what CNBC’s fast-money fuckwits may think, the stock market is not America’s report card.  Wall Street is the white elephant that America can’t afford to feed anymore and China doesn’t have the slightest interest in buying (just take a look at the Shanghai Composite).   Continuing to yield to its tantrums will undoubtedly destroy us.

Fun Facts:  Total U.S. GDP growth in the 20th century was $9.93 Trillion, while the  government accumulated $5.5 Trillion in debt.  In the 21st century, the US has borrowed $10.7T and has a grand total of $5.30T in GDP growth.


Notes for nerds: Most of the calculations presented were derived from data compiled by the World Bank which can be viewed or downloaded here.   World GDP was set to 100% and each country’s percentage determined simply by dividing by world GDP.   Japan’s debt as a percentage of GDP from Fred (225% was used for 2011).  Estimate of U.K.’s 2012 Debt/GDP from here.  U.S. GDP stats from (2012 estimate adjusted for 2% growth).  US debt from Debt to the Penny.

Notes for non-nerds:  How much World GDP changes from one year to the next depends entirely on what is being used to measure it.  For example, World GDP expanded by 109% from 2002 to 2011 in USD terms, but contracted (-59%) in terms of gold.  Using the Euro would produce different results (+59%), as would using barrels of oil (you figure it out).  Looking at countries relative to World GDP is an honest measure of their changes.  To say that Japan is still growing (at least in terms of Yen), but everyone else is growing much, much faster in terms of Yen distorts the reality that  Japan is undeniably shrinking relative to the world (no matter what currency is used).

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NidStyles's picture

Sure it was all because of Philosophy rather than bad economics...


You sound like more New Ager nonsense.



Aurora Ex Machina's picture

Two points:

a) Who was Rand's greatest acolyte? Hint: Color-Bridge

b) RAND Corporation (see what I did there?) fell in love with Cybernetics and early modelling. Intro to the topic



New Ager? Nope, you're just missing translation wetware.

WezTheJuic's picture

Well, I guess this would be a matter of one’s belief in your fellow man/woman, call it, a section of this species.  I will use myself as an example, "From what I have seen within many of the people within ZH, there are those that do have levels of sight in which, we all can learn.  Hence, which is why, like others, have decided to join."

After all, what is the purpose of "open source"?  Namely wikipedia.  And source code, along with many others applications of this ideal.

Which leads me to this question. 

YES, there many within ZH that do have some genuine applicable insights into the economic/political/social environments within our different shared western societies.  Yet, how many of you have, that internal balance between your logical and emotional sides to not just see, but to see through?

Optimist am I?  Perhaps. Yet how about this, "WE ARE NOT DONE."



Ps.  Which also means, I myself will be dropping by more often as well.

Aurora Ex Machina's picture

Reuters is part of the bullshit, fyi.

Story where Wiki pages are "individually" edited by traceable FBI / CIA connections?



NidStyles's picture

You apparently do not understand how Wikipedia works.

Zap Powerz's picture

Control is the new freedom.  Happy 1984 everyone!

Zap Powerz's picture

Fuck this fucking shit and the fuckers who did it!

Pairadimes's picture

Fuck You, Bernanke!

TruthInSunshine's picture

Easiest, cheapest, automatic +1 one liner on Zero Hedge. I think it produces reflexive +1s.

It's the slut/easy ass of ZH.

Ballin D's picture "fuck you bernanke"

brings up 3,960 results in google.  Thats perserverance.

crusty curmudgeon's picture

"I'm deeply offended.  Hahahahhahahahahhahahhahhahahh!"

-The Bernankstah (running to the bank)

TruthInSunshine's picture

Fuck you Blythe Masters (what sick parents name their daughter Blythe?), Lloyd "Patron Saint" Blankfein, and fuck you Jamie Dimon, as well.

Slut easy.

vintageyz's picture

CNBC’s fast-money fuckwits....


Well stated.

fonzannoon's picture

That was my highlight too.

I can't wait to hear the ratings agencies try to pat us on the back when some shit deal gets struck. If CNBC are fuckwits then what are they?

newworldorder's picture

What about Fucktards or fucktarts? I do like fuckwits though.

mark mchugh's picture

I use fucktard too often.  Wanted to mix it up.

ZFiNX's picture

Yep. Double the money-supply over 10 years (as they plan to) and you'll get inflation of a minimum 10% per annum. So we repeat the 1970s following the economic policy of Japan. The dollar is going the way of the yen.

Cognitive Dissonance's picture

For those who did not live as a working adult through the 70's, this concept is a little difficult to appreciate. Not saying "they" will be able to pull it off (again) but it sure looks like they are trying.

<For those with Just-In-Time paychecks.......when facing the choice of half a loaf and none, there really is no choice.>

hairball48's picture

I remember the stagflation of the 70's very well. For several years we got "cost of living" pay raises every 6 months based on the inflation rate(not sure who calculated it).

The sheeples, especially the younger ones, are going to shit in their britches when they see the "price inflation" of stuff that's coming on top of the "asset deflation" of paper assets like the US$ that will accompany the price inflation of stuff.

Gold bitchez :)

Bad Attitude's picture

There is already a lot of hidden inflation - less product in what is superficially the same sized package, or just less product at the same price point. And sometimes, not so hidden inflation. Almost two years ago, rolls of toilet paper got smaller. They shrunk from 4.5 to 4.1 inches wide, and the length of the roll also shrunk (some brands more than others). One hundred rounds of Winchester FMJ 9mm has gone from $21 to $23.

willwork4food's picture

They shrunk from 4.5 to 4.1 inches ..

Kind of like Kramer & Bernanke's dicks? No wonder they're pushing for inflation.

IrritableBowels's picture

bought a bag of dog food today, and I always grab the biggest bag of Nutro large breed.  I could've sworn they came in 35 lb bag, not the 30 lb bags I was seeing.  The price seemed reasonable (unch). 

Dr. Eldon Tyrell's picture

Don't forget nearly all ice cream containers are now 1.5 quarts instead of their historical 1/2 gallon.
I am curious how they are going to downsize a gallon of milk.

New and improved ergonomic containers!  Lighter and easier to carry.

Sudden Debt's picture

the 70's in retrospect where a time where our world was dancing on a tightrope. 40 years ago and nobody really recalls it.
All my father remembered was that his paycheck was bigger every month.
why this time is different?
Our governments feel our paychecks should match the chinese paychecks and don't want them to rise.
and yet... we expect companies to grow their revenue a billion a quarter at least to get a normal divident or hope they'll eventually give one.
we invest bigtime in wallmart, Apple and all the low paying employers.
we pick up a smart phone, go to a store and scan the products hopping we'll find it cheaper online.
we all like to pay pennies for a product but want to earn tens of thousands of dollars a month.

and we complain over the debt?

we are consummerists that love crap. feel robbed for paying peanuts. feel like we all deserve a hommer simpson job where we press a button once a day without knowing what it does for top dollars.

yeah.... where will this,recovery come from?

why should we hope for a better future when we are all willing to drown the future in debt?

why do we talk about the future as a person that will pay our bills?

Totentänzerlied's picture

"feel like we all deserve a hommer simpson job where we press a button once a day without knowing what it does for top dollars."

Service economy, bitchez. Boggles the mind how little correlation there is between job tasks and job salary.

Freedom Pilot's picture

Under the heading of "things from the 70s," I fear we will once again hear demands for the "living wage" -- a large step forward toward our destruction.

BattlegroundEurope2011's picture

Too fucking late now.  Save yourself!!!!!!!!!!!!!!!!!

PeterSchump's picture

Well that puts it in perspective now, doesn't it.

SheepDog-One's picture

But...we're FEELING better.....right?? BAAAAAAA!!

Bay of Pigs's picture

Uncle Shalom Bernanke = David Copperfield

Temporalist's picture

Deficits don't matter. 

azzhatter's picture

CNBC is laughable like a 2 clown circus. The station is filled with Obama sack swingers who just want the status quo to continue. Never mention spending as a problem. I saw they had the ancient fraud Buffett on again and Quick was gushing like a school girl. They have some mentally challenged cub reporter named Sorkin on now in the morning in between LIESman and that piece of shit Kernan. I watch the crawl on the screen with the sound off early in the morning. If I listened for any length of time I'd just commit suicide

willwork4food's picture

Well, Kramer has some good stock pics sometimes. Except for that Bear Stearns call, he was probably having a bad day.

willwork4food's picture

I know spooz...should've put a /sarc on it...

spooz's picture

Dayum, second time in two days I missed the sarcasm. pretty hard to miss, and its usually my stock and trade. shoulda known nobody on fight club would be defending Kramer.  Kind of like defending Karl Marx.

Need a good night's sleep, I guess.


willwork4food's picture

What was wrong with Karl Marx?

RockyRacoon's picture

I wouldn't call Kudlow nor Bartiromo in the tank for Obama.  

Just the same, the both are horrible stereotypes as you describe.  

There is no worse clown show except Fox News (sic).

TruthInSunshine's picture

Why is this so confusing?

The more fiat/credit/debt (all the same thing in a Modern Money Mechanics/full fractional reserve fiat system) that is printed the better the economy fares.

Do not resist the inevitable. 25 trillion of national debt officially (approximately 250 trillion plus using an actually relevant, accurate method of tabulating the debt in line with Kotlikoff's calculus) will soon (probably within 7 years) be the former 1 trillion in national official debt.

You will be assimilated.

Read the following article carefully, and as fellow ZHers have pointed out, see if you can spot the clear message that "it's better than Ghana is the new middle class target."

The New American Slogan:  

"America. Hey Now, It's Still Better Than Ghana, Bitchez."

Two Families Show an Uneven Rise in Consumer Confidence

The New York Times

By , CHRISTINA CAPECCHI and CHRISTOPHER MAAG Published: November 27, 2012

Angelina Sam couldn’t afford to celebrate Christmas last year, serving peanut butter, soup and rice for the holiday meal. And she didn’t buy gifts for her husband or 2-year-old son.

But last week, Ms. Sam had already done five rounds of holiday shopping by the time she headed out for Black Friday specials in a suburb of St. Paul.

“The money was not there,” Ms. Sam said of last year. “But this year, I’m very, very confident.”

Americans are feeling better about the economy than they have in four and a half years, data released Tuesday shows. Preliminary consumer confidence results for November by the Conference Board showed an uptick in confidence, with the index rising to a preliminary 73.7, the highest level since February 2008, from 73.1 last month.

Retailers say they are hoping to cash in on that confidence, beginning last weekend with a deluge of discounts and specials meant to draw shoppers into their stores and onto their Web sites.

But while shoppers like Ms. Sam raised hopes that growing confidence might mean increased sales, economists and retail analysts have said many Americans — even some upbeat ones — continue to hold back. 

Ms. Sam, a Ghanaian immigrant, was ready for the holiday season, having paid off her $1,000 Visa bill earlier in the year. An energetic shopper, she hurried through five stores in five hours on the Friday after Thanksgiving. She grabbed a $49 Nook e-reader at Target for her brother in Ghana; a $24.99 Disney Cars bike for her son at Kmart; a $6.88 Disney Cinderella watch for her niece at Walmart; and a $49.99 luggage set from Kohl’s for her mother.

***Ms. Sam said it was all made possible by a grueling work schedule. A nurse’s aide, she took a second full-time job this year, adding an eight-to-12 hour evening shift to her schedule. She now works as many as 100 hours a week, for $13 to $15 an hour. (She took Thursday night off, so she could find some deals.) Her husband has a full-time engineering job***

“Sometimes I get tired,” Ms. Sam said, “and that is to be expected, but I want the best for my son. So I have to work hard for him, just so he doesn’t have to work a double job in order to survive.”

Ms. Sam seemed almost mystified by the extra income this year. “This year there are leftovers,” she said. “We can save money and put some into our son’s account. We still have extra money to spend.”

It was not enough extra that Ms. Sam could indulge after buying presents for relatives: she bought nothing for herself. “I don’t think about me,” she said. “I think about my family. If they’re happy, I’m happy.” She added, “Maybe when I’m done shopping, I’ll give Santa my list.”


grid-b-gone's picture

I have a little different take on the article. This approach of sacrificing one generation to leapfrog the children solidly into upper-middle class America, has worked for many immigrants.

Entrenched Americans attempt the same result but spin their wheels by taking on student loans for a degree not worthy of the resulting indebtedness.

What one does not see from the article is the flip side of the child being showered with gifts is the stress and expectation he will feel to excel commensurate to the effort his parents are putting out on his behalf.

Take a lesson, America. Live below your means. Avoid debt except where it is an honest investment for a greater future reward (not a hope or wish), work your butts off, and pour most of your effort into giving your children the same head start successful immigrant families do. 

These families routinely drive older cars, live together in good surburban school districts, and disproportionately get their kids into the top 25 colleges - majoring in something with immediate market demand.

The article highlights a woman who works more hours than the average American is willing to do, is thrilled about her good fortune, and even though her spending is the focus of the article, she notes she will have money left over for savings, too.

There is no mention of her taking on debt for her purchases.

Unlike the typical American who will take months to pay off their holiday purchases, Mrs. Sam will be saving and investing in her family as of Jan 1st, 2013. That's how it's done.


MachoMan's picture

We also have to take into account the internal wiring of various peoples throughout the world.  While having a meager starting point and forced labor are often a steadfast governor for consumption and perspective of wealth, they're not the only considerations.  I think there is a much broader conflict...  The issue is that wage arbitrage is not a virtuous endeavor.  In fact, it can be implemented in such a manner (inevitably I think), that ensures basic human rights/natural rights are violated (i.e. the supposed pillar of objectivism), through among other things a tragedy of the commons.  Some people are inherently more tolerant of abusive behavior...  of obscenely disproportionate spoils from similar work.  But it chips away at everyone none the less.

The bigger issue is that in order for society to continue down its path, the populace must buy in to its direction.  At this juncture, there is not only a vote of no confidence booming, but a complete rejection of many commonly held beliefs.  You can complain about american donkeys lying down in the dirt and refusing to budge, but the carrot is no longer the same motivator it used to be.  While not as luxurious or nice, subsistence living is vastly less complicated.  There is presently a change going on whereby people are no longer capable of keeping up with all the complexities and intricacies of modern living and are choosing not to participate.  In short, the juice is not worth the squeeze...  the shiny and sparkly things not worth the headaches to achieve them...  the winners and losers not meritoriously chosen.

I concede that many americans are lazy...  but it's academically lazy to leave it with a blanket characterization and not conduct further analysis.  There are much bigger issues at play.

mkkby's picture

Sacrificing herself to leapfrog the children is a noble deed, and I commend her.  However, her children will grow up in public schools and will assimilate with the native black kids.  By the time they grow up they'll be more like inner city gangsters than their thrifty, hard-working parents.  Shame, really.

Totentänzerlied's picture

Minor correction: "Ms. Sam had already done five rounds of Hopium(tm) by the time she headed out for Black Friday specials."