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Marc Faber Asks: Is "Big Government" Thwarting Economic Growth?

Tyler Durden's picture


Submitted by Marc Faber of The Gloom, Doom, and Boom report,

Science fiction author Frank Herbert opined that,

“All governments suffer a recurring problem: Power attracts pathological personalities.”

Friedrich Hayek thought that,

“the more the state ‘plans’ the more difficult planning becomes for the individual,”

and John Stuart Mill wrote already in Principles of Political Economy (1848) that,

“In all the more advanced communities the great majority of things are worse done by the intervention of government, than the individuals most interested in the matter would do them, or cause them to be done, if left to themselves.”

Economist Richard Rahn, the eponymous creator of the Rahn Curve, makes the connection between the rate of economic growth and the size of government.

The Rahn Curve suggests there is an optimal level of government spending (as a share of GDP) that maximizes the rate of economic growth. As government begins to rise from zero percent of GDP, initially it spends to protect life, liberty and property; as this happens the economy surges. When government makes people safe, enforces contracts, protects liberty and enforces property rights great things begin to happen. As government continues increasing, it next spends on infrastructure. Such spending further accelerates economic growth. It is clear that a little government does a lot of good. At this point government’s share of GDP is between 10% and 20%. From its founding to circa 1930, total US government spending was around 10% on the Rahn Curve.

In general, I have great sympathy for the Rahn Curve, which essentially states that the larger the government becomes beyond a certain point (about 20% of GDP) the slower economic growth will be.

Under the influence of the neo-Keynesian interventionists and the professors at the Fed, the public has been brainwashed into believing that governments can revive economic growth. But as Ronald Reagan pointed out,

“Government is not a solution to our problem, government is the problem.”

Barry Goldwater warned that,

“The government that is big enough to give you all you want is big enough to take it all away."


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Sat, 07/05/2014 - 17:09 | 4927279 stant
stant's picture

They have mostly got already what's not nailed down, and are now looking for a crowbar

Sat, 07/05/2014 - 17:21 | 4927304 Newsboy
Newsboy's picture

System complexity reaches a point that efficiencies of added complexity become negative, yet complexity increases typically go on and on until systemic collapse.


Sat, 07/05/2014 - 17:44 | 4927344 knukles
knukles's picture

Is it thwarting economic growth?

Do people ask dumb questions?

Sat, 07/05/2014 - 18:22 | 4927404 economics9698
economics9698's picture

The federal government is limited in size to about 20% of the GDP.  That does not mean it cannot get to 25% of the GDP, it has, but the unpleasant truth is with the current tax system there is an inverse relationship between taxes collected as a percent of the GDP and spending as a percentage of the GDP. 

During WWII federal spending was 42.7% of the GDP but tax collections only 20.5%.  The 20.5% is the most ever collected in taxes at the federal level.  Recently Clinton collected 19.9% while in a boom, spending only 17.6% of the GDP.  Obama spent 24.4% but collected only 14.6%.  And so it goes there is a negative, although certainly not absolute R2 1.00, relationship between spending and taxes collected.

Note, during WWII the deficit was financed by printing, hence the need for ration cards for consumers, to prevent hyperinflation.

As federal spending goes up it removes resources from the productive private sector, there is less positive economic activity, less taxes are collected. 

All the debate about raising taxes is political bull shit.  Politicians know they will not collect more taxes but they will increase their leverage to sell political favors, which is really what it is all about for the sociopaths.

At the federal, state, and local level government spending has gone up from 26% of the GDP in the 1950’s to 43%.  Zero Hedge readers in NYC know the number is 50% or even 60%.  This increase in overall government burden plus additional regulations is why the economic growth rates of the 1950’s deviate so much from today.  Yes the top tax rate in the 1950’s was 91% but deductions and the minimum tax was much more generous than today.

If Zero Hedge wants a blog on this feel free to contact me.  John Aziz knows my facebook profile.

FYI the max size of federal, state, and local should never exceed 20% of the GDP, and that is obscene. 

Sat, 07/05/2014 - 18:26 | 4927425 Sudden Debt
Sudden Debt's picture

That 20% is not a revenue but a cost so you should subtract that 20 from the gdp and not adding it.
But what's 20% when you see in europe regions where it's over 70%...

Thanks for the complex taxation systems they can fund the interest on the loans to keep the game going.

So all you need to know is that for every % the government grows, the economy goes down 1 also.

And they say your country is in shit when debt is over 100%.
You can change the numbers but it's still over 100% after you change the way you do math and bring it down to 90% and 100 is 100 when you need to service the debt.

Sat, 07/05/2014 - 18:46 | 4927482 TeethVillage88s
TeethVillage88s's picture

ttp:// (Total Debt as percent of GDP)

Federal Debt: Total Public Debt as Percent of Gross Domestic Product 2014:Q1: 103.43927 Percent of GDP

But that must be a standard to compare National Government Debt to GDP, but hey... what is 60 Trillion to 17 Trillion =

= 352% Debt to GDP for USA

Sat, 07/05/2014 - 20:46 | 4927743 economics9698
economics9698's picture

The 103% is federal debt, the 352% is total debt.  250% is fatal.  

Sun, 07/06/2014 - 05:21 | 4928480 0z
0z's picture

That graph is wrong.

It should start from the upper left to the lower right, like in inverse exponential function.

No government (Monopoly of Judication) has the most prosperity.

Sun, 07/06/2014 - 09:02 | 4928674 Headbanger
Headbanger's picture

It's the Laffer Curve that was part of "Supply Side Economics" from the Reagan years.

But now the "Evil Empire" strikes back and we have Bonzo in office instead of The Gipper!

Way to fucking go America!

Sun, 07/06/2014 - 10:19 | 4928793 economics9698
economics9698's picture

Two sociopathic liars. 

Sat, 07/05/2014 - 19:26 | 4927556 Angus McHugepenis
Angus McHugepenis's picture

If you like your taxes (slavery), you can keep your slavery...

If you like freedom, you won't like your taxes...

Can't recall who said it, but this is very true... and I paraphrase. "Humans are the only species on this planet that pays RENT to live here". Only a fucking Bankster could come up with that shit.

We must all be insane. Grizzly bears and wolves laugh at us when they're not eating us on our camping trip. I'm sure if the .gov could figure out a way to tax wildlife they would do it. In the meantime, the grizzly bear has not been, nor will ever be, TAXED and forced to hand over its Swiss bank info.

And neither will I. Going on 14 years now.

Sat, 07/05/2014 - 18:42 | 4927467 ThirteenthFloor
ThirteenthFloor's picture

Keep in mind that the Govt. spending is paid for by unstearlized bond monetization paid to a PRIVATE bank cartel, that sets interest rate and money supply as it pleases.  As such govt. debt (i.e., spending) grows OUTSIDE control of the free-sovereign state.  Our economy as envisioned by Franklin, Hamilton and others was completely broken by the treasoness act of the Federal Reserve Charter. We sold control of our country's economy in 1913 and became sycophants to corporatism and the banking cartel.

Regarding the 91% tax rate - John Kennedy a Democrat cut that in 1962, as the largest tax cut ever.  Please see Kennedy responds to Krugman.  A brilliant move by Kennedy.



Sat, 07/05/2014 - 18:40 | 4927468 TeethVillage88s
TeethVillage88s's picture

Corporate Taxes are disappearing

Not sure what you feel about corporations paying

I'm not far off on my data, but show Corporate taxes South of 15%. We can talk about different kinds of taxes but the big categories are Individual and Corporate. My corporate tax payments are taken from 3th Quarter FISCAL YEAR for Corporations, but 4th quarter doesn't look much better. (corporate profits, 1-1-2014)

Corporate Taxes end of 2013 = 273.5 Billion (Treasury data end of Fiscal year Sept 2013)
Corporate Profit end of 2013 = $1.9045 Trillion

$273.5/1,904,5 = 14.4% Corporate Tax

Sat, 07/05/2014 - 20:51 | 4927758 economics9698
economics9698's picture

Corporate taxes are passed on in the form of lower wages, less profit, less R&D, corruption, and so forth.  The perfect corporate tax rate is zero.

Sat, 07/05/2014 - 21:16 | 4927824 TeethVillage88s
TeethVillage88s's picture

Thanks. But large corporation also pass on huge expenses for perks, benefits, compensation for executives, nice new office buildings, teleconference centers, cafeterias, it all addes up and Frankly I see it at Administrative Cost that are a problem to Investors and to the articles of incorporation.

If you are a non-profit and you admin cost exceed like 22%, then you lose a place on the Combine Federal Campaign, where you get to publish and solicit for federal employees to contribute to your charity. This is significant since one of the great charities fell to earth in the 1970s as it was revealed that they had huge admin expenses to pay executives.

This is a conservative principal.

This is where people draw the line.

Today we don't know where to draw the line.

And no one cares to look, to monitor, to watch, to track, and to supervise the corporations that run our lives.

Costs to High Admin Cost in a Corporation:

1) Investors
2) Bond Holders (I think)
3) Customers
4) Governments that supervise in taxes
5) Citizens who pay for products and services

Sat, 07/05/2014 - 21:17 | 4927827 TeethVillage88s
TeethVillage88s's picture


Heard that Even Private Universities Take Federal OR State Funding, SO WE SEE MORAL HAZARD (IMHO).

Your point about Mansion for University President makes additional issues:

-Under Reform US Government
-Under Tea Party Government
-Under Libertarian Government

Maybe rules of incorporation could be interpreted quiet differently to reduce Executive Pay, Executive Compensation, Executive Perks (like cars & housing), and high admin costs/high overhead.

(I'm not a Tax guy or Financial Mgr)

-Section 501(c)(3) Nonprofit entity
-Section 509(a)(1) 1/3 of support from gifts, grants from public
-Section 170(c)(1) state or government entity

Many Charities got whacked in the 1970s as it was uncovered that either March of Dimes or UNICEF has huge Admin Costs (forcing them to report & disclose & even reduce admin costs to below 23% of expenses)

990 EZ Form Instructions:

-2) The Council of Better Business Bureaus "Standards for Charitable Solicitations" states, "Reasonable use of funds requires that, a) at least 50% of total income from all sources be spent on programs and activities directly related to the organization's purposes; b) at least 50% of public contributions be spent on the programs and activities described in solicitations, in accordance with donor expectations; c) fund raising costs not exceed 35% of related contributions; and d) total fund raising and administrative costs not exceed 50% of total income."
-5) Is the organization paying its Board Members inappropriately, or are its staff salaries unreasonable?
-6) Section 4958 (Line 40b) - Excess benefit transactions
(Nice Chart on Top Salaries for Universities)

-Instructions for Application of Tax Exempt (IRS Form 1023) Status as 501(c)(3) state that the PRIMARY PURPOSE can not be for Trade OR Business, but College is an Capitalist Industry these days formed to Capture Funding & Provide Jobs.

Sat, 07/05/2014 - 18:53 | 4927491 TeethVillage88s
TeethVillage88s's picture


Interesting about the Rationing.

I think we could use that kind of Idea in the future of the USA and controlling capital from going overseas or to gambling of some kind. I guess we call that Capital Controls.

I remember that in Vietnam they used Script instead of money to control the Black Market.

Perhaps TBTF Banks using TARP, QE, Operation Twist, and ZIRP to gamble in the financial markets is like the Black Market. It takes money out of the US Economy and like occupation forces they are spending money overseas, ... Capital Flight, Stagnant Capital(financial), money sitting in bank accounts of wealthy or big banks....

Sat, 07/05/2014 - 19:52 | 4927619 ThirteenthFloor
ThirteenthFloor's picture

Yes the unstearilized bond monetization (FRB operations, QE and MBS creation) remove money from investment side of economy.

Add to that multi-nationalization, off-shore, immigrant workers, they basic destroyed the US production economy.

Sat, 07/05/2014 - 20:56 | 4927772 economics9698
economics9698's picture

TeethVillage88 also during WWII the bond drives were to remove money from consumers and park it where it would not be spent.

Sat, 07/05/2014 - 21:01 | 4927774 economics9698
economics9698's picture

Double post.

Sat, 07/05/2014 - 21:01 | 4927775 economics9698
economics9698's picture

Did it again.

Sat, 07/05/2014 - 19:12 | 4927525 TeethVillage88s
TeethVillage88s's picture

Speaking of Taxes interesting looking at recovery from the Recession between Individual Tax Revue & Corporate Tax Revenue. I may not be as well read as others. Maybe someone can explain how Individual Taxes took a Dive, then recovered, but Corporate Taxes Did not???

Corporate Income Taxes Receipts 1998 = $ 188.7 Billion
Corporate Income Taxes Receipts 2002 = $ 148.0 Billion (Recession)
Corporate Income Taxes Receipts 2006 = $ 353.9 Billion
Corporate Income Taxes Receipts 2007 = $ 370.2 Billion
Corporate Income Taxes Receipts 2008 = $ 304.3 Billion
Corporate Income Taxes Receipts 2009 = $ 138.2 Billion (Recession)
Corporate Income Taxes Receipts 2012 = $ 242.3 Billion
Corporate Income Taxes Receipts 2013 = $ 273.5 Billion

Individual Income Taxes Receipts 1998 = $ 828.6 Billion
Individual Income Taxes Receipts 2002 = $ 858.3 Billion (Recession)
Individual Income Taxes Receipts 2006 = $1.044 Trillion
Individual Income Taxes Receipts 2007 = $1.163 Trillion
Individual Income Taxes Receipts 2008 = $1.146 Trillion
Individual Income Taxes Receipts 2009 = $ .915.3 Trillion (Recession)
Individual Income Taxes Receipts 2012 = $1.132 Trillion
Individual Income Taxes Receipts 2013 = $1.316 Trillion

Sat, 07/05/2014 - 20:01 | 4927636 ThirteenthFloor
ThirteenthFloor's picture

Local corporations park short term funds in the market, and borrow cash for short term needs.   However in 2008 there was a business capitol crunch that caused businesses to pull cash from the market to maintain operation cash flows.  This reduced income and revenues and of course corporate taxes.  This same did not apply for households.  I suspect corporate stock buybacks have reduce corporate income taxes to a large degree as well recently.

Sun, 07/06/2014 - 10:41 | 4928844 Democratic koolaid
Democratic koolaid's picture

Paying for your sex change operations thrawrts economic growth, literaly sometimes, and insuring risky investments that safeguard already wealthy intrests.

$30,000 on discount for gender reassignment surgery, I googled it so it must be true. that adds up and macklemores new CD is due out soon so buisness should pick up.


Sat, 07/05/2014 - 18:23 | 4927412 ThirteenthFloor
ThirteenthFloor's picture

US Economy went bust in 2008.  We fell off the cliff then.  We are now in freefall.  The stock market euphoria is the freefall and the unstearilized bond monetization by the FRB since 2005.

Late last year we lost the Saudi support, Russia and China and other BRICS moved quickly to create their own development bank to reduce damage from the pending USD collapse.  China starting buying US assets left and right including JPM Chase.  G20 discusses this danger of divergence in Jan '14.

Obama tried to apease Saudis in Syria but failed.  Saudis last week tried to set it's own dev bank off USD.

IMF and World Bank are in US Courts trying re-consolidate under a proposed global redev economic plan using OITC GOLD (Global Debt Facility) this going on since '11-'12.

Ground is now approaching fast including a new US Currency of some sort.

Sun, 07/06/2014 - 11:13 | 4928922 TeethVillage88s
TeethVillage88s's picture

The [yuan] has effectively already become a de facto reserve currency because so many central banks have already invested in it," he said. "The [yuan] may become a de facto reserve currency before it is fully convertible."

Thanks for the Replies Thireenthfloor.

I've had to look up some terminology.

Still looking for Minutes or agenda for G20 Meeting in January. (US Treasury Holdings)

Renminbi Trading Hubs

1 London
2 Luxembourg
3 Moscow
4 Paris
5 Singapore
6 Tokyo
7 Australia

Sat, 07/05/2014 - 17:21 | 4927294 JustObserving
JustObserving's picture

Q1 GDP shrank by 2.9% even as the US BLS faked the US inflation rate lower by 4% to 8%.  So real US GDP declined by 6.9% to 10.9% in Q1 2014.  Forward.

Sat, 07/05/2014 - 17:32 | 4927323 Winston Churchill
Winston Churchill's picture

According to Williams GDP has been negative since 2005, with the correct deflator.

Now its just achieved terminal velocity, is all.

Everything is fine so far.



Sat, 07/05/2014 - 17:54 | 4927350 TeethVillage88s
TeethVillage88s's picture

"Endo" used to be a term for this. Actually reminds me of the Rahm Chart Above.

They must have stopped teaching the Bureaucratic Paradox in college and universities. It was like Organizational Behavior 101. Obviously as things get complex, you have to go back and organize. This is like a Reoganization with Layoffs, but also applies to Legislation & Paperwork.

Streamlining and Simplification is a known tool in legislation.

But in our US Congress they can't think for themselves they are just order-boys for Lobbyist.

-Flat Tax is a good example of simplification Federal Acquisition Streamlining Act of 1994

Sat, 07/05/2014 - 18:02 | 4927335 TeethVillage88s
TeethVillage88s's picture


Maybe the Balloon of Financial Instruments indicates Ballooning Opportunity, and so the dollars 40 years ago that would have been either invested in the economy are going to Financial Paper Investments (and in cycling them through).

IN fact in a Recession the decision to loan or investment capital is either to hold the dollars till there is more certainty, invest in derivatives, invest in FOREX, Invest overseas, buy equities, or Invest in US Domestic Businesses and their expansions.

Late add:

Continuing Resolutions have merely accelerated the spending increases that GWB put in place. Pretty much all across federal agencies, except for job training and HUD. But look... double digit budget increases should have jump started the Economy (in a normal government(not corrupted)) and this should have seen 5% GDP Growth if not 7% since Federal government has grown to double in spending (not so much in employees unless they were NSA or covert employees)

Sat, 07/05/2014 - 17:18 | 4927298 disabledvet
disabledvet's picture

" a machine." Platoon.

The PTB cannot turn it off. That includes more than just the USA..but Russia, Germany, Britain, Saudi name it. "These things will get out of hand and there is nothing we can do to stop it!" (Hunt for Red October.)

Sat, 07/05/2014 - 17:33 | 4927327 Ol Man
Ol Man's picture

Actual Quote...


"This business will get out of control. It will get out of control and we'll be lucky to live through it."



Sat, 07/05/2014 - 17:24 | 4927308 Umh
Umh's picture

On;y big companies can survive the paperwork and others hassles that come from big government.

Sat, 07/05/2014 - 17:26 | 4927313 TeethVillage88s
TeethVillage88s's picture


-Capital is Stagnant
-Capital is Flight from the USA
-Bailouts, TARP, QE, Operation Twist only provided more corruption to the stinking system
-Free Trade is not Free Trade
-We compete with Slave labor with no Auditing

-Monetary Policy failed since it only serves Bankers (big ones)
-Fiscal Policy failed since it was just expanding the usual spending programs and budgets.
-Now we are screwed with No Representation in Congress and Exponential Growth of Debt.

Fed Money Data updated from Jan 2014

M1 Money Stock, 2014-06-16: $2.83 Trillions of Dollars (Exponential Growth, but doesn't include Dollars overseas)
M2 Money Stock, 2014-06-16: $11.32 Trillions of Dollars
MZM Money Stock, 2014-06-16: $12.54 Trillions of Dollars (Money with zero Maturity)

Looks like 1981 was the Money Velocity high, note manufacturing plunged 1979. (Top was 2007 Q4 at 10.7, now down to 6.3) (Top was 1997 Q3 at 2.2, now down to 1.5) (Top was 1981 Q1 at 3.5, now down to 1.4) (Top was January 1987 at 3.1, now down to .7) (Employees: Manufacturing 12.1 M Persons)

M1V M1 Velocity of M1 (6.305 Ratio)
M2V M2 Velocity of M2 (1.540 Ratio)
MZMV MZM Velocity of MZM (1.386 Ratio)
MULT M1 M1 Money Multiplier (0.705 Ratio)

Sat, 07/05/2014 - 17:30 | 4927321 BobTheSlob
BobTheSlob's picture

69% of the feral guvmint's budget is wealth redistribution in the form of SS, healthcare, welfare, food stamps, pensions, and guvmint employee paychecks. So no, government isn't big enough yet. We need MOAR MOAR MOAR.

Sat, 07/05/2014 - 19:45 | 4927600 ThirteenthFloor
ThirteenthFloor's picture

Actually at this point 51% of government deficit is ROLLED over INTEREST payments on unpaid previous year debts.  Interest PAID to BANKERS that have TAX LOOPHOLES themselves and collect big BONUS and KUDOs from people that support unfettered Wall Street cronies.

Debt that came originally from Politicians that act like a public Santa Claus to collect votes.  The entire food stamp budget is less that the electric bill for the NSA facility in Utah.

The new gun pointed to all our heads is USD distruction, and distruction to our PRODUCTION economy as a result of corporations seeking lower costs and tax/regulation asylum by moving off-shore.  Our govt. is bankrupt, while the rest of world knows this, the US is about to find out.


Sat, 07/05/2014 - 17:30 | 4927322 BaghdadBob
BaghdadBob's picture

Socialism is a dirty word in the US, but you've managed to achieve it. Albeit an extremely fascist version of it. Well done.

Sat, 07/05/2014 - 19:32 | 4927568 BobTheSlob
BobTheSlob's picture

We're going to make the Nazis look like pikers.

Sun, 07/06/2014 - 08:26 | 4928625 Uncle Remus
Uncle Remus's picture

Yes we can!

Sun, 07/06/2014 - 16:17 | 4929581 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

You just don't like the president because he's black! </sarc>

Sat, 07/05/2014 - 17:32 | 4927325 WTFUD
WTFUD's picture

Is BG Thwarting EG?
Does the Pope shit on little children in the woods?
Are bears catholic?

Sat, 07/05/2014 - 17:45 | 4927347 FreedomGuy
FreedomGuy's picture

Asking if Big Government thwarts economic growth is like asking if the Pope is Catholic or if it rains in the Amazon, but only to people who do not have a deep seated near relgious belief in the goodness, wisdom and efficency of government. To them criticizing government methods and programs is like insulting the Pope to Catholics.

Sat, 07/05/2014 - 17:53 | 4927358 WTFUD
WTFUD's picture

Me I am big enough and ugly enough to fuck harder those who try to fuck me BUT I object to the Down Arrow on BEHALF of the KIDS being sodomised and mutilated by the pope, cohorts of the pope, royal families, politicians, ruling elites and the general scum albeit that the latter usually do jail time.

Sat, 07/05/2014 - 17:38 | 4927334 Bunga Bunga
Bunga Bunga's picture

Like Ronald Reagan said: Government is not the solution, government is the problem. Anarchy is the logical answer.

an = without

archy = ruler

We have the technology to govern ourselves, we don't need central rulers anymore. The blockchain is just the beginning.


Sat, 07/05/2014 - 17:44 | 4927343 Winston Churchill
Winston Churchill's picture

From their cold dead hands.

Sat, 07/05/2014 - 18:27 | 4927433 TeethVillage88s
TeethVillage88s's picture

But look with Exponential Debt

Where can we go from here?

Seems like we have to break down big units into small units. I know states and cities try to operate with transparency and balance their budget. But they have mostly failed in the areas of pensions and financing. I hear Universities also bought in to zombie hedge funds.

Just kicking this around in my mind. I'm for anti-trust law and thing that lobbying and corruption of regulator has under cut laws to prevent oligopolies... like in the media and all big corporations that can twist our federal government for whatever if wants regardless of what you think of corporate taxes and that citizens will soon have to pay all the taxes.

-Anti Federalism is an idea
-Cut off revenues to federal government by legislative action in order to strengthen states & cities power
-Anti-Privatization is another idea (expensive, Cost Benefit Analysis doesn't work)
-Maybe States as sovereign countries would be small units responsible for debts, expenditures, and jobs
-Maybe Federal Debt & Obligations are too far reaching for anyone to understand at this point
-Maybe the settlement of debt & Credit issues should now be pushed to the State level to get the Federal Government out of Control

Sat, 07/05/2014 - 17:55 | 4927359 Herdee
Herdee's picture

Here is part of the scenario for the coming global currency reset.It sees the American Dollar as no different from the Mexican Currency and being included in a large basket of world currencies with a difference in them of only 5%.That means that right now,countries around the world are using the U.S. Dollar a lot less and getting are gradually getting out of it so that they are not included in U.S. policies.When Great Britain was deadbeat bust after two world wars and the U.S. took over as the world's reserve currency,it didn't mean that right away that countries stop using the British Pound.It took time.All countries know now that the reset is eventually coming and are now planning by diversifying out of the Dollar and into Chinese Currency.It is because of very large deficits and trillions of dollars of debt that cannot ever be paid back.That is called high risk.Interest rates will eventually become very high for Americans because of out of control deficits.More folks won't be able to afford gas,food and a home and will give up the last of what they own to Communists.The manufacturing sector in America was purposefully gutted by politicians in America to finance war.That means international players like the Communist Chinese can will come in full force eventually and buy up and take away what's remaining.Property and hard assets being the big two things.It's already happening but still on a small scale.The big Chase Manhatten building in New York is a good example.It was sold too cheap because they owe the Chinese a lot of money.You also have to understand that The Fed on a mark-to-market basis is insolvent just like their European counterparts.Europe is being held up by Fed swap lines of printed fiat after the EU took over 2 trillion of extremely high real estate off of the hands of the European Banks.They're all bust too.It's basically simple and because of endless war spending by the U.S. and 900 military bases worldwide.The Chinese right now already control General Motors through all the patents that they own.They're doing the same to all other major corporations.They also control Boeing.The world is waking up to the fact that it no longer wants useless fiat paper dollars printed by Uncle Sam and will demand a seperate U.S. currency that needs to be backed by gold for trading.It's a lack of confidence in the Currency.You have to understand that this economic war has already been won by the Communist Chinese.Do you really think that the Chinese that have basically free education and health care in their society and who are very smart people would just finance and buy up trillions of U.S. debt without some kind of hedge or collateral?That's why most economists now think that all of the gold that the U.S. has held has all been pledged to China as insurance but the U.S. is never going to get it back now.It's all been leased out.The Chinese will sit at the table during the coming monetary reset with a position of power and Congress will be helpless in stopping them coming in and buying everything in site while a depressed economy and its' people get hosed by The Fed who sold out America.It's the only way to restore manufacturing in America and the rebuilding of its' infrastructure.After the reset and social unrest,Americans will all be working for foreigners.It's all been blown by your friends in Washington,D.C..

Sat, 07/05/2014 - 18:21 | 4927417 Winston Churchill
Winston Churchill's picture

Thats JC Collins theory over at

Its too elegant, and relies on honor amongst psychopaths.Fatal flaws.

The Chinese haven't been buying all that gold because its price will stay  the same

in USD's.Gold is money to Asians,not paper.

No system(like SDR,SDRM),that leaves the USA able to pillage, and rape the rest of the world,

will,or could last but 12 months.

I just don't buy it,sorry.Not going to happen.Its doomed from the getgo.

The Tylers seem to agree.

Sat, 07/05/2014 - 20:32 | 4927369 Sam Spade
Sam Spade's picture

Per Lacy Hunt, academic studies from just the past three years have documented that economic growth slows dramatically when combined public and private debt exceed 260% to 275% of a country’s GDP.  From 1870 to the late 1990’s, real GDP in the US grew by an average of 3.7% annually.  Since the year 2000, annual GDP growth in the US has averaged only about 1.8%.   2000 was the year that total debt in the US breached the critical 260% level (it’s now around 350%).  This debt overhang sucks oxygen out of the economy, and will continue to do so.  The Fed's "solution" to this problem, of course, has been to encourage more debt!


Sat, 07/05/2014 - 18:05 | 4927379 Colonel Klink
Colonel Klink's picture

My answer is a resounding YES.  Because I'm not doing shit to contibute to the economy or government coffers until they reduce the size of the Federal government by 50% and get the fuck out of controlling everything in our lives.


Sun, 07/06/2014 - 00:26 | 4927388 ThirteenthFloor
ThirteenthFloor's picture

Govt spending when performed through unsterilized bond monetization, removes investment from the economy, reduces value of currency (sic: inflation).

As that unsterilized bond activity increases as a % of GDP investment falls, GDP then contracts further and the economy begins a collapse.  

But the problem here is not JUST government spending.  When PRIVATE banks are charging USURY via a private FRB on govt. spending, govt. debts begin to explode and bond stearilization grows completely, investment decays at an ever increasing rate.  Ibero-American debt payments today are 46% interest to PRIVATE banks. 

Corporations cut investment and new development then fight to lower costs to fight inflation, and seeking lower costs they LOBBY and PRESSURE for 'more free trade' aka off-shore production, free-trade agreements, more tax credits (increase govt. debt further), more off-shore labor, lower on-shore wages finally reduces consumer spending and the economy decays even further.  The ongoing spiral is brutal until the economy is cold embers.

Three things need to happen in the truly free soverign state - 

1. Govt. spending is based on A. Hamilton Credit base system at the Treasury NOT A PRIVATE BANK via usury and a debt system.

2. Currency needs to be backed and set to a public owned trust of AU and AG. 

3. Govt. needs to be kept FULLY in CHECK by the citizens to avoid illegal corporatism and excessive spending

Sounds like the original Constitution.



Sun, 07/06/2014 - 00:33 | 4928248 Anusocracy
Anusocracy's picture

Free and government are contradictory.


Like free and enslaved.

Sun, 07/06/2014 - 11:21 | 4928939 ThirteenthFloor
ThirteenthFloor's picture

Maybe thats why nothing in life is 'free'.

Sun, 07/06/2014 - 12:06 | 4929027 TeethVillage88s
TeethVillage88s's picture

many plans might be possible.

I agree with you in the simpleness of what you said.

>Just like Stock Markets can't work with Fraud
>Just like Toxic AAA Rated US Paper turns foreigners against the USA
>Just like without accounting rules, auditing, independent auditors, sound ratings agencies you can't have a conservative movement or sound financial basis
>We need to standardize if not Regulate Financial Instruments

Alexander Hamilton could not have envisioned the growth in financial instruments we have today. Of course we would have a New Revolution if our first citizens got wind of any of this.

Sat, 07/05/2014 - 18:09 | 4927390 I Write Code
I Write Code's picture

I'd move the Y origin on that Rahn chart about halfway up, to show that there are regions where the effects are strictly harmfull, where more government doesn't just fail to promote growth but it actively suppresses it.

Sat, 07/05/2014 - 18:14 | 4927400 TeethVillage88s
TeethVillage88s's picture

Who the hell is going to be responsible for the Supply of Commodities?

Just talking about Economic Shocks

If the most valuable Assets are part of speculation like the US Housing Market, and Financial Schemes go after the one big Tail Wind in a Recession, what the hell do you do?

If Corn, Wheat, Soybeans, Rice, Potatoes, Beef, Chicken, Pork, Rabbits, Guinea Pigs, Quail, Turkey, Sheep, Goats, Oysters, Clams, Shrimp, Talapia, catfish, Salmon, Trout, Crab, and Lobster are Commodities... but we rely on these for National Security, then what the hell are we doing?

If food, Water, Housing, and Energy are not protected, but are National Security Issues,.. then What are we doing???

Sun, 07/06/2014 - 10:39 | 4928812 Democratic koolaid
Democratic koolaid's picture

Government should certainly be part of the the Commodities control chain, certainly.

Sat, 07/05/2014 - 18:21 | 4927419 kill switch
kill switch's picture
Marc Faber Asks: Is "Big Government" Thwarting Economic Growth?


Is he fucking insane??? YES!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Sat, 07/05/2014 - 18:21 | 4927420 conspicio
conspicio's picture

Only because Marc reads here from time to time do I ask why the premise is a question and not a statement? I'd love to see more on that. Livio Di Matteo has a good round number of 26% for a government spending cap based on some hard data, good analysis, and scholarly review. From his point of view, there is no question. There is a statement of fact. I would much rather prefer a stasima of the Greek tragedy unfolding before us versus the mimesis of the question.

Sun, 07/06/2014 - 12:22 | 4929070 TeethVillage88s
TeethVillage88s's picture

If Public Debt is Exponentially Growing, then you are saying that GDP is exponentially Growing.

That can't be right. $59.398 Trillion All US Debt (Exponential) $17.6 Trillion Federal Debt (Exponential) $17 Trillion GDP

Debt/GDP = 104% (But who believe the methods of calculating the GDP are correct when any financial transaction is counted as Value added to the Economy, Really Inflation counts as Value added?)

But okay 26% is like the 2013 Federal Budget as percent of GDP $3.5 Trillion (roughly) / $17.6 Trillion = 20% (Roughly)

How can these numbers be manipulated. I heard from John Williams and others that Fed Changes numbers monthly sometimes... But I can't get around Rentier activity being counted as value added in GDP.

Sat, 07/05/2014 - 18:56 | 4927492 johngerard
johngerard's picture

Do bears shit in the woods, Marc?

Sat, 07/05/2014 - 21:01 | 4927791 tarsubil
tarsubil's picture

Obama asks, "Is all this anal sex causing my hemorrhoids?"

Sun, 07/06/2014 - 09:09 | 4928676 messymerry
messymerry's picture

No, anal sex is good for hemorrhoids.  So is riding a bicycle...


Sat, 07/05/2014 - 19:01 | 4927504 ToNYC
ToNYC's picture

Muscle-ini by Government Economics is Corporatism 2.0

Sat, 07/05/2014 - 19:14 | 4927534 RMolineaux
RMolineaux's picture

What we have here is big government controlled by corporate power, not big government acting on behalf of the citizenry.

Sat, 07/05/2014 - 20:06 | 4927643 Robert of Ottawa
Robert of Ottawa's picture

Nonsense. We have big government, acting on behalf of itself, which attracts crony capitalists which will lead to fascism in it's pure sense.

Sat, 07/05/2014 - 19:16 | 4927537 TeethVillage88s
TeethVillage88s's picture

30 September 2013, Final Monthly Treasury Statement, Outlays and Revenues, Table 5.

Total—Department of Agriculture Outlays 2013 = $181.7 Billion
Total—Department of Agriculture Outlays 2000 = $94.6 Billion
Total—Department of Agriculture Outlays 1998 = $71.5 Billion

Total—Department of Defense—Military Outlays 2013 = $609.4 Billion (Down from $650 B)
Total—Department of Defense—Military Outlays 2000 = $283 Billion
Total—Department of Defense—Military Outlays 1998 = $257.9 Billion
Total--Department of Education Outlays 2013 = $89.5 Billion
Total--Department of Education Outlays 2000 = $33.4 Billion
Total--Department of Education Outlays 1998 = $30.6 Billion

Total--Department of Energy Outlays 2013 = $31 Billion
Total--Department of Energy Outlays 2000 = $18.8 Billion
Total--Department of Energy Outlays 1998 = 17 Billion

Total—Department of Health and Human Services Outlays 2013 = $980.9 Billion
Total—Department of Health and Human Services Outlays 2000 = $405.5 Billion
Total—Department of Health and Human Services Outlays 1998 = $372.4 Billion

Total--Department of Homeland Security Outlays 2013 = $66.5 Billion
Total--Department of Homeland Security Outlays 2000 (FEMA) = $3.9 Billion
Total--Department of Homeland Security Outlays 1998 (FEMA) = $2.9 Billion

Total—Department of Housing and Urban Development Outlays 2013 = $59 Billion
Total—Department of Housing and Urban Development Outlays 2000 = $42.5 Billion
Total—Department of Housing and Urban Development Outlays 1998 = $51.7 Billion

Total—International Assistance Program Outlays 2013 = $48 Billion
Total—International Assistance Program Outlays 2000 = $25.7 Billion
Total—International Assistance Program Outlays 1998 = $26 Billion

Total--Department of Labor Outlays 2013 = $88.5 Billion (What?)
Total--Department of Labor Outlays 2000 = $33.8 Billion
Total--Department of Labor Outlays 1998 = 32.3 Billion

DOL Unemployment Trust: Federal-State Unemployment: State Benefits, Outlays 2013 = $66.9 Billion
DOL Unemployment Trust: Federal-State Unemployment: State Benefits, Outlays 2000 = $20.6 Billion
DOL Unemployment Trust: Federal-State Unemployment: State Benefits, Outlays 1998 = $19.9 Billion

Total--Office of Personnel Management Outlays 2013 = $133.7 Billion (What?)
Total--Office of Personnel Management Outlays 2000 = $71.8 Billion
Total--Office of Personnel Management Outlays 1998 = $66 Billion

OPM, Employees and Retired Employees Health Benefits Fund Outlays 2013 = $43.9 Billion (?More than Double?)
OPM, Employees and Retired Employees Health Benefits Fund Outlays 2000 = $19.7 Billion
OPM, Employees and Retired Employees Health Benefits Fund Outlays 1998 = $17 Billion
OPM, Civil service retirement and disability fund Outlays 2013 = $77.4 Billion (Expanded Employment & Retirement??)
OPM, Civil service retirement and disability fund Outlays 2000 = $45.2 Billion
OPM, Civil service retirement and disability fund Outlays 1998 = $43 Billion
OPM, Government Payment for Annuitants, Employees Health & Life Insurance Benefits, Outlays 2013 = $11 Billion (?Double?)
OPM, Government Payment for Annuitants, Employees Health & Life Insurance Benefits, Outlays 2000 = $5 Billion
OPM, Government Payment for Annuitants, Employees Health & Life Insurance Benefits, Outlays 1998 = $4.1 Billion

Total--Social Security Administration Outlays 2013 = $870.3 Billion
Total--Social Security Administration Outlays 2000 = $443.4 Billion
Total--Social Security Administration Outlays 1998 = $409.6 Billion

Total—Department of the Treasury Outlays 2013 = $550.1 Billion (IRS Surge in spending)
Total—Department of the Treasury Outlays 2000 = $409 Billion
Total—Department of the Treasury Outlays 1998 = $401.7 Billion

Total--Interest on the Public Debt, under Treasury, 2013 = $415.7 Billion
Total--Interest on the Public Debt, under Treasury, 2000 = $362.1 Billion
Total--Interest on the Public Debt, under Treasury, 1998 = $363.8 Billion

Total—Department of Transportation Outlays 2013 = $76.9 Billion
Total—Department of Transportation Outlays 2000 = $46.5 Billion
Total—Department of Transportation Outlays 1998 = $40 Billion
Total—Department of Veterans Affairs Outlays 2013 = $143.6 Billion
Total—Department of Veterans Affairs Outlays 2000 = $50.1 Billion
Total—Department of Veterans Affairs Outlays 1998 = $45.6 Billion
Total--Tennessee Valley Authority Outlays 2013 = $65.8 Billion (what is happening here)
Total--Tennessee Valley Authority Outlays 2011 = $38 Billion
Total--Tennessee Valley Authority Outlays 2009 = $32.7 Billion
Total--Tennessee Valley Authority Outlays 2007 = $19.4 Billion
Total--Tennessee Valley Authority Outlays 2005 = $20.9 Billion
Total--Tennessee Valley Authority Outlays 2003 = $13.9 Billion
Total--Tennessee Valley Authority Outlays 2001 = $11.3 Billion
Total--Tennessee Valley Authority Outlays 2000 = $8.3 Billion
Total--Tennessee Valley Authority Outlays 1998 = 9 Billion

Total--Military Personnel Outlays under DOD 2013 = $150.8 Billion
Total--Military Personnel Outlays under DOD 2000 = $75.9 Billion
Total--Military Personnel Outlays under DOD 1998 = $68.9 Billion

Total--Operation and Maintenance under DOD 2013 = $259.7 Billion (Obviously not enough money to fix everything)
Total--Operation and Maintenance under DOD 2000 = $105.9 Billion (Before the wars)
Total--Operation and Maintenance under DOD 1998 = $92.8 Billion

Total—Procurement under DOD 2013 = $114.9 Billion
Total—Procurement under DOD 2000 = $51.6 Billion
Total—Procurement under DOD 1998 = $48.2 Billion

Total—Research, Development, Test, and Evaluation under DOD 2013 = $66.9 Billion
Total—Research, Development, Test, and Evaluation under DOD 2000 = $37.6 Billion
Total—Research, Development, Test, and Evaluation under DOD 1998 = $37.4 Billion
IRS, Total Outlays—Internal Revenue Service, under Treasury, 2013 = $103.3 Billion (Boom)
IRS, Total Outlays—Internal Revenue Service, under Treasury, 2000 = $38 Billion
IRS, Total Outlays—Internal Revenue Service, under Treasury, 1998 = $33.2 Billion (??? What? For what??)
IRS, Payment where earned income credit exceeds liability for tax Outlays 2013 = $57.5 Billion (?What?)
IRS, Payment where earned income credit exceeds liability for tax Outlays 2000 = $26 Billion
IRS, Payment where earned income credit exceeds liability for tax Outlays 1998 = $23.2 Billion
Payment Where Child Tax Credit Exceeds Liability for Tax Outlays 2013 = $21.6 Billion (?What?)
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax Outlays 2000 = $806 Million (Million)
IRS, Payment Where Child Tax Credit Exceeds Liability for Tax Outlays 1998 = Zero.....

Sat, 07/05/2014 - 19:48 | 4927609 HurricaneSeason
HurricaneSeason's picture

Anyway, what I got out of the article, is that it is very important to keep an eye on government spending as a percentage of GDP.  I assume he means federal, state and local and Indian tribes and banks.  So what is the current percentage?  Lame article.

Sat, 07/05/2014 - 19:52 | 4927622 taint
taint's picture

Yeah HUD!!! A shining example of govt growth containment.

Sat, 07/05/2014 - 19:55 | 4927627 RMolineaux
RMolineaux's picture

No one has answered the question: how did it happen that the federal government (using its "unified budget" approach) achieved a fiscal surplus in the last two years of the Clinton administration, while no one has been able to do so since?   The answer is: a combination of Bush tax cuts and war spending.

Sat, 07/05/2014 - 23:48 | 4928171 taint
taint's picture

Surplus? I saw not a single year where us govt debt did not increase. I guessSurplus must mean the new small deficit.

Sun, 07/06/2014 - 09:04 | 4928675 messymerry
messymerry's picture

LIke paper gold, that was a paper surplus.  It never existed except in the imaginations of a bunch of psychopaths...

Sun, 07/06/2014 - 16:22 | 4929590 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture

Think: Social Security "Trust" Fund.  The clinton years look better (and are better) but the idea that they were running surpluses is not truthful.

Having said that -- I'd also like to say "Fuck Bush!"  There now I feel better.

Sat, 07/05/2014 - 20:04 | 4927642 MASTER OF UNIVERSE

The pre-2008 growth model was built on lies, God damned lies, and statistics. Growth is redefined every business quarter in order to salt the economy. Consumers are wise to the established media ruse of a hyped market when in fact we all know that as the market is hyped the risks are played down. Investmnet today is a high risk environment and I'm not the only person that thinks this way. The Titanic economy is listing and everyone will undoubtedly attempt to right the ship if they have the engineering background to do it. Unfortunately, not a soul on the face of the planet Earth can do much about the lunatic amount of debt that debt slave America has gotten herself into. Lady Liberty was too much of a Park Avenue diva for the United States of America's own good. You need to cut the bitches credit card up and put the bitch [Lady Liberty] on a diet

cuz the bitch is getting too fat and her Liberal largesse is hanging over her belt buckle so she can't tuck her shirt in anymore. In short, the bitch looks like she needs gastric bypass or she will need a bigger house with more servants to feed the little shop of horrors we call the 'Gubberment'. 

Sat, 07/05/2014 - 20:10 | 4927656 kchrisc
kchrisc's picture

1) Government is a criminal sydicate of theft and violence.

2) Government always accomplishes the opposite of the stated goal. Always. That is because the stated goal is always cover for more theft.

3) Government has no resources of their own and so must steal all that they have. Therefore, government can only produce poverty, misery and death.


"The only solution to those of government is the guillotine."

Sun, 07/06/2014 - 06:43 | 4928528 Central Ohio
Central Ohio's picture

Sun, 07/06/2014 - 08:02 | 4928593 AdvancingTime
AdvancingTime's picture

 The large number of government programs that have failed to carry out their duties and the dim view many Americans have towards Washington may be starting to take its toll on those who think big government is the answer. The Democratic Party has long been thought of as the party of "big government"  filled with believers that government can solve and is the answer to curing many of our woes.

Sadly cost and reality are quickly beginning to show the flaws in this theory, government is far better at providing access of citizens and good at passing popular laws, but the private sector tends to be more efficient and better at controlling costs. More on the flaw in the concept of big government in the article below.


Sun, 07/06/2014 - 08:58 | 4928669 messymerry
messymerry's picture

This is much bigger than Washington Bruce.  I did a little research and came up with these numbers:

87,525 local governments

15000+ school systems

50 state governments

1 fed

Over 100,000 mobs with a needle in our vein.  

They're bleeding us fucking dry!!!

Sun, 07/06/2014 - 08:27 | 4928628 Uncle Remus
Uncle Remus's picture

If you haven't gone Galt, get there.

Sun, 07/06/2014 - 08:49 | 4928659 messymerry
messymerry's picture

Thank you Marc Faber and thank you Richard Rahn.  This is exactly what I have been saying to deaf ears for years...  (I'm a poet, I know it, hope I don't blow it...with apologies to Bob.)  

Government is just like aspirin.  A little helps a lot and too much is deadly.  There is only one way to control government and preserve our freedoms.  That is to regulate the amount of money they can expropriate from us.  Government is a glut.  It will eat until it explodes.  

When we write the new constitution, we must have rock solid provisions for maintaining governance at a fixed percentage of GDP.  If government wants to grow then by gum, they can work to make the economy more powerful and increase GDP.  

All governments GDP calcuations will have to be approved by at least a two-thirds majority of "all" members of a United Nations GDP Oversight Committee with at least 50 members representing at least 50 member states.  

So there, HA!


OBTW:  Short of Gort, this is the only solution.  ;-)

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