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Guest Post: The Great American Economic Lie
Submitted by Lance Roberts of Street Talk Advisors
The Great American Economic Lie
The idea that the economy has grown at roughly 5% since 1980 is a lie. In reality the economic growth of the U.S. has been declining rapidly over the past 30 years supported only by a massive push into deficit spending.
From 1950-1980 the economy grew at an annualized rate of 7.70%. This was accomplished with a total credit market debt to GDP ratio of less 150%. The CRITICAL factor to note is that economic growth was trending higher during this span going from roughly 5% to a peak of nearly 15%. There were a couple of reasons for this. First, lower levels of debt allowed for personal savings to remain robust which fueled productive investment in the economy. Secondly, the economy was focused primarily in production and manufacturing which has a high multiplier effect on the economy. This feat of growth also occurred in the face of steadily rising interest rates which peaked with economic expansion in 1980.
As we have discussed previously in "The Breaking Point" and "The End Of Keynesian Economics", beginning in 1980 the shift of the economic makeup from a manufacturing and production based economy to a service and finance economy, where there is a low economic multiplier effect, is partially responsible for this transformation. The decline in economic output was further exacerbated by increased productivity through technological advances, which while advancing our society, plagued the economy with steadily decreasing wages. Unlike the steadily growing economic environment prior to 1980; the post 1980 economy has experienced by a steady decline. Therefore, a statement that the economy has been growing at 5% since 1980 is grossly misleading. The trend of the growth is far more important, and telling, than the average growth rate over time.
This decline in economic growth over the past 30 years has kept the average American struggling to maintain their standard of living. As their wages declined they were forced to turn to credit to fill the gap in maintaining their current standard of living. This demand for credit became the new breeding ground for the financed based economy. Easier credit terms, lower interest rates, easier lending standards and less regulation fueled the continued consumption boom. By the end of 2007 the household debt outstanding had surged to 140% of GDP. It was only a function of time until the collapse in house built of credit cards occurred.
This is why the economic prosperity of the last 30 years has been a fantasy. While America on the surface was the envy of the world for its apparent success and prosperity; the underlying cancer of debt expansion and lower personal savings was eating away at core.
The massive indulgence in debt, what the Austrians refer to as a "credit induced boom", has now reached its inevitable conclusion. The unsustainable credit-sourced boom, which leads to artificially stimulated borrowing, seeks out diminishing investment opportunities. Ultimately these diminished investment opportunities lead to widespread mal-investments. Not surprisingly, we clearly saw it play out "real-time" in everything from subprime mortgages to derivative instruments which was only for the purpose of milking the system of every potential penny regardless of the apparent underlying risk.
When credit creation can no longer be sustained the markets must began to clear the excesses before the cycle can begin again. It is only then, and must be allowed to happen, can resources be reallocated back towards more efficient uses. This is why all the efforts of Keynesian policies to stimulate growth in the economy have ultimately failed. Those fiscal and monetary policies, from TARP and QE to tax cuts, only delay the clearing process. Ultimately, that delay only potentially worsens the inevitable clearing process.
The clearing process is going to be very substantial. The economy is currently requiring roughly $4 of total credit market debt to create $1 of economic growth. A reversion to a structurally manageable level of debt would involve a nearly $30 Trillion reduction of total credit market debt. The economic drag from such a reduction will be dramatic while the clearing process occurs.
This is one of the primary reasons why economic growth will continue to run at lower levels going into the future. We will witness an economy plagued by more frequent recessionary spats, lower equity market returns and a stagflationary environment as wages remain suppressed while costs of living rise. However, only by clearing the excess can the personal savings return to levels which can promote productive investment, production and ultimately consumption.
The end game of three decades of excess is upon us and we can't deny the weight of the balance sheet recession that is currently in play. As we have stated in the past - the medicine that the current administration is prescribing to the patient is a treatment for the common cold; in this case a normal business cycle recession. The problem is that this patient is suffering from a cancer of debt and until we begin the proper treatment the patient will continue to wither.
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There is no lie if you've been on the right side of the trade.
No personal lie but a general die. One lie to a hundred die. Malthus would be proud.
True lies. But the fact is that bonuses on Wall Street have been getting huger and huger every year. More and more Wall Streeters own their Golfstreams. No?
Fake profits. Real bonuses.
Instead of too big to fail it's too big to jail
How about don't put it in jail just nail it to lampost. Or mail it to outer space.
American decline is the result of Internationalization of Finance. Take over then out source.
Hey! U Left Out THE REAGANOMICS FAILURE ... growth was all tax spending as new debt.
The Entire REPUBLICAN ECONOMIC THEORY was run up our credit card to the max limit.
A FRAUD. A SHAM. A CON. A FARCE. WHERE IS THE GOP REPENTANCE?
One Lone Voice Of Truth...David Stockman: "REPUBLICANS BANKRUPTED AMERICA"
What...I suppose I should write a novel?
Yes, the Republican Reaganomic Credit Boom was awful, but the Keynesian policies of the Democrats would've been even worse. Until we return to a rule of law, sound money, FREE-MARKET (none of this socialist hybrid bullshit) then America will continue to die.
Why do you think Ron Paul broke with Reagan on the 80s and left the party? Because he KNEW the policies they were pursuing would result in this. He has 30+ years of public statements that bear this out- unlike the rest of the prez contestants.
I think I'm gonna call false Left / Right paradigm bull shit on your post. Sorry.
"We suck less than the other guys" is not a campaign slogan.
For a long time I realized that something broke at about the same time we put a man on the moon. I wasn't sure what exactly went wrong, but I was pretty confident about the timing. Now, many years later, I see that the decline of US prosperity ("American Dream") coincided with abandonment of the gold standard.
If we can afford to put two guys to work on the moon how come we cannot do the same thing in Kansas?
Oh all of these things looks a lot like the other ones, all of these things look like they belong...coincidence?
http://dieoff.org/page125.htm
By late-1993, I had further tested the Olduvai theory against several more sets of data, e.g., Davis (1990) and the UN (1993). In both cases, the historic peak occurred in about 1978. Again, the Olduvai theory prevailed (Note 4). I reported these results in a paper, "Sustainability—Is There a Middle Road?: The Transient-Pulse Theory of Industrial Civilization" (Duncan, 1993a).
Yeah, so you say. When your choice is between Satan and an irritating uncle who is somewhat clueless, it is absolutely relevant
You'd be a much more effective troll if you'd get your partisan panties out of a wad. Otherwise, you'll have to go over to FreeRepublic if you want to get any real action. Around here, as with any partisan stance, it just looks childish.
Didn't you hear Rep. Stark? Debt is income.
Get with the program.
Yes, debt is money.
www.youtube.com/watch?v=Dc3sKwwAaCU
Bernank has said the same, and as we all know he even went so far as to say flat out that, "no, Gold is not money." Something he probably regrets saying, but still something he very much believes to be true.
90% of america.. they seem to be fine with lies.. sad
ride the train http://www.hedgeaccording.ly/2011/07/when-robots-are-driving-you-gotta-r...
Edward Hopper, 99.99% Americakkans can't tell the reality is an illusion.
On a long enough timeline even shit will have to decompose at some point.
Markets curently shiniest pile of highly polished turds.
The Evening Careless Whisper Report
Mad Scientist Creates Synthetic DNA
http://www.guardian.co.uk/science/2011/sep/14/synthetic-dna-in-yeast-bre...
Tweet This: Two Disembowled Bodies Found Hanged From Bridge In Mexico With Message Attached
http://edition.cnn.com/2011/WORLD/americas/09/14/mexico.violence/
Campaign Laughing Stock
http://www.youtube.com/watch?v=-XYKRokgX00
Tony Bennett & Amy Winehouse Duet Released Today; Body & Soul
http://www.youtube.com/watch?v=_OFMkCeP6ok
Sounds like that synthetic DNA thing is going to be a winner. See no problems there.
Hmmm, I just got a hankerin to watch "I am Legend."
pods
Put another way, we're F-ed. Where have I heard that before?
No recovery until the markets clear, until assets are repriced at confidence-inspiring valuations. IOW, no recovery until the interventions stop and are unwound. IOW, no recovery until we end the Fed.
End the Fed, bitches.
Oh-No, Not this again. We been through this before:
"Put another way, I'm F-ed."
how much money was made by selling out to inter. bankers?
how much suffering of U.S. citizens?
tell you what,
i wont lynch these rich bastards,
but i wont stop it
The financial system will collapse just like all the previous ones in history have collapsed. You can't sustain the unsustainable which is a economic system based on borrowing at a rate of interest or compounding interest.
Why it'll last until we eat the last kernel of seed corn.
Yes but yesterday Target stores were mobbed by thousands of ZigZag pant speculators buying thousands of dollars worth of Missoni apparel to resell on Ebay. Within the first hour of the stuff going on sale over 25k items were listed on Ebay to sell. Unbelievably hilarious.
My store must have missed out on the hype since most of the stuff was still there today. I guess if a few stores in NY and CA were trashed by mobs of people it must have happened at every store right?
I guess women really are stupid enough to pay three times retail for ugly sweaters just to be "cool". Who am I kidding, I know they are since they pay $500 for a vinyl purse made in China for $4.
Any day now, my investment in Beanie Babies is gonna pay off, big time.
The play:
Buy hyped crap on credit.
List on eBay.
Sell it, or return it, before the credit card payment comes due.
Wonder how much will be back in the stores in about 20 days?
So whose batting on behalf of America in lieu of a global expansion? The lobbyists?
Why do I hear crickets?
Since it is political suicide for politicians to allow the unwinding of credit and the pain that will accompany
the unwinding, we will have to wait until the economy crashes for that to happen. When the crash occurs,
it will be far more painful than most people expect.
Actually our physical economy has been contracting since '68. Also, the declining wages wasn't on 'advances', it was because of outsourcing and FREE TRADE. Saying it was 'advances' that caused lower wages is a bit like saying the Jell-o made you full.
Which coincidentally, (free trade) also was the factor in destroying our manufacturing base, and leaving us with 'service' and 'financialization'.
Overall it is the policies of MONETARISM, which is inherently anti-american, or in a broader scope anti-any country, that causes this.
MONETARISM is a farce...keynesian, austrian, or other. Monetarism is not a way to build a physical economy for everyone to participate in, it is bullshit dogma to keep the power elite at the top at the expense of opportunity.
Glass-Steagall
"Free Trade", which is politically managed, isn't the same thing as FREE TRADE where people from various countries can buy and sell without political interference. It is the former which has destroyed our economy, and it is a return to the latter that will save us.
Please don't confuse the two, and read up in Austrian analysis of FREE TRADE before condemning it. BTW, until a sound money policy is implemented (aka free-market in methods of payment, not just a gold standard, but that would be nice) then even FREE TRADE won't save us. If people can't save money, and lend it fairly (since they can be sure to get an appropriate level of return) then capital formation cannot occur, and society dies.
Read some Rothbard and get back to us.
Given the ideas behind all words are corrupted over time, perhaps it's time to abandon the tainted one known as FREE TRADE (which has morphed into corporatism).
Whenever I talk to any of my lefty friends, I instead use the word Voluntarianism, which they have no problem aligning with (though they likely still will refuse to see the state as coercive).
http://www.voluntaryist.com/
N/A- I love your posts, and get the "voluntarism" meme, but it's "free trade" vs FREE TRADE, and you used the wrong version. :-(
FREE TRADE= good, "Free Trade" = bad, cronyist, corporatist, gov't controlled.
I do like using the phrase "voluntarism", as in "voluntary, above board, no scheme trade" and can see why it appeals to leftists. My college EX has turned out to be a big lefty, and the language has been so corrupted that having a conversation with him about "capitalism" vs "the free market" has become an exercise in clearly defining terms.
Orwell was a big socialist, but he was prescient in his understanding of how TPTB have corrupted language. Look at how the word "liberal" (and I'm a BIG liberal) has been co-opted by the collectivists. Fucking assholes!!!
why?
Tax cuts with no offsetting spending cuts.
First Reagan then Bush cut taxes but continued to increase spending.
Tax cutting is no economic miracle.
Well for the 30 years , US may be loosing its prosperity but in the eyes of world , it was still one of the major power center...
The Credit boom happened due to excessive and blind borrowing , the 9/11 war ,the unemployment , higher inflation ..everything is combined effects of all these years' ignorance..
To avoid the risks, I follow http://www.forecastfortomorrow.com/ they give an accurate predictions about the market and other happenings
I can't stress this enough. Please look up the difference between the words "loose" and "lose." "Loosing" is what one does with an arrow. "Losing" is what one does with prosperity.
While I've been known lose an arrow, I've never loosened one.
My bowels? Well, that's a different story.
imagine a world where everything is produced by robots.
Where do you see savings going up in this scenario ?
If you buy a car made by robots, it costs less than a car made by people. Then take your cost savings and, well, save it. Hence savings goes up. I suggest you learn about Austrian economics. Quickly.
Seize Mars- THANK YOU!
If I created a machine that made bread, milk, beans, broccoli and spam from household garbage, that can be installed in any house for $100, the "prosperity" (in terms of calories & nutrients needed to survive) goes up 100%. No one would ever need to die of starving. The very poor could never spend another penny on food, and yet eat forever.
That doesn't mean that all food production would stop- even the poorest of the poor would want a filet, or salad, or chicken sandwich or burger now and then. They would have MORE disposable income to spend on that since all their basic caloric and nutritional needs could be met with garbage.
If all houses could be built from garbage in the same way, and constructing a new house cost $100, no matter the size, then it would free up capital for custom wallpaper, or nice art, or great mattresses or 3D TVs.
Advancing tech just frees up capital to be employed in new arenas.
A world where all basic needs were met via machines, virtually for free, would unleash a Renaissance that would make the era of DaVinci and Michelangelo look like cave painting.
Only time and energy can be "wasted." The "garbage" that you talk about is most likely excess to begin with- with a reduced input stream (due to people not being able to over-indulge to begin with) will result in a reduced "waste" stream. One need only follow the logic put forward by all the (then) waste veggie oil (to run your car) folks- it's "free!" Yeah, energy problems solved, just build more McDonald's!
Additionally, MANY animals are fed "waste." (and since we then eat Them, it's not really "waste")
Funny is, the planet is quite capable of producing all the food that we need, without "tech!" Tech eats oil (go ahead, find any "tech" process that doesn't require fossil fuel inputs), something that's in decline (based on our grow-or-die behaviors). Yet, man's hubris just won't step aside, for He can do better than nature (which has polished its system over the course of billions of years).
Nonetheless, it's good to see discussions that tend toward the true fundamentals: Food, Shelter and Water.
Seer-
Language and culture are technology, and without them we would still be living in trees and eating grubs and bark. Fire is technology. The wheel is technology.
7B humans could not survive on the earth without technology.
"Fire is technology. The wheel is technology."
NO! Fire is fire and the wheel is a wheel. TECHNOLOGY is a PROCESS which defines how to create. And without energy or materials technology is merely a thought.
As far as living in trees and eating grubs, wouldn't that have been a cultural thing too? Meaning technology (communicated)?
"7B humans could not survive on the earth without technology."
Well, it's 6B+, but, again, all us "humans" survive because of the sun (direct as well as stored [fossil fuels]) and mineral/physical resources. Thought processes represented in technology allow us to EXPLOIT energy and physical resources: well, some things, like metabolizing food aren't a thought process, isn't a "technology."
Without a doubt, without the physical resources "7B humans" cannot be sustained via technology's processes.
Technology does NOT create that which doesn't already exist. That is, it may TRANSFORM, but it cannot create out of thin air. Hm... if it could, would that mean that we could over-mass the earth, cause it to collapse?
Sorry, but the "technology will save us" mantra gets a bit old after a while. It is, I find, a convenient way to con people.
Current figures are that it is 6.98 B. Margin of error could easily place it at 7.00 B or greater, so the OP is correct.
World Population is 7.00 B, or will be within 4 months.
Look at world history from 1350 to present. Technology HAS enabled the population growth - Oil was present for only a short period of those 661 years.
Perhaps I should have broken it down more simply for Seer-
CONTROL of fire is technology, ditto the wheel. Both exist in nature but humans are the only that use it. Of course monkeys that live in trees and eat grubs have a primitive culture, but no means of expanding it. We do. It, in the form of the technology of LANGUAGE and HIGHER CULTURE has allowed us to go from a global "carry capacity" of +/- 1M people a few thousand years ago to +/- 7B today. Less than 100 years ago it was +/- 1B, so tech has allowed us to septuple (think about the concept of "septuple"- the mix of language and math, without which we would still be living in trees) that capacity in 100 years. Continued refinement of that ability to extract and refine and REUSE resources will mean a virtually unlimited carrying capacity as long as we don't allow our global masters to drive us back to the dark ages.
Seer, I suspect that you are utterly ignorant of economics, history and the mechanics of progress. I am only responding to you in case some other reader sees your reply and thinks you have a point. You do, but it is on the top of your head. Put down the Time and People magazine, turn off the CNN and Fox News(sic) and learn about the rich and amazing power of human ingenuity. Malthus was wrong 200 years ago, and will be wrong 200 years from now.
Agree with you, but disagree with how you went about the discussion.
Are these robots cognizant and thus self-owning, or are they someone's property? See where I'm going here? Either the robots acquire savings, or their owners do.
Now, if I built a dumb robot, do I not own its output, as well as any savings it produces?
If technology took care of everything for us, no one would have any money, because no one would be working.
I've destroyed 20-30 jobs in the past 6 months alone, creating automation programs. The only cash that was freed up was the business owners.
Hey! U Left Out THE REAGANOMICS FAILURE ... growth was all tax spending as new debt.
The Entire REPUBLICAN ECONOMIC THEORY was run up our credit card to the max limit.
A FRAUD. A SHAM. A CON. A FARCE. WHERE IS THE GOP REPENTANCE?
One Lone Voice Of Truth...David Stockman: "REPUBLICANS BANKRUPTED AMERICA!"
Yes, to be sure.
But dude, if you are still buying in to the whole left versus right paradigm then I don't know what to tell you. You've got some learning to do. Good thing you are in the right place to start learning.
Yes, Republi-Ken and his twin, Democr-Addie, drive me nuts. BOTH parties are in on this rape of America. Keynes vs Friedman- who will drive us to bankruptcy first.
People ignorant of economics should keep their mouths shut lest they reveal to all their ignorance.
What's the matter. Union hall Beef and Brew end early and you decided to enlighten us with your 'insightful' propaganda. LOL
Bailouts are not solutions. Creating more debt does not address underlying problems. Kicking the can down the road does not solve the problem. It only satisfies the cowardly instincts of spineless bureaucrats to avoid facing reality.
You don't destroy the financial intermediaries by making them commercial banks (see the DIDMCA of March 31st 1980) & expect higher real growth.
I.e., the DIDMCA created the legal framework for the addition of 38,000 more commercial banks to the 14,000 we already had, and in the process, the abolition of 38,000 intermediary financial institutions. The intermediary financial institutions effected were the nation's savings and loan associations, mutual savings banks, and credit unions. Trust companies and stock savings banks have been commercial banks for many years.
See the General Theory: John Maynard Keynes gives the impression that a commercial bank is an intermediary type of financial institution serving to join the saver with the borrower when he states that it is an “optical illusion” to assume that “a depositor and his bank can somehow contrive between them to perform an operation by which savings can disappear into the banking system so that they are lost to investment, or, contrariwise, that the banking system can make it possible for investment to occur, to which no savings corresponds.”
In almost every instance in which Keynes wrote the term bank in the General Theory, it is necessary to substitute the term financial intermediary in order to make the statement correct. This is the source of the pervasive error that characterizes the Keynesian economics, the Gurley-Shaw thesis, etc.
To make sense(?) of Keynes' GT you have to substitute another word or concept for every other word, and only then does the devious and evil brilliance of what he wrote become apparent.
He gave the gov't a blank check to spend money, create credit, and build deficits. He was a tool of the elite, and will one day take his place amongst Mao, Stalin, Hitler and FDR.
1980-ish marked the beginning of the sell out of the real American economy...
"beginning in 1980 the shift of the economic makeup from a manufacturing and production based economy to a service and finance economy, where there is a low economic multiplier effect"
The "service and finance economy" terminology was the code phrase for off shoring the entire production infrastructure of America.
Since American corporations wanted to gain maximum profit from the goods they escaped America, planted their factories in Korea, Taiwan, Mexico, and eventually China and exported their products back to America.
The phrase "service and finance economy" was used to assuage the fear and loathing of American's that their country's wealth was being exported and that they would be left far more poor...
...welcome to today, courtousy of your Corporate Citizens, where their high rise office towers dominate over the vast wastelands of a formerly and once great nation...
They make 100-500 x the lowest workers' wages for attending meetings and selling out their nation.
It seems to have worked for them.
Correct. The breakdown came as the nexus of Wall Street and Main street became one of immorality. In the 1980's, greed was determined to be good. It isn't. Profit is good, not greed. In the 80's America left the tracks in terms of any long term thinking, any sense of loyalty to anything but self. Instant gratification in America was born in the 80's.
CEOs who acted in accordance with greed, they were rewarded. Main street was punished. In mid 80's, the debauching of the US dollar commenced...for real.
All of the wrong things ramped up at this time, and ever since...and have never looked back despite the obvious wreckage in the wake.
And all of the same criminal syndicate Wall Street bankers that lie to us daily about the value of their goods and services...they are the children of this time.
Sigh, nationalism is a horrible lens...
Check out nearly every chart and you'll see that the downward trend started around 1971, the same time that the US went off the gold standard, the same time its oil production peaked. This is the point of deflection. But, even this time-frame is irrelevant given that we couldn't truly expect anything different from a system based on perpetual growth that is operating in an environment that's limited- DUH!
1980-ish marked the end of the Industrial Age in America. It won't come back unless we lower US wages and living standards to globally competitive levels so lets hope it NEVER comes back.
We are thirty years (a whole generation plus) into the transition to whatever comes next.
We have squandered that 30 years trying to buy back the "good old days" with borrowed fiat money that does not represent real useful goods and services. It does not even meet the basic definition of money. It isn't money. It won't buy back the "good old days on the assembly line" or anything else. Fugeddaboudit. The world has moved on.
What comes next? Maybe Alvin Toffler is right when he says it will be an Information Age where Knowledge is wealth. Maybe not. I certainly don't know. All I know is that every day we waste trying to hang onto the past is a day wasted.
We are approaching System Failure. Every module is unstable. It is time to do a major backup, shut the system down, do a low-level format and rebuild with a new operating system, hardware and software. We can do the system shutdown in a planned, orderly manner and salvage old data. Or we can crash and lose everything.
I am a cynical bastard about human nature. I think we would rather crash than change. The net result will be that we will crash AND change. Bring it on - We will build new and better on the rubble! (Hiroshima and Nagasaki look pretty prosperous today)
Cordially,
TwoHoot
"Since American corporations wanted to gain maximum profit from the goods they escaped America, planted their factories in Korea, Taiwan, Mexico, and eventually China and exported their products back to America."
True, but there were other factors contributing to this. Primarily, the awful pollution that factories caused to urban areas. The terrible smog effect over high-population areas as a result of the industrial revolution had to be contended with. So, yes, they wanted higher profits, but also they were being forced to clean up their act, so there was an impetus.
HOWEVER, the greatest impetus to improve profits(and therefore start a slow and steady shift to production overseas) was the rebirth of the two powerhouses of industry that the US rebuilt--Germany and Japan. Always missing from these fond reflections of the years 1950-1970 is the fact that the US had the only un-bombed industrial facilities in the world for quite some time. The US was an economic powerhouse because THERE WAS NO OTHER INDUSTRIALIZED NATION AFTER WWII. Once the developed world caught back up with US production there was competition again, and this competition was dealt with a number of different ways, eventually leading to the infamous abandonment of the Breton Woods agreements.
One otyher critical point needs to made here, however, where geopolitical cause and effect are concerned. Note that US corporations had no problem setting up in Latin America and manipulating peple and resources for the better part of two centuries. One cause for NAFTA and other economically expansionist initiatives was the fall of the Soviet Union. There was no longer a threat(real or imagined) to corporate factories in Asia. With the Soviet threat gone industrialization of these areas ramped up, on their own accounts but also with US participation. To the victor go the spoils?
In any case, I find it troubling that so many people distort their own understanding of US and world history by looking at the prosperous 1950's and 60's as the RULE as opposed to the EXCEPTION that it clearly was.
Obama TRAPPED in Keynesian Twilight Zone
http://youtu.be/XLJTYWKALzE
THE SUPERCOMMITTEE WILL SAVE US ALL
Keep wages low - but credit easy. Keep education and healthcare expensive but processed food and gas cheap. Bailout the banks regardless to how reckless they are but throw consumers to the debt collectors and bankruptcy courts. Cut taxes for the uber rich but keep them high for small business owners.
America is broken.
"The decline in economic output was further exacerbated by increased productivity through technological advances, which while advancing our society, plagued the economy with steadily decreasing wages."
With increased productivity through technological advances, wages go up becuase the worker becomes more productive using the technology.
Wages went down because we no longer have productive jobs and wages did not keep up with inflation.
The main problem with the paragraph you highlight, is the conflation of (at least) three things:
(1) deliberate mismeasurement of GDP (overstatement of output due to hedonics, chain-indexing and substitution effects in the CPI which understate the GDP deflator and thus overstate 'real' GDP);
(2) the stupidity of using output per worker-hour as a measure of productivity (rather than something more sensible such as the Solow residual - preferably estimated using a CES or CRESH production function rather than Cobb-Douglas);
(3) the notion that while some sectors have become more productive due to actual capital deepening (increases in the K/L ratio) and improvements in technology), there has also been a shift in the distribution of employment away from capital-intensive (and technologically-advancing) sectors and towards low-capital, domestically-oriented sectors (especially the domestic services sector ex FIRE). So while the average output per worker might rise in concert with 'productivity', the distributional effects mean that the median FALLS (as does the mode).
It is a trivial exercise to construct a model in which those three effects lead to precisely the 'stylised facts' observed in US (and other Western) data - while retaining marginal-productivity factor pricing.
Nobody in their right mind ought to disagree with debt as a matter of 'principle' - if a project merits undertaking, then using leverage to launch it is not a bad thing in and of itself, but when GOVERNMENT gets to issue debt, projects that have negative IRR get funded because some 'wide stance' geriatric closeted-gay career parasite needs a bridge to nowhere in order to get votes... (or some Napoleon-complex shortass needs to show all the big kids who picked in him that he can blow up half the Levant).
Technology does not decrease wages or cause wide-scale unemployment - that stupidity was dealt with ten decades ago (buggy-whip manufacturers being the archetypal example of 'sectoral unemployment due to technical change'); likewise, voluntarily-assumed debt which is taken on in order to fund projects on which due diligence has been performed - that's as a good a thing as can be.
But when some bunch of fuckwits starts taking on massive debt withOUT due diligence, for the largest and most heavily-leveraged purchase of their lives (housing) or in order to buy home electronics? Not so much.
And how did those people - who would not have got a loan in the privatte sector - get to take on all that debt, apparently without thinking (and with huge lies about their assets, income, and ability to service the debt)? Because a government program (and at least two agencies) existed to force lenders to extend down the risk spectrum.
And of course no tirade would be complete without mentioning the US government's obsession with periodically setting part of the world alight - the actual reason why 'they' (the brown people of the world) hate you ('you' being the US government, not US citizens: we fuzzy-wuzzies are not as incompetent as we're made out by your news cartoons).
GeoffreyT, with this one post you have rocketed to the top as far as my favorite posters on ZH! Awesome, informative, dense post. If people like Seer understood what you wrote, this entire discussion would become academic and unnecessary. +1Quadrillion (or the deficit in 2015 if we stay on this path)
Blame Edward Bernays as much as anything else.
He taught us to buy what we wanted after we bought what we needed, and to keep on buying.
The father of the debt slave economic model.
Wife and I have no debt and are stacking silver.
Screw you EB..!!
The Euro will save us, it's freegold.
Although I'm uncertain of FOFOA's loyalties, my extensive examination of "freegold" has left a sour taste in my mouth- and I REALLY wanted it to work. Too bad the regulatory and financial elite will never allow it. It's a smokescreen designed to give hope to those who still cling to the belief that any gov't created and controlled currency can ever replace free market currency.
Repeal legal tender. Let people pay with fractional shares of GOOG, or a pig, or a rental house, or (maybe, just maybe) real gold or silver or copper or lead. Let each merchant and buyer negotiate (and trust me, frictionless, instant transactions that are converted at POS into whatever holding currency the merchant or seller wishes to hold it in would become a big business) and the euro, dollar, yen etc. become redundant and extraneous, except for the payment of the vig to the local mafia...I mean taxes to gov't.
Freegold operates under the same delusion as MMM
Slavery -> Indentured Servitude -> Easy Credit
The central banking system, founded by the house of rothschild, is kicking ass, they are slowly but surely taking over america through the lending of money to the us government, and being repayed with assets. They pay no tax, and are quadrillionares. They are simply assetizing their otherwise worthless paper, the value of which is protected by the US Military. They are getting control of food, air, and water. The population is dumbed down via fast food , basic education and Haarps. If anyone complains, either jail them or throw more welfare scraps to shut down any populist anti-establishment movement.
QUESTION:
What do the talking heads mean when they say "It is time to recapitalize the banks"?
Honestly. Does this mean that capital is taken from some folks and given to the banks?
from everyone if it is printing money to do it as it dilutes the value.. and also adds the tab to future generations as we all pay interest on the money us Americans aren't allowed to create
Well... you know when you reach in the fridge and there's not enough milk to put on your cereal? Well, you go to the supermarket and get some MORE milk- presto! You've "recapitalized!" See, we're just allowing the banks to go to the supermarket and get MORE so that they can then, well...
They're just trying to make their numbers look better so that they don't get shut down prematurely. Only the well-connected will be allowed to be left standing, and all of this shuffling around of the deck chairs just allows them the time to get their books prettied up for the final dance/dunking. Yeah, as usual, NO ONE has thought things out, thought about what happens after the books "look better." Total denial that they'll still be a horse in the glue factory. Suppose that they figure "god" will step up to the plate and save their asses: "god" told Bush II that it was OK to go to war; Blankfein is doing "god's work."
...prophetic strong delusion ...Bitchez. http://www.biblegateway.com/passage/?search=2+Thessalonians+2%3A8-14&version=KJV
Johnny Bond (lol) ...and the sale of broken hearts (lol) There is an auction in the tune too, lol. http://www.youtube.com/watch?v=PZM-VQTrU0s
I guess that's it for manned space exploration! We're not about to colonize the galaxy any time soon.
Those are all symptoms, the real issue was the end of cheap energy.
The next 30 will be much worse than the last 30 - because now we have IOeRs (thanks in part to Milton Friedman), & nobody understands them.
IOeRs are contractive; & cause dis-intermediation (an outflow of funds from the non-banks, i.e., the financial intermediaries). IOeRs stop (or retard), the flow of savings into real-investment. IOeRs induce debt deflation.
Ok, I don't buy the bullshit business cycle theory that is behind this article. Nor do I buy into Keynes. What I DO know is that Economists don't know shit.
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