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Guest Post: How Long Before Massive Government Debt Buildup Triggers Another Financial Shock?

Tyler Durden's picture


From Madeline Schnapp, Director of Macroeconomic Research at TrimTabs

Stimulus Tactic of Increasing Government Debt to Increase GDP Broken and Unsustainable. How Long before Massive Government Debt Buildup Triggers Another Financial Shock?

Sometimes a picture is worth a thousand words.  A recent post on the popular ZeroHedge financial blog compared the annualized growth in federal debt to the annualized growth in GDP in Q1 2012.  ZeroHedge reported that while U.S. government debt rose by $359.1 billion in Q1 2012, the U.S. GDP grew only $142.4 billion.  Durden noted that, “It now takes $2.52 in new federal debt to buy $1 worth of economic growth.”

The surprising observation prompted us to examine the relationship between growth in debt and growth in GDP from 1975 through 2012.  What we found is both astonishing and frightening.

In Q1 2012, GDP rose $142 billion, while debt rose $359 billion.  In other words, it took nearly $2.50 in debt to generate $1.00 in GDP.  We wanted to understand how this relationship compared to those that prevailed in previous decades.  The graph below shows our findings.

Source: Bureau of Economic Analysis – and Treasury Department –
Note:  The negative value in 2008 was due to negative GDP growth.

From 1975 to 1980, each $1 increase in GDP was accompanied by an increase in debt of between 20 and 47 cents.  In other words, the increase in GDP was two to five times the increase in debt.

From 1981 to 2007, the amount of debt required to produce $1 of GDP growth crept higher, and it ranged from a low of 3 cents in 2000 to a high of $2.25 in 1991.  In only eight of those years did it take more than $1 of debt to produce $1 of GDP growth—1982, 1986, 1990 to 1993, 2002, and 2003.  On average, it took 79 cents of debt to produce $1 of GDP growth.  In other words, the increase in GDP was nearly 1.3 times the increase in debt.

Along came the Great Recession.  Since 2009, the traditional relationship between debt and GDP growth has been turned upside down.  Each $1 increase in GDP has been accompanied by, on average, a $2.50 increase in debt.  Before the recession, an increase in debt generally generated a greater increase in GDP, but now it takes an enormous increase in debt to eke out a small increase in GDP.  At some point, the amount of debt required to generate even modest GDP growth will suffocate the economy and trigger another financial shock.


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Fri, 05/11/2012 - 17:55 | 2418812 skepticCarl
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You're fricking kidding me:  the answer is "At some point.."  ? 

Fri, 05/11/2012 - 18:00 | 2418822 CrazyCooter
CrazyCooter's picture

I think this was a trend observation, not so much a prediction.

Besides, Eisenhower was the last president to actually shrink federal spending, so it shouldn't be a surprise to anyone. Paul, if he gets a chance to cut $1T in his first year, would break that trend ... otherwise its ... brick wall, here we come!



Fri, 05/11/2012 - 18:09 | 2418848 ThatGuyEhler
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It's a prediction of the continuation of a trend. A very easy one at that, since the ratio of debt/GDP of the US is not going down anytime soon.

Fri, 05/11/2012 - 18:34 | 2418894 The Alarmist
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We already crossed the event horizon, so " at some point" is already passed. We just don't know it, because as we get sucked into the black hole, time appears to slow down.

Fri, 05/11/2012 - 21:57 | 2419164 forexskin
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did somebody let Denninger loose in here?

Fri, 05/11/2012 - 22:37 | 2419277 The Big Ching-aso
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Until China gives us the big fat finger of fate.

Fri, 05/11/2012 - 23:08 | 2419304 economics9698
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Here let me write that money pit equation ... Y = C + I + (0.40) G + NX.

I like this one better...Y = C + I - G + NX

Fri, 05/11/2012 - 23:28 | 2419337 economics9698
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What you are looking at is the responsiveness to "crowding out" of the private sector by the federal government.  Here are the percentages of the GDP the feds consumes starting in 1975.

21.3 21.4 20.9 20.7 20.7 20.1 21.7

Now 1981 to 1990.

22.2 23.1 23.5 22.2 22.8 22.5 21.6 21.3



Notice how the effectiveness of debt decreases when Reagan ran a record, for then, deficit in 1982-83.

Now 1991 to 2001


22.3 22.1 21.4 21.0 20.6 20.2 19.5 19.1 18.5 18.2 18.2

When the fed spending gets around 18% of the GDP the more diminished borrowing becomes much more effective.

Now 2002 to 2007.


19.1 19.7 19.6 19.9 20.1 19.7

And finally 2008 to 2012 (est).

20.8 25.2 24.1 24.1 24.3

The correlation is strong, the more the government spends the less effective debt and stimulus spending is measures as a percentage of GDP.


Lesson of the story, if the federal government restricted spending to 15% of the GDP, had a "rainy day" fund for when there was a recession, they could actually be a productive member of society.  As it is the federal government creates poor economic performance with its overspending.

Here's a link, table 1-3.

Sat, 05/12/2012 - 05:30 | 2419585 jeff montanye
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"From 1981 to 2007, the amount of debt required to produce $1 of GDP growth crept higher, and it ranged from a low of 3 cents in 2000 to a high of $2.25 in 1991."

this sounds misleading when the graph shows a fifty cent decline "per" $ of gdp growth in 2009.  the implied causality, imo, is more tenuous.

Sun, 05/13/2012 - 19:27 | 2422281 JeffB
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Even if you took out 2009 the trend is still very obvious.

But I'm not sure why it should be taken out. They were cranking out money hand over fist and our GDP shrunk significantly anyway.

Our total debt went up $1,785,603,936,384.06 (per the Treasury) in fiscal year 2009 (10-1-08 to 9-30-09).

Shouldn't we be able to expect some bang for ou buck, or Trillions of bucks as the case may be? Why should they get a mulligan just because GDP went south despite the massive government spending?

If anything, that would seem to bolster the argument to me.

Sure the argument would be "a little more tenous" without the most glaring example, though I think it still stands even without that "anomaly", but that seems to be special pleading, much as former Washington D. C. Mayor Marion Barry claiming the D.C. crime rate wasn't so bad if you didn't count all the murders.



Sat, 05/12/2012 - 09:43 | 2419667 flacon
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Very interesting. I just wanted to address one point though: "they could actually be a productive member of society. ". Gov can never be a productive member of society because that would require them to actually produce something (instead of consuming first via taxation). :)

Sat, 05/12/2012 - 09:56 | 2419673 LawsofPhysics
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LOL!!!  Yeah the military is pretty useless along with all that technology that gets developed from government R&D.  What a moron.  Let me guess, all those "financial products" created in the private sector have "real value".

Wake the fuck up idiot, what we have now are useless people in the private sector stealing wealth by controlling your government.   One party, for the banks and financial sector, by the banks and financial sector.  You represent the perfect useful idiot.

Fine with me, crash the system, crash it all and let's have a total free-for-all.  At least then we will find out the real value of everyone's labor.  Fucking bring it.

Sat, 05/12/2012 - 09:59 | 2419675 spinone
spinone's picture

Roads, ports, defense, and a legal system are not productive? Try having an economy without them.

Sat, 05/12/2012 - 10:11 | 2419688 Calmyourself
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Exactly not one of them "produce" a damn thing.  Their existence allows productive people and enterprises to utilize them to be productive by themselves they produce nothing, a vitally important distinction.  Infrastucture is built through taxation which is money taken from the productive to increase private productivity.  I have a better question try having an economy without productive private enterprise, you can print money and build mega ports, roads and defense and if the private sector does not produce you got bupkus.. Modern liberals cannot think..

Sat, 05/12/2012 - 14:24 | 2420035 LawsofPhysics
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Private enterprise is very tight with their capital moron.

FYI, your taxes pay for police, firefighters, the military, technology R &  D (this investment produces  the next generation of drugs, cars, planes, computers, etc.)

You really think that all the innovation that got us here came from private companies?  You are a moron, get the fuck out of your parents basement and educate yourself.  Private companies will not risk their wealth on developing certain innovations due to the cost and extended time it will take.  There isn't a single technological device or drug that has come to the market without government funding.  Just crash the whole damn system, go ahead, I dare you.  Then you will see precisely how fucking tight private capital is (and other countries will continue to leap ahead, making your employment opportunities weaker).  Again, this is completely fine with me, at least then we get to find out what everyone's labor is really worth and compensation (in numerous forms) will find its way back to people who are actually worth a shit.

Sat, 05/12/2012 - 15:16 | 2420128 Calmyourself
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R&D wasn't the question lib..  It was ports, roads, courts and defense but of course that particular set of points kicked your lib ass so you of course like a good Statist changed the subject.

"There isn't a single technological device or drug that has come to the market without government funding."

In this case lets throw out 90% of the technology in existance and you can move back to to the Soviet Union which is a massive success as a result of complete Government control and spending..  One day soon there will be a reckoning you had better hope this economy never actually crashes because guys like you who believe the Government is a source of anything without private individuals whom it depends on to rob and redistribute are fucked..

Sun, 05/13/2012 - 10:42 | 2421041 The Alarmist
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Wonder why I am reminded  of the "What have the Romans ever done for us" scene in The Life of Brian.

Fri, 05/11/2012 - 22:41 | 2419274 Max Fischer
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It now takes $2.52 in new federal debt to buy $1 worth of economic growth....

This article erroneously presupposes that every dollar of debt is intended to increase GDP.  Where did that notion come from?  When GDP contracts, would you argue that all government spending leads to an immediate contraction of GDP?  What about spending on the Afghan war?  Is that intended to increase GDP or fight terrorism?  There are so many variables which influence government spending that it's nonsensical to draw any conclusions from overlaying GDP charts over government debt.

Tax revenues are up since 2008, right? Government spending is, too.  If I overlayed a chart of government spending and tax revenues, could I claim that increases in government spending increase tax revenues?

Correlation does not equal causation.


Fri, 05/11/2012 - 23:54 | 2419381 WatchingIgnorance
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Jamie Dimon said MF couldn't have his money back.

Poof. It's gone.

Move along sir. This line is for people who have money in this bank.

Sat, 05/12/2012 - 10:13 | 2419689 Calmyourself
Calmyourself's picture

"This article erroneously presupposes that every dollar of debt is intended to increase GDP"

Your right Max a large portion of it is used to get worthless politicians re-elected..

Sat, 05/12/2012 - 13:08 | 2419892 malikai
malikai's picture

Is the liquidity trap actually nonsensical? I recall that Keynes spent considerable time on the subject. There must be something to it.

Sat, 05/12/2012 - 08:42 | 2419631 RiverRoad
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Also known as a slowly simmering pot of Sheeple-Frog soup.

Fri, 05/11/2012 - 18:38 | 2418900 Jack Napier
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Did someone say Event Horizon?

Fri, 05/11/2012 - 18:53 | 2418925 Charles Wilson
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"Ron Paul is right about everything though. He's just not the savior."


That's one of the points.  The Statists would criticize Ireland for its LOW 15% CORPORATE TAX RATE.  Not one German/Belgian Bureaucrat ever argued that maybe the EU should lower ALL CTRs to this 15% (or lower...) level.  Thus, the purpose of all their braying was for the purpose of skimming more and lowering the Collective IQ of the European Slave Zone.




Paul Paul is not the savior. ODrumbo is not the savior.  Mitty boy is not the savior.  THEY AREN'T SUPPOSED TO BE.  Someone should be screaming about the return of markets,  free exchange and all of it.  To argue that we need a "Savior", especially to the Leftists out there in La-La Land, is to play right into their hands.

At every opportunity, we should be asking each and every Big Smile Politician, "What are you doing to cut spending and promote Free Markets?"  'N not necessarily in that order.



Fri, 05/11/2012 - 19:04 | 2418945 Charles Wilson
Charles Wilson's picture

Left out the important quote:

When Nero had ordered Vespasian (and soon after that, Titus) to road grade Judaea, murdering millions, he ran slightly afoul of know...those pesky Roman subjects.  Just before he died, he was reported to have said,


"What a poet the world is losing."


This is the bubbly nonsense we put up with.  With a world in flames, Nero, who married...well, look it up...was contributing to the end of the Julio-Claudian line and rise of the Flavians within a year or two.  The Machine continued while the rulers changed with the wind.  Not even a Civil War would stop the carnage.


We don't need a savior.  We got enough of those.



Fri, 05/11/2012 - 19:05 | 2418948 The Alarmist
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Krugman says Diocletian was an effective emperor who turned things around for Rome ... why don't we just dig him up and run him for President?

Fri, 05/11/2012 - 19:47 | 2418997 Dixie Rect
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Sat, 05/12/2012 - 02:57 | 2419515 f16hoser
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Ball Room Blitz!

Sat, 05/12/2012 - 04:08 | 2419560 matt_chart
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Why The Dow Jones Will Reach 11700 Sooner Than Expected

Fri, 05/11/2012 - 18:32 | 2418891 OldPhart
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CrazyCooter:  There is a solution available


Fri, 05/11/2012 - 18:33 | 2418893 F. Bastiat
F. Bastiat's picture

Dr. Paul's all talk; he's actually accomplished next to nothing - despite having 30-some odd years to at least do something.  Although his message rings true, the problem appears to be with the messenger.

Fri, 05/11/2012 - 18:41 | 2418905 Peter Pan
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The problem is not with the messenger but with the listener.

Fri, 05/11/2012 - 18:49 | 2418906 Jack Napier
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Paul is a masonic controlled Jesuit pawn along with Alex Jones and the John Birch Society. He plays the role of vampire killer well, but he is still being directed by a shadowy puppetmaster. All the players have danced with the devil in the pale moonlight if they wanted to live.

People think they are awake but they just woke up from a dream within a dream. There are more veils to peel back. Does anyone honestly believe the elite would let anyone rise to power against them if it wasn't part of the plan? The entire resistance is part of the plan, including Occupy, whether they know it or not.

Fri, 05/11/2012 - 19:04 | 2418946 citizen2084
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your point is...we should all just go die?

Fri, 05/11/2012 - 21:45 | 2419154 KennyW
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People will have a choice. 1. Join the new world order and ultimately accept the mark of the beast  or 2. Believe in Jesus Christ. 

Fri, 05/11/2012 - 21:56 | 2419166 disabledvet
disabledvet's picture

I'm a follower of Smiley myself...

Sun, 05/13/2012 - 12:47 | 2421337 Dexter Morgan
Dexter Morgan's picture

Personally, I worship the Mighty Hawk, like Borat.

Fri, 05/11/2012 - 19:20 | 2418973 blunderdog
blunderdog's picture

Fuck that, Ron Paul's the real deal.  He's a talented politician, that's all, so he's been able to remain 100% true to his own totally simplistic world-view for 30 years.

He's honest, relatively intelligent, correct on most points, and ultimately just as incapable of "solving everything" as all the rest.  It's disappointing truth well communicated by H.L. Mencken's observation that each and every one of us are pretty sure we've got the one big answer.

Fri, 05/11/2012 - 19:56 | 2419005 fuu
fuu's picture

Everyone wants to hit that Silver Bullet Grand Slam.

Fri, 05/11/2012 - 21:58 | 2419169 disabledvet
disabledvet's picture

Hahahaha. "Honest politician." That's a good one. Still..."he's consistent" which IS saying something!

Sat, 05/12/2012 - 09:49 | 2419669 oldschool
oldschool's picture

Just curious -- what examples of his dishonesty are you thinking of?

Fri, 05/11/2012 - 19:31 | 2418980 Victorio
Victorio's picture

Perhaps, but they obviously would rather have obamney than Paul. I don't see how it could be otherwise. Why not at least try not to give them exactly what they want and hope for the best? Personally I do not engage in what is the illusion of choice of a country's president or its supposed effect on the course of this country. I've got other things I'd rather do than participate in mass mental masturbation. If someone started talking about sending bankers, warmongers and politicians to gitmo I might start to listen. Best of luck to Paul though...

Fri, 05/11/2012 - 22:50 | 2419290 Clinteastwood
Clinteastwood's picture

Utterly right.  Romney and his supporters (Goldman Sachs) don't really care whether or not they win the election.  They just want Romney CONFIRMED.  Obama and his supporters (Goldman Sachs) really don't care whether or not they win the election.  That's why President zero came out for gay marriage, despite the US population being against it 60-40%.  Obama just wants Goldman Sachs to notice he's still in the tank.

This election was about Ron Paul vs. Goldman Sachs.  The American people had the opportunity to digest Paul's message and they didn't listen well.  They have lost the wisdom needed because they've forgotten to pray to God, the source of wisdom in this universe,.......for wisdom.

A lotta people have gotten the message, though.  It'll be interesting to see if the Ron Paul Revolution (synonymous with the Tea Party) has a deciding influence on the Obamney administration, or whether we just get gridlock (and bankruptcy).

Sat, 05/12/2012 - 01:58 | 2419487 Harbanger
Harbanger's picture

Ron Paul has been around for long time but the larger Populist movement that finally woke up and "discovered" him only started in 2009.  I would say they had a very deciding influence in the last election cycle.   Congress in theory holds the purse strings so maybe a little gridlock isn't so bad when you're careening off a debt cliff.   

Fri, 05/11/2012 - 20:14 | 2419023 spinone
spinone's picture

I think you overestimate the "elite"

Fri, 05/11/2012 - 23:06 | 2419303 zorbathefreak
zorbathefreak's picture

Smoke another one, brah!

Fri, 05/11/2012 - 23:56 | 2419384 WatchingIgnorance
WatchingIgnorance's picture

Way ahead of ya . . .

Fri, 05/11/2012 - 18:48 | 2418916 CrazyCooter
CrazyCooter's picture

LOL. Well, if I had to choose between "endorsing what congress has done for the last 20 years" and "oppose what congress has done for the last 20 years", I would have to side with Paul on that one at the expense of not having a lot of merit badges so I could be an Eagle Scout like all the other cool kids.

Right now, the best thing Congress can do is to STOP LEGISLATING.

Sometimes I wonder what would happen if we just rolled back the legislative clock 10 or 15 or 20 years. Not just repeal a few things, but every single thing passed. All Congress does is screw things up more ... so, lets do a little time warp and un-screw up things.

I think this is probably the big thing I learned reading Tainter. We have reached "maturity" in a lot of spaces, but keep on legislating, making things worse instead of better. Old fashioned common law didn't need a lot of improvement, yet look at how much shit is on the books now. If we can't figure out how to prune this beast back in short order, it will take us all down with it.



Fri, 05/11/2012 - 20:01 | 2419012 blunderdog
blunderdog's picture

The bottleneck is in enforcement.  Live well and when the law comes along, make it earn its due. 

They're bringing charges, right?  Just another bill.

Fri, 05/11/2012 - 21:57 | 2419167 wisefool
wisefool's picture

Deadhorse: The tax code is what brings down every empire. Not monetary policy. Congress needs to implement a flat tax and just make honest women out of their K-Street whores. Take 'em back to their districts/momma.

Speaking of dead things, The STL fed is advocating the end of keynsianism . "Death of a Theory." 

Ron Paul helped. Krugman is probably breathing into a paper bag. Again,the tax code created by congress is the number one problem, the fed is secondary in blame.

Fri, 05/11/2012 - 22:32 | 2419266 Jani
Jani's picture

Right now, the best thing Congress can do is to STOP LEGISLATING.

Sometimes I wonder what would happen if we just rolled back the legislative clock 10 or 15 or 20 years. Not just repeal a few things, but every single thing passed. All Congress does is screw things up more ... so, lets do a little time warp and un-screw up things.


I though you would have a hundred green votes on this CC.

Congress doesn't have to throw money at every problem -- just make thing easy for businesses to start, grow and expand.

Expand repealing laws and regulations to the state and local level also. It all boils down to more personal responsability and eliminating the nanny state. We don't need guys like Little Mikey Bloomby telling everybody what they can eat and not eat.

Sat, 05/12/2012 - 14:29 | 2420050 LawsofPhysics
LawsofPhysics's picture

I am all for no regulation so long as you have 100% transparency.  Good luck with that.  How about prosecuting the fucking fraud for a change idiot?  What about restoring the fucking rule of law?  Gee, you fucking think that might be a good idea?  Now wonder this country is in trouble, it is full of morons.  In order to have "personal reasponsibiity" there have to be fucking consequences.

It will come soon enough.  There will be a period of no laws, no regulation, and outright free-for-all.  Fine, fucking bring it.  At least in a well-armed society everyone will be considerably more polite and justice (right or wrong) will be carried out in the fucking streets.  Fucking bring it.

Sat, 05/12/2012 - 10:57 | 2419724 acetinker
acetinker's picture

I'll drink to that!  In fact, why not roll all the way back to the Constitution + Bill of Rights and start over from there?

Fri, 05/11/2012 - 19:01 | 2418939 citizen2084
citizen2084's picture

next to nothing? Okay.

I am sure that the Fed reserve would still be front and center if RP had never went to congress.

I am sure that seizing the GOP establishment by the short hairs in 11 state now, is nothing.

I am sure you'd had "Bastiat" screen name and Gadsden flags as an avatar before 2008....

yep yep - almost nothing. 


BTW in an intellectual battle (which is what the liberty vs statist battle is in middle America)...talking is important.... 


Fri, 05/11/2012 - 22:25 | 2419234 A Nanny Moose
A Nanny Moose's picture

The guy even had "She-Turned-Me-Into-a" Newt talking about The Fed.

It seems surreal when political oppoents are agreeing with you...and make no mistake, Newt, Sanitarium, and the rest of the cavalcade of GoP also-rans are ideologically opposed to Dr. Paul when it comes to the vote buying conveyor...The Fed.

Sat, 05/12/2012 - 03:01 | 2419517 f16hoser
f16hoser's picture

Dr Paul has done exactly what politicians are suppose to do. Pass laws that make sense and vote Nay on the frivolous ones. He didn't earn his nickname: "Dr No" for nothing. He's one of a very few congressman that actually returned unspent money back to the treasury.....Amazing!



Sat, 05/12/2012 - 03:08 | 2419519 f16hoser
f16hoser's picture

Don't worry though. I'm guessing Obummer (Manchurian Candidate) will cancel this years election by Executive Order. He is the Supreme Ruler of Amerika. There will be another 9/11. NWO commands it!

Fri, 05/11/2012 - 18:13 | 2418855 sunaJ
sunaJ's picture

Can somone add % increase/decrease GDP line to this chart?

Fri, 05/11/2012 - 18:50 | 2418920 JackT
JackT's picture

Looks like we are over leveraged in terms of both time and credit. All we can do is keep our heads down and get our houses in order as best we can.

Fri, 05/11/2012 - 19:40 | 2418993 Dan The Man
Dan The Man's picture

Syllogism of the Day

When Saverin leaves he will ofcourse want to pay as little exit tax as possible.

He would then want to sell at the least portfolio valuation. 

He is therefore about to call a bottom. 


...Rightly or wrongly.


Fri, 05/11/2012 - 21:47 | 2419155 InvalidID
InvalidID's picture


 Someone give this man a fucking cigar! Best first post I've ever seen on ZH.

Sat, 05/12/2012 - 07:38 | 2419615 Element
Element's picture


You're fricking kidding me:  the answer is "At some point.."  ?


... going long popcorn ...

Face it, we've only had the very beginning of the second wave of global recession breaking on us.

It'll take at least three waves of recession to really sink us, so that the third time around, no one will have any doubt that greenshoots are NOT coming back until everyone is considerably older ... and wiser.

This is going to be like war, 95% boredom, 5% shitting-your-pants and trying to survive another day.

Eventually well just drop the bomb on the banks, to spare further casualties.

Sat, 05/12/2012 - 08:54 | 2419637 RiverRoad
RiverRoad's picture

It'll be over when the Fat Lady, Chindia, sings; when there's absolutely nowhere else in the world to go to make a buck.  Then it's over.  This is the Mother of all financial wars for sure, with the central banks dropping the bomb on our collective feet.

Fri, 05/11/2012 - 18:02 | 2418820 lolmao500
lolmao500's picture

IMO those maths don't work because you have to include corporate/state/city/personal debt to be right...

Fri, 05/11/2012 - 18:12 | 2418856 brewing
brewing's picture

hey, Caddyshack is in AMC tonight...

Fri, 05/11/2012 - 18:43 | 2418904 dwdollar
dwdollar's picture

I likes beer.

Fri, 05/11/2012 - 20:00 | 2419009 Yes_Questions
Yes_Questions's picture



Unless MATHS refers to the ever changing sets of numbers used in concocting the stories that are GDP.


Fri, 05/11/2012 - 18:00 | 2418823 Bohm Squad
Bohm Squad's picture

Law of Diminishing Marginal Utility demonstrated by our Government.

Fri, 05/11/2012 - 18:11 | 2418853 Joe The Plumber
Joe The Plumber's picture

Plus the headwind of the zero bound and deleveraging.

A dollar of debt just cant buy the GDP it used to

Fri, 05/11/2012 - 18:01 | 2418825 zerotohero
zerotohero's picture

once again..........ITS FRIDAY FUCK THIS SHIT!!!!

Fri, 05/11/2012 - 18:36 | 2418897 The Alarmist
The Alarmist's picture

FTSF ... Fuck This Shit Friday. I like that!

Fri, 05/11/2012 - 18:07 | 2418842 carbonmutant
carbonmutant's picture

Beware of external events...

Fri, 05/11/2012 - 18:07 | 2418844 Monkeyfister
Monkeyfister's picture

When the (gone Galt) "JOB CREATERS" get off their asses, and actually start, you know, creating some fucking well-paying JOBS, Tax Revenue will start flowing again, and reduce the deficits in line with the myriad Deficit Reduction measures put in place the world over.


The problem is not, "zOMG!!! Look at the massive deficits!!!," no... The problem is, "zOMG!!! Look at the massive UNEMPLOYMENT!!!"


Fri, 05/11/2012 - 18:18 | 2418858 Joe The Plumber
Joe The Plumber's picture

The age old argument of chicken versus egg

I would love to create one or two well paying jobs but i need some well paying profits to justify it.

Fri, 05/11/2012 - 18:28 | 2418878 Monkeyfister
Monkeyfister's picture

Not at all.

Report after report show that the "Job Createrz" are reaping MASSIVE profits, and hording TRILLIONS of Dollars. The "Job Createrrrrrz" claim that that they are put upon, and broke-- BUT, they seem to have deep, deep pockets to blow Millions on art, and hopeless political campaigns.

Some Billionaire douchebag dumped $10 Million into Newt Gingrich's doomed campaign. That $10 Mil could have kept a lot of people employed in proper Middle Class jobs. Tax Revenue would be reducing deficits, and the newly employed would be buying stuff, again.

The "Jaaaaahb Createrrrrz" are glibly laughing their Galtian asses off. They'll continue to do so until noboby can afford to buy their products any more, OR the enraged unemployed show up at their doorsteps with pitchforks and torches.

Incidentally-- this quarter actually marked the first Surplus since the 1990's.

But, or Galtian gLibertarians like to have it both ways-- to mock the poor and unemployed, AND fein shock at the deficits. That is not a sustainable position, nor one to take seriously.

Fri, 05/11/2012 - 18:42 | 2418908 traderjoe
traderjoe's picture

Hey troll...the Rachel Maddow show is that way ==>

Fri, 05/11/2012 - 20:01 | 2419011 Joe The Plumber
Joe The Plumber's picture

Daily kos has found us

Fri, 05/11/2012 - 19:08 | 2418955 Bohm Squad
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re:  $10 million "douchebag"

You should research how much the aforementioned person gave to charity and/or how many jobs he or she directly and/or indirectly created.  When you have that information and can submit a level-headed critique of a contributor's ethos, I'll be all ears.  In the meantime, please realize presenting obviously biased information does nothing for one's only makes them appear uneducated and unimportant.

People hold cash because they are unsure of the investment environment, for example...or are unwilling to loan it at artificially low interest rates; they cannot get the correct risk premium.

Keep asking "why" until you find the root cause.  Complaining about symptoms is meaningless and will only sway the weak minded.

Fri, 05/11/2012 - 19:12 | 2418959 Spacemoose
Spacemoose's picture

"But, or Galtian gLibertarians like to have it both ways-- to mock the poor and unemployed, AND fein shock at the deficits."


i don;t know what you have been smoking, but that is not a true characterization of libertarians. 

Fri, 05/11/2012 - 19:18 | 2418969 gunsnmoney
gunsnmoney's picture

Ummm......the Gingrich campain is broke. That money was "blown" buying ads from the networks who employ people who buy shit from other people......damn that money was part of GDP! WTF?

Looks like you made an argument against the concentration of wealth...... Damn those unintended consequences!!

Fri, 05/11/2012 - 19:32 | 2418982 Spacemoose
Spacemoose's picture

monkeyfister, i have a suggestion for you. sit down with a bowl of popcorn and re-watch the movie one flew over the cuckoos nest. McMurphy is the libertarian and Nurse Ratched is the government. that should clear it up for you.

Sat, 05/12/2012 - 06:26 | 2419592 slowimplosion
slowimplosion's picture

It's clear you need to watch it again.  You really didn't get it at all.

Fri, 05/11/2012 - 20:07 | 2419018 blunderdog
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Those rumored profits may turn out to have been slightly exaggerated.  Losses don't tend to make the video exposé circuit.

For sure, there's been a lot of paychecks cashed based on the profits so far, one way or another.

Fri, 05/11/2012 - 21:57 | 2419165 IndicaTive
IndicaTive's picture

Platitudinous bullshit. You should fucking know better.

Fri, 05/11/2012 - 22:01 | 2419172 disabledvet
disabledvet's picture

and to think "we get killed for merely threatening" as well. we really ARE screwed!

Sat, 05/12/2012 - 20:41 | 2420454 dougngen
dougngen's picture

hey Barack, go sell that at Huffpo

Fri, 05/11/2012 - 18:19 | 2418863 Tijuana Donkey Show
Tijuana Donkey Show's picture

Two words, military spending. 

Fri, 05/11/2012 - 18:54 | 2418927 JackT
JackT's picture

Unfortunately I think you are correct and we all know what happens when we want/need new toys

Fri, 05/11/2012 - 18:21 | 2418866 Spacemoose
Spacemoose's picture

why should i gamble and borrow money to expand my business when the government is just going to confiscate a huge share of my winnings?  and if i lose the government takes a share (albeit smaller) of the earnings i need to generate to pay back the loan proceeds i just wasted.  honestly, government has simply sucked all the incentive out of me ... 

Fri, 05/11/2012 - 18:28 | 2418879 jamezelle
jamezelle's picture

This! This! A thousand times this!!!

Fri, 05/11/2012 - 18:43 | 2418910 The Alarmist
The Alarmist's picture

You forgot the part where they hound your every step with regulations and mandates that eat into your hard-earned profitability ... then they demand a share of what little is left ... and then you use what little-little is left to pay back the loan. And if you decide you don't want to play the game any more, they then tell you you are not doing enough for your fellow citizens as they liberate a chunk of the capital gain you built up in your business as well as a piece of your re-captured depreciation.

Fri, 05/11/2012 - 22:06 | 2419179 disabledvet
disabledvet's picture

you forgot the part where "this cost the taxpayer 180 billion but i get to keep the 100 million payout...EVEN WHILE TESTIFYING BEFORE CONGRESS!" This is EASILY the stupidist people ever elected "to serve the people" in American history. I have a sudden urge to "pull a Greece and see if by not ever paying taxes someone decides to give me 100 billion."

Fri, 05/11/2012 - 20:14 | 2419024 blunderdog
blunderdog's picture

I'm not an expert on the relative variation across government borders,  I live in the USA.  Here in my home country, the way THIS system works is you gamble and borrow money to expand business when the government is just going to confiscate a huge share of the winnings when:

 1) you're some kind of narcissistic psychopath to whom "money" has no real meaning other than insofar as it can provide gratification


 2) you're some kind of zealot who is SO EXCITED with your own product that you really will take all that risk to try to share your work with the world on a massive scale

Fri, 05/11/2012 - 21:39 | 2419140 MayerRothschild
MayerRothschild's picture

You must not be a bank or TBTF

Fri, 05/11/2012 - 18:27 | 2418877 FlyoverCountryS...
FlyoverCountrySchmuck's picture

"When the (gone Galt) "JOB CREATERS" get off their asses"

The Recovery doesn't begin until the day Obama leaves office.

the CEO's of Intel and Emerson Electric tried to tell you what was happening, and why they took the jobs and left America, but no one wanted to listen.

Fri, 05/11/2012 - 18:37 | 2418896 Monkeyfister
Monkeyfister's picture

So, this lot would bitch and scream if the Government launched a Works Program like the Civilian Conservation Corps v2.0. Yep.

That is some really shitty politics, considering how easy this Admin has been with incentives, non-regulatory regulations, and Tax Credits. Wall Street has rebounded just fine.

Also, too-- most Americans fully understand what's going on these days. They see the obstruction, and the Lobbyists in action. The Corporate spin is wearing thin.

Fri, 05/11/2012 - 20:08 | 2419016 Joe The Plumber
Joe The Plumber's picture

We would prefer a more efficient use of capital than government jobs programs. All most of us want is the government to just get out of the way for a while. Do i really need to keep a msds sheet on my whiteout and aur freshener in my office? All these little nitpicky regulations do is take my focus off building my business

Fri, 05/11/2012 - 20:11 | 2419019 Joe The Plumber
Joe The Plumber's picture

The gvernment doing favors for wall street doesnt help the economy. Most of us just want a government that cant do anyone a favor. At least that way we have a chance for equal treatment

Fri, 05/11/2012 - 20:24 | 2419034 spinone
spinone's picture

I want the government to get out of the way of individuals, but regulate corporations, prosecute white collar crime and enforce the rule of law.

Fri, 05/11/2012 - 20:22 | 2419035 spinone
spinone's picture

I want the government to get out of the way of individuals, but regulate corporations, prosecute white collar crime and enforce the rule of law.

Sat, 05/12/2012 - 06:26 | 2419593 slowimplosion
slowimplosion's picture

The "government got out of the way" and the "galts" created an economic nightmare.  No thanks.

Sat, 05/12/2012 - 20:49 | 2420461 dougngen
dougngen's picture

wow! we should thank them!!!!! they confiscate the fruits our labor at point of a proverbial gun and start a jobs program?? ( minus 55% for administrative costs) fraud waste and abuse ect.... Man are we lucky to have such altruistic comrades among us!! let's give them more of our money and hey, we can all be rich!!!!

Fri, 05/11/2012 - 20:25 | 2419037 Maos Dog
Maos Dog's picture


"The Recovery doesn't begin until the day Obama leaves office."

There may be some kind of "relief rally" when Obama is gone, but the rabbit hole goes way deeper than just Obama. 


Fri, 05/11/2012 - 19:17 | 2418966 moonstears
moonstears's picture

wish I could flag this up +100, 'fister...exactly..."it's the fuckin' jobs, DC stupids!" 

Fri, 05/11/2012 - 20:20 | 2419027 spinone
spinone's picture

Look, its not some sinister plan, its just automation making lots of jobs redundant, plus regulations that make offshoring other jobs immensly profitable.  Good jobs for high school graduates are a thing of the past.

You had the misfortune of not being born into the rich caste, and being alive during the biggest credit bust in the history of the world.  If you measure your life in material goods you're going to be miserable for the remainder of your days.

Fri, 05/11/2012 - 23:37 | 2419350 Stunned But Fun
Stunned But Fun's picture

Sorry dude but it isn't about revenue. Obama doesn't give a shit if tax revenue goes up or down. He said if himself. It just about "fairness", those who make more paying more. That is all. Anyway, if someone wants a job, let them MAKE their own freaking job and quit whining about how someone won't GIVE them one. I'm so sick and tired of the lazg blamers!

Sat, 05/12/2012 - 14:02 | 2419990 Poetic injustice
Poetic injustice's picture

So you say that "police for hire". "teacher for hire" and "judge for hire" are your ideals?

Sat, 05/12/2012 - 14:38 | 2420067 lakecity55
lakecity55's picture

Yep. NoBama isn't concerned about anything free-market oriented since his 2nd and permanent term will have Central Planning like all Soviet States.

Sat, 05/12/2012 - 07:52 | 2419616 Element
Element's picture


The problem is not, "zOMG!!! Look at the massive deficits!!!," no... The problem is, "zOMG!!! Look at the massive UNEMPLOYMENT!!!"


When a GDP-bubble occurs, due to a spectacular failure to budget, for several decades (otherwise known as malinvestment) ... then yes, you will tend to get that ... hence the incitement of strategic war ... gives everyone something else to do, and a range of concerns more compelling with which to occupy themselves.

Pity we had such a monster bubble in non-budgeting, that produced far too many unproductive jobs that were too highly renumerated, huh? 

The economic mantra that, "sectoral-balances must balance", kinda misses the forest for the trees.

Fri, 05/11/2012 - 18:07 | 2418845 Mr Lennon Hendrix
Mr Lennon Hendrix's picture


Fri, 05/11/2012 - 20:30 | 2419042 Hulk
Hulk's picture

I detect a sequence: Tuesday...

Sat, 05/12/2012 - 08:54 | 2419638 HurricaneSeason
HurricaneSeason's picture

Wednesday (Dump Day)

Fri, 05/11/2012 - 18:11 | 2418851 ebworthen
ebworthen's picture

Not soon enough?

Fri, 05/11/2012 - 18:18 | 2418859 DavidPierre
DavidPierre's picture




JP Morgan has a monkey wrench in their gears.  They call an emergency press conference last night and admitted to a $2 Billion loss which Jamie Dimon said "could get worse and go on for a little bit unfortunately".

$2 Billion?

This is chicken feed ... less than they make in a quarter.  So what is the big deal?

Unless, maybe it is a big deal?

Maybe it is larger than we are being told? With all of the smoke and mirrors that are used in today's world, a $2 Billion hiccup could surely have been swept under the rug...right?

Unless, it can't?

JP Morgan is the largest participant in the derivatives markets with $89 Trillion worth. This figure by the way is roughly 6 times the size of the annual U.S. GDP and again 6 times the size of the over bloated Treasury debt.  A 1% "screw up" on their book would mean making or being offside $890 Billion, NOW we're talking some real money! Who knows what the trades are that went bad and everyone is speculating that it involves some European bonds, probably so though it doesn't matter.

It doesn't matter because they have just proven that their derivative book is not bullet proof.  Of course everyone already knew this because interest rates DO move and Silver surely DOES NOT grow on trees or in fields like corn.

Shocked that an announcement was even made?

This came as a result of British and American regulator's actions over the last month.  A very simple question, ARE THEY CRAZY?  

What possible good could come out of JP Morgan ... the Fed's personal banker... being forced to admit a loss?

What is the upside to this? Is this a 180 degree about face where all of a sudden they're going to tell us the truth? No... seriously doubt it! There is not enough information to make a real judgement but this certainly opens up all sorts of possibilities up to and including that the plug is in the process of being pulled.

VERY odd indeed that such a miniscule loss by THE cornerstone of finance would be aired publicly.  As the ONLY thing holding the system upright currently is CONfidence, this is surely not something to build CONfidence.

They DO want to build CONfidence...don't they?



Fri, 05/11/2012 - 19:08 | 2418913 The Alarmist
The Alarmist's picture

"$2 Billion?

This is chicken feed ... less than they make in a quarter.  So what is the big deal?"

The big deal is that this is the Q2 bonus pool, so they desperately need a bailout if they are going have any enjoyment at their summer homes in the Hamptons rather than worrying about how they are going to make the nut on the mortgage.

Fri, 05/11/2012 - 19:26 | 2418977 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Ironic.  Oops is how I started my blog's article about the JPM Blowout.

Fri, 05/11/2012 - 19:53 | 2419003 realtick
realtick's picture

Like I commented in a previous thread, That may be true but the fact of the matter is they topped this thing at an occult number (13,330.30) on an occult date (May 1) so the downtrend is for real.

Fri, 05/11/2012 - 20:55 | 2419092 skepticCarl
skepticCarl's picture

Finally, some science on ZH!

Fri, 05/11/2012 - 21:14 | 2419111 blunderdog
blunderdog's picture

realtick, what are you doing?  Don't you remember our last meeting, in Antioch?

Fri, 05/11/2012 - 22:09 | 2419186 disabledvet
disabledvet's picture

the beauty of course is they TELL all of us here "it's an emergency." REALLY? YOU DIDN'T SEE IT COMING? Crimeny...I was telling everyone here for OVER A YEAR not to "touch your junk." DID ANYONE LISTEN? Noooooooooooooooooo.

Sat, 05/12/2012 - 14:36 | 2420063 lakecity55
lakecity55's picture

I think these problems at JP are a warning to me to buy more PMs.

Keep Stackin!

Fri, 05/11/2012 - 18:20 | 2418864 evolutionx
evolutionx's picture

JPM CDS exploding


also all other banks deep red

Fri, 05/11/2012 - 19:30 | 2418979 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

It's a trainwreck, and, surprise, the media is running Dimon's apologia instead of focusing on the ramifications of the blowout of the world's largest bank by derivative exposure.

Fri, 05/11/2012 - 18:23 | 2418869 asteroids
asteroids's picture

You gotta give them credit. They are "kicking the can" as far as it'll go. They gotta know that it's gotta end some day. God help us when it does.

Fri, 05/11/2012 - 19:50 | 2419000 itstippy
itstippy's picture

"As long as the music's playing you've got to get up and dance."

Chuck Prince, Citigroup

Fri, 05/11/2012 - 22:11 | 2419190 Monkeyfister
Monkeyfister's picture


Just like Russian Roulette musical chairs.

Last Casino, errr -- Bank left standing when the music stops at the end of every rally/collapse cycle, gets suicided.

Must be a fun game for the Banksters-- they keep doubling down on the same bad bets.

Fri, 05/11/2012 - 18:25 | 2418875 Rainman
Rainman's picture

I used to think a 250% Japan-like debt/GDP would be the last straw, but we're already there ex-ponzi bookkeeping. Consequently return to sanity will require the big bang. 

Fri, 05/11/2012 - 18:33 | 2418880 SwingForce
SwingForce's picture

Madeline, nice work. The point is, it costs WAY MORE than $1 to produce $1 and how retarded is that to keep trying?

 The Benbernank has a PHD and a nice beard (and he is beholden to his Bankster Bosses This is the only explanation). After I read G. Edward Griffin's CREATURE FROM JEKYLL ISLAND, EDITION 5 my eyes were wide open. I can now see the lies IN REALTIME! That book changed my outlook, more than INSIDE JOB, IT TAKES A PILLAGE, $TRILLION DOLLAR MELTDOWN, all of them. Your work dovetails nicely with what I now know- that the $Dollar increase in Debt goes down a bottomless pit to pay the INTEREST on bad debt (not the bad debt itself, no, they need that to keep earning interest from). As RCWhalen says, "Its All About The FRAUD", yup.


Fri, 05/11/2012 - 18:30 | 2418883 Bill D. Cat
Bill D. Cat's picture

JPM just got whacked again from stable to negative ..... wheeeeeeeeeee......

Fri, 05/11/2012 - 18:31 | 2418889 Snakeeyes
Snakeeyes's picture

Not too long. I have been warning about this for years in Congress. They don't listen.

Think about how the Adminstration's push to have EVERYONE refi their mortgage at 4% will work. Crush pension funds and investors. Load MBS holders with interest rate risk. Will require bank, pension fund bailouts as well as bigger losses for Fannie and Freddie.

These people are insane.

Now Plouffe is giving a Forrest Gump plea for everyone to screw investors without explaining costs or risks.

Fri, 05/11/2012 - 18:33 | 2418892 MrNude
MrNude's picture

''Buy JPMC Stock, it's your patriotic duty! failure to comply will result in detainement in your local FEMA camp as an enemy of the state'' - A Shill

Could they get any more syphophantyic or obvious today in the MSM?  

Fri, 05/11/2012 - 18:38 | 2418901 stiler
stiler's picture

who did they make the bad hedge trade(s) with in loosing 2 bill? who's got the $$?

Fri, 05/11/2012 - 19:37 | 2418991 SwingForce
SwingForce's picture

$2 Billion? They have $70 TRILLION in total exposure. Can you say ICEBURG?

Sat, 05/12/2012 - 10:50 | 2419718 RiverRoad
RiverRoad's picture

Somewhere Soros is laughing.

Fri, 05/11/2012 - 18:43 | 2418909 orangegeek
orangegeek's picture

Weekly SP500 chart shows down.

Fri, 05/11/2012 - 19:00 | 2418938 Vince Clortho
Vince Clortho's picture

I hope the ingrateful taxpayers don't make a big stink out of having  to bend over again.

Any sacrifice to save our gifted Banker Elite is worth the sacrifice.

Fri, 05/11/2012 - 21:01 | 2419102 skepticCarl
skepticCarl's picture

Indeed, I look forward to "sucking it up".

Fri, 05/11/2012 - 19:07 | 2418954 Hohum
Hohum's picture

This article misses the larger point.  It's taken more than $1 of combined private and government debt to produce $1 of GDP for DECADES.

Fri, 05/11/2012 - 19:10 | 2418958 The Alarmist
The Alarmist's picture

... or the fact that this coversation should have happened long before the ratio reached 1:1.

Fri, 05/11/2012 - 19:11 | 2418960 blunderdog
blunderdog's picture

i think it'll be a little while

Fri, 05/11/2012 - 19:24 | 2418975 lolmao500
lolmao500's picture

The latest crap from Krugman the hack...

All of this strongly suggests that we’re suffering not from the teething pains of some kind of structural transition that must gradually run its course but rather from an overall lack of sufficient demand — the kind of lack that could and should be cured quickly with government programs designed to boost spending.

Fri, 05/11/2012 - 20:00 | 2419007 Global Hunter
Global Hunter's picture

feel dirty giving you a thumbs up after reading that...

Fri, 05/11/2012 - 20:53 | 2419091 docj
docj's picture

...the kind of lack that could and should be cured quickly with government programs designed to boost spending.

Crazy, stupid... and evidently living under a fucking rock since mid-late 2008. Ladies and Gentlemen, I give you Paulie Krugnutz!!

Fri, 05/11/2012 - 19:33 | 2418981 Bagbalm
Bagbalm's picture


Fri, 05/11/2012 - 19:51 | 2419002 Yes_Questions
Yes_Questions's picture



WTF happend in 2009? 

Fri, 05/11/2012 - 20:08 | 2419010 Global Hunter
Global Hunter's picture

I distinctly remember there being a "war on terror" in 2009.  There was a "war on drugs" around that time too if I recall...

*EDIT* My smrt arsed comment was directed at you personally, having some fun on a Friday.  No idea what caused that drop off in debt per $1 of gdp in 2009 interested to know myself.

Fri, 05/11/2012 - 20:15 | 2419026 Yes_Questions
Yes_Questions's picture



Must be a glitch in the Matrix.


Or the chart author snorted beverage though the nose reading ZH and its merry band of posters.


Fri, 05/11/2012 - 20:18 | 2419030 Global Hunter
Global Hunter's picture

Have me noodlin this, US GDP growth rate dips to negative for most of 2009 may have something to do with it (skewed the formula).  Don't understand how it went negative though in the chart above.

Fri, 05/11/2012 - 20:35 | 2419044 Yes_Questions
Yes_Questions's picture



Ok, so ~$1.9 trill of increased (official) debt with an entire year of (official) significant contraction.


Results like this do not belong on the resumes of those doing "God's Work".





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