Guest Post: Where’s The Crisis?

Tyler Durden's picture

Submitted by Azizonomics

Where’s The Crisis?

A hilarious BusinessWeek piece from 2005 asked:

Is the U.S. in a savings crisis? We think not, though one may be brewing if attitudes toward the budget deficit don’t change in Washington. The fact is that for the past 20 years, America has grown faster than Europe and Japan, two of the world’s highest savers. Year after year, U.S. deficits are financed, bills are paid, and living standards rise. If anything, America is awash in money. So where’s the crisis?

2008 answered that question pretty well, I think. They asked for a crisis, and they got one. This is the same slack-jawed cocaine-addled bozo thinking that led some very serious analysts to declaim that subprime was “contained” in 2007 (of course, we know now that thanks to the cult of endless syphilitic re-hypothecation nothing can be contained), and the same brand of thinking that leads some very serious economists today to claim that the threat of an alien invasion would trigger an economic recovery.

Here’s the dreamland fantasy:

It could only go up and up, right? This time is different, right?

And here’s the crisis:

I know, I know. Correlation does not imply causation. But that’s a pretty brutal correlation: personal savings fall lower and lower and lo and behold we hit a once-in-a-generation crisis. (Of course, if governments keep repeating the policies that led to that “once in a generation crisis”, it will be soon be a twice-, or thrice-in-a-generation crisis).

So what brought us here? What took us from the savings and investment-driven society of the postwar years to the wild-eyed derivatives, hookers and iPads society enchained to a crushing swathe of debt?

Was it moral decline? The decline of the notion that debt is something to be avoided? Was it the softening and fattening of society, bread and circuses, Superbowls and all-you-can-eat Vegas buffets? The aura of American invincibility having won the cold war? The arrogance of modernity, and the undying myth that “this time is different”?

All factors played their part. However one shines out above and beyond any other: the intellectual fallacy that all GDP is equal, and that GDP growth — even debt-driven growth, even growth based on lies, fallacies and errors — paves the road to the future.

 Simply, the social variables emerged from a period in which the dominant intellectual, governmental and media culture condoned and actively encouraged profligacy.

Easy money policies pushed by Greenspan and the lackeys of irresponsibility discouraged savings in favour of consumption. As it became less (in the short term) expensive to borrow and consum, more people did it. It became socially acceptable. As the debt was securitised, and  pumped off into the shadow banking system for endless re-hypothecation and carry trading, the companies issuing the debt stopped giving a damn about creditworthiness. The easy-money mythology led to house price rises that seemed never-ending and built up the social acceptability of  remortgaging your house, and spending the proceeds on boats, cruises and keeping up with the Joneses.

That is where the BusinessWeek article picked up; to an objective observer versed in history, the United States fiscal and financial situation in 2005 seemed perverse and absurd. But GDP kept growing, and the hopium kept flowing, and so this time it was different until it wasn’t.

The thing about GDP, is that it doesn’t really measure wealth creation, or the size of the economy. It measures a derivative of that: money circulation. If Congress passed a law saying that everyone in America had to smoke meth (hey, if you can mandate the purchase of health insurance, why not mandate drug consumption in the name of increasing GDP?) and gamble all their disposable income on horse racing, GDP would almost certainly improve. And that’s growth, right? Except it isn’t. Real growth comes from innovation, productivity, imagination, and hard work. You can attempt to quantify it, but there is no easy catch-all number that will give you a quick and simple insight.

Here’s industrial production:

In 2005, we were where we were five years previous. That looked problematic at the very least.

Here’s the US trade balance:

In 2005 — after a century of being creditor and importer to the world — America was running the greatest trade deficit in history. America was losing its spirit of self-sufficiency, which in my view was one of the keys behind its earlier successes.

So it was easy to find a brewing crisis without even looking at the crisis of savings, and without even looking at the growing bubbles in subprime, in the DJIA, in securitisation, in student debt, and in McMansions. But only if you knew where to look. Only if you knew that the concept of GDP — the prism through which the political and intellectual hoi polloi viewed the economy — didn’t really represent the underlying reality.

The frightening truth is that those who do not learn from history are doomed to repeat it. And the focus of the intellectual and governmental elite since the crisis has been on reflationism — reflating GDP, housing, stocks, corporate earnings, consumer borrowing — with no regard to the concept that the system being reflated is the problem.

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slewie the pi rat's picture

Real growth comes from innovation, productivity, imagination, and hard work. You can attempt to quantify it, but there is no easy catch-all number that will give you a quick and simple insight.


agree, but if you can't measure it, you can't manage it

LowProfiIe's picture

But then Slewie you are correct, it's kind of like how Rosenberg views things, his assesments are correct based on the metrics he uses, and he uses good and sound metrics but he missed the fact that Ben actually did own a helicopter and had a license to use it, so poor old Dave was calling for the equity markets to stall and slip backwards back in spring of 09 and completely missed the run to 1400. To his credit his calls on gold and  the ten year were on the  money.

Xkwisetly Paneful's picture

So what brought us here? What took us from the savings and investment-driven society of the postwar years to the wild-eyed derivatives, hookers and iPads society enchained to a crushing swathe of debt?

Crushing swath of debt=making money available to just about anyone at historically low rates of interest. Or in simple english, enabling opportunity galore.

The question should why this opportunity was squandered on plasmas, escalades et al

and not education, healthcare, small business or many other things that provide a return.


john39's picture

the educational debt bubble is massive, plenty of "spending" there...  healthcare is bankrupting people across the country, again, plenty of spending there...  and yet, here we are.

sschu's picture

America spends more per capita on education than just about anyone.  The return on our education dollar is pathetic, especially on K-12.


spiral_eyes's picture

Click the link before you downvote, or do I have to write /sarc after every sarcastic thing I say?

Xkwisetly Paneful's picture

and yet here we are every house has three plasmas, two escalades and inhabitants with no unique or valuable skills. As far as whatever being spent on education, it must not have been spent wisely and as far as healthcare-the number of insureds v uninsureds hardly changed and hardly ever does. 

Venture capital 25yrs ago was 1%/month and half the net.

Venture capital through the easy money period was priced at lint.

They made capital available to the masses at historically low rates and yet somehow this was a scheme by the rich to take advantage of the poor.

the best of this piece of course is the obvious:

of course the leading edge is what creates growth

of course speculators are the ones largely feeding the leading edge

of course the wealthy create jobs since they are the speculators.

anything short of double digit red will be disappointing, afterall anything disturbing the woe is me the world is fucking me beyond belief credo is auto red.

john39's picture

nothing about the US healthcare system supports productivity.  it is waste, a cost.   it is not designed to promote health, or even be efficient at managing disease.  just another big corporate fail.

as for defending the banking system, perhaps you can explain why the bankers get to charge people interest for something they are given the right to create from thin air?   our economy can begin to be productive again only after the money changer/parasites are hanging from lightpoles.   which can't be far off now. 

Xkwisetly Paneful's picture

Funny since the US has the highest survival rates for the 12 most common forms of cancer.

Funny since the head of the nationalized Canadian health system came to the US for healthcare.

Funny since the US drug and biotech industries is one of the few things the country actually still does well.

Funny since the leading edge medical equipment industry in the US is one of the few things the country actually still does well.

Funny since the US is amongst world leaders annually in newly adopted medical procedures.

Try again, and this time go with siphoning money from R&D to maintain the status quo which is every nationalized healthcare system leads to a drop off of output from that lesser R&D.


Still don't get it-

Country needs: banking system, military, food and fuel to operate,

it doesn't need 15,000 agencies doling out social benefits. People like you think paying the people stems violence whatever and meanwhile the outcome everytime is violence and whatever.


They made money available to anyone at ludicrous interest levels.

That equates to never seen before and never seen again type of opportunity.

never getting around that. Can spin until your head falls off, that is what happened.

Some of us have been around for a  while know exactly how difficult procuring capital was at times.

and how ludicrous any other idea's as to what took place happen to be. 


hedgeless_horseman's picture



Stay focused everyone.

....and gamble all their disposable income on horse racing...

Now this is an idea that needs more consideration.

Moon Pie's picture

Well said, HH.  BTW, I got a line on the Derby winner....wins for fun...

centerline's picture

Yeah, life is pretty good here at the top.  The food supply is incredible.  Steaks and good wine... tuna flown in from across the world... etc.  Too bad it was all built on unstable ground.  Two steps forward and one step back maybe is our future on a longer timeline - and the next step back is going to suck considering how big the last two steps forward were.  Are you prepared to be homeless?  Hungry?  Unable to provide for your loved ones?

Ever looked at historical population growth charts? If so, wondered if how long that could continue?  And if when the time comes for the process to top and turn that you would  be doing the right thing in the right place to not be part of the "thinning process"?  Or are you banking on the process being slow enough to spare you (maybe not your kids though)?

Party is almost over.  You can tell because the bar is practically giving the drinks away for free.  When it ends though, the hangover is going to be long and painful.

lasvegaspersona's picture


every kid who breaks his arm but heals to become productive, every patient with rheumatoid arthritis who stays on the job and every child cured of leukemia who lives to adulthood proves your statement incorrect. Medicine is productive. There is waste and if you want to count taking care of the elderly who paid into medicare but now are not working as waste...then there is a bunch of it. Overall though saying it is just a cost is wrong.

mrpxsytin's picture

Perhaps he meant that it was a net cost...

Sure you can spend money on healing people but everyone knows that an investment is only as good as its net return. What net return are you getting on treating people who never go back to work?

john39's picture

that, and it is a pathetic system designed to generate profits, not health or even efficiency.  there is a huge difference.   Many effective treatments are basically outlawed because they cannot be used to make money.  big pharma is very corrupt.  owned by the same fascists who own the banks and other large corporations, so, what do you expect really?

Xkwisetly Paneful's picture

Profits create jobs which creates prosperity,

nothing else on the planet does so as efficiently,

and it is debatable whether anything else does at all.

afterall I got some guy telling me daily natural resources don't create prosperity.

It is not big pharma's doing that is costs $1billion to get a drug to market and surely if they owned the fascist government it would not cost $1billion.

No system is perfect and the US system could be significantly improved. 

However you like the WHO health rankings are whacked out of your fucking minds.

So spoiled it is mind boggling.

the poorest idiot lives closer to Bill Gates than ever.
A guy who revolutionized the world, eats at the same restaurants, doctors educated at the same schools, everyone has the same gadgets, teachers all taught by the same people.
class warfare in face of the obvious, where there is no such thing as unttainable luxury anymore where dispersion, inclusion whatever have largely made US life banal.

WTF is it that you want exactly? A large pile of fiat that has been earning 0% interest all the while getting crushed by inflation? 


Calmyourself's picture

Yes you do trust me on this every time you wish to use sarcasm here start and end with "sarc"...  Unless of course like me you don't give one rats ass how many red arrows you get..

smb12321's picture

It's a cultural event - the destruction of education.  I can remember being warned in the 60's and 70's that our system would eventually fail us and it has.  It is perpetuating a class distinction with well-off folks valuing education and others discounting it. As a former tutor I was surprised that many nminority kids "acted up" to prove they were not taking education seriously - it was seen as a negative.  

The fact that businesses cannot hire educated workers in this environment says it all.  It's not really a surprise considering the minimal amount of time spent in school and on study. In the small village in France where my wife lived, the kids not only were in class 30 more days but went 1-2 extra hours.   It was NOT a place for social experimentation, debates on religion, history or politics.  The village had a communist rep but there was absolutely no disagreement over education.

GeorgeHayduke's picture

"The question should why this opportunity was squandered on plasmas, escalades et al...and not education, healthcare, small business or many other things that provide a return."

Because that's the true American Way circa 2008 - 2012. Conspicuous consumption became the mantra when Ronnie Reagan hit the White House and it hasn't slowed since. This is America man, it's about the show, not the go; quantity over quality, perception over reality, etc...

duo's picture

I'm sorry, but divorce lawyer's fees are considered a part of GDP.  There is nothing productive about that.

Then again, we have banks, more banks, WMT, and McDonald's as part of the DJIA so I guess we believe bank fees and hamburger flipping are wealth creation.

nmewn's picture

Two imposters in a row...complimenting each other as it were...and why on this subject?

The boiler room has been activated ;-)

Poor Grogman's picture


Obviously questioning the actual idea of GDP is politically incorrect.


The way I view GDP is as a simple measure of money supply growth, it is simply looking at inflation and calling it economic growth.




Calmyourself's picture

NMEWN, have you also noticed that most of our new posts are dominated by a few idiots speaking just enough sense but never with cites or anything too convincing just enough to have to read it.  They are normally beat back by a regular or two but they dominate the top of the post.  The infowars have begun and the penetration of Alinskyites is astounding.

trying to make sense of it all's picture

Get over it. He makes more sense than the "original".

Vic Vinegar's picture

I hope you aren't talking to me, fuu.  Your paranoia is getting the better of you if that's the case. 

In the meantime think on this:

1. The real slewie is one of the great commenters here. The real slewie is on the short list of people I'd like to see be benevolent dictator of the universe...I'd entrust him and about five other people with that power.  And while slewie will never become that, my fantasy is no different than a lot of comments on this thread...rooted in principle but never going to materialize in the real world.  LOL

2. This is going to be a boring summer.  Obama v Romney is Clinton v Dole all over again: the guy you despise v the guy you can't vote for.  Ain't no chance in hell Romney wins - who the heck is going to vote for the stiff white guy with no charisma, here in "modern America"?  The answer is the same today as it was in 1996's "modern America".  All we need is the angry, principled white guy (calling Ron Paul - can you put those Ross Perot ears on and have some bad shit happen to your daughter to give us the full effect?) to come in third party-style and ensure this happens. LOL again

3. Although, unlike 1997, 2013 will bring us a Department of Homeland Security with 450 million rounds of ammo.  Also, unlike 2013, 1997 brought us hits from Third Eye Blind.  If I get shot up by DHS with said ammo, I so hope it's to the sweet sounds of Stephan Jenkins.  Maybe Third Eye Blind makes a comeback next year?  One can hope.

4. When are you, fuu, going to put up something that matches trav's theme?  That was pure art.  But let's be honest - RobotTrader's theme kinda sucked.  Give us something new to jam to, buddy!

Seriously, dude.  This was perfection

Vic Vinegar's picture


All apologies.  It's much more principled to get riddled with bullets by your own government while a Smashmouth hit from 1997 is playing rather than a Third Eye Blind tune. 

Your red arrow speaks to me.

Calmyourself's picture

Vic, youth and enthusiasm can be added to the ticket.  A better question is who the hell votes for the bamster?  Unions and the hardcore committed apparently, the bigger story is the compelete and total subversion of the voting process.  Widespread cheating on a grand scale is the only way dog eater wins..

fuu's picture

1) I agree slewie is a gem.

2) Summer has been boring since 1985.

3) I am not touching this one.

4) There just haven't been any good trolls lately that have lasted a year, plus I like Robo's theme.

5) Her writing style is reminiscent of yours, my bad.

NewWorldOrange's picture

Not everything needs "managed." The "invisible hand" of millions of individuals working, creating, and trading "manages" an economy just fine in the absence of a bunch of central planners, central bankers, and other assorted crack whores.

rwe2late's picture

The "hand" is only made "invisible" by ignoring all the privileged and privatized protections for "property", lands, waters, and resources. And also by turning a blind eye to patent rights, licenses, liability laws and other protections given property owners.

Monetary profit is a man-made concept. It is a limited concept. Profit does not and cannot measure the worth of every and all things and be the ultimate guide to human conduct. The concept nonetheless underpins the whole notion that the pursuit of micro self interests will result in the best of all possible worlds. And it is that mistaken notion which is often used to justify the worst of all outcomes, and pronounce that the ultimate solution to our miseries is to increase business profits.

Never mind the profits made by ruining forests, rivers, and oceans. Never mind the profits from destroying the fisheries and polluting the air. Never mind financial parasitism. Never mind sweatshops, child labor, and poisoned foods. Micro profit, it seems, does not measure the environmental losses to society, nor the debilitation and destruction of human beings. But yet, it is to be the ultimate arbiter of human conduct. Or so we are told.

Xkwisetly Paneful's picture

Never mind that the human race is thriving largely thanks to these egregious capitalists.

Never mind that a Gates has done more to the benefit of every man, woman and child on the planet than any not for profit could dream about.  Go cry a river about eugenics elsewhere. Somehow that is and crap like the global proliferation of the computer chip is micro profit.

Never mind getting 12 times the yield on an acre of land vs two generations ago that's micro profit afterall evil Monsanto is responsible for Orange Crush and a littany of other toxins along the way.

World starving absent agritech is micro.

Deluded utopian realm where one gets human advancement without any negative by product.

Religion is a sham, revolving door justice systems, epidemic single parent households, crappy education systems, pretty much the only reliable arbiter of right and wrong left is profit.










john39's picture

12x the agricultural production doesn't mean shit if it slowly kills you.  screw monsanto and the rest of the corporate "persons" out to enslave humanity.

Xkwisetly Paneful's picture

The human race is thriving, they not slowly killing anyone, if that was the case over population wouldn't be an issue.


Go back to the yields before and the world is starving.

Peak food probably before your time, just insert food into the peak oil posts to get an idea.

and per usual it is nice to see so many would rather  see the world starve.

afterall why put world hunger in front of another chance to post the usual stupid shit about those evil corporations.





john39's picture

thriving?  really.... been to a middle america walmart recently? how about checked out the  incidence of auto-immune diseases? cancer? heart disease? obeisity?, compared to fifty years ago?  no doubt you are going to say all that results from eating too much good nutritious GMO frankenshit, so i just go ahead now and point out how idiotic that would be.

Xkwisetly Paneful's picture

YEa thriving. Population increasing everyday.

The first world is largely obese.

Lifespans in the third world are at an all time high and would be in the first world absent obesity caused from thriving.

No plagues, pandemics or whatever.

If I fed my fish poisonous food and warmed their water or generally replicated the conditions you idiots believe exist they would be dead. Their population would not only decline it would goto zero.


centerline's picture

You have cause and effect mixed up like so many other idiots around here.  The human race is not thriving.  Unless your measurement in time is fixed and viewpoint very narrow.

How long do think this continues (population growth)?



Xkwisetly Paneful's picture


How does one conclude it is not thriving?

Number of whining posts on the internet doesn't count.

Via myopic POV competely devoid of any actual substance.

How long has the population been growing despite you people of the world warning otherwise?

You told me in 1970 in no uncertain terms world out of food by 2000-instead we have epidemic obesity-good call.

You told me  in 1976 the world will be out of oil by 1995,

currently threee times the reserves exist as in 1976-good call.

You told me I would fry thanks to a hole in the ozone layer, my electronic life would be wiped out on Y2K, Three Mile Island was supposed to nuke me..........

I could go on for 10days here, the doomsdayers will inevitably be right at some point of course they will never have the gratification of saying I told you so,

but until then you are wrong and at this point in time you are wholly and completely wrong about  the human race.  In the midst of a technological revolution, the advancement in the last 40yrs rivals that of the previous thousands.  People are living better as a whole than their grandparents could have dreamed about.

 Unless of course we employ that myopic POV.


petridish's picture

FOOD doesn't make humans obese, eating chemically produced toxic waste like high fructose corn syrup does.

erg's picture

Yields are better therefore it's all good. Got it. We're thriving. Autism, cancer...we're thriving alright.

Quick everybody, let's throw a pool together. First person to pick the year this guy clues in gets the jackpot.

I thought I heard the other day that the very research firm that blamed Monsanto in part for the great bee kill-off was just bought by....Monsanto. Nice little thing they got going on there.

john39's picture

Same reason that the war on cancer, like the war on terrorism, will never be won. That is not how this game is played.

erg's picture

You're not a patient, you're a customer.

Here, this pill will cure your immediate problem but it causes this but worry not there's a pill for that.

Continue until you are either dead or broke. Preferably both.

TBT or not TBT's picture

Cheap carbohydrates did stave off the Population Bomb result globally, aaaand they permit the lower income folks here in the US(or the gummint SNAP program) to pay for food more easily, BUT they are poisonous, it turns out, resulting in a raft of degenerative diseases, not just obesity, but expensive productivity crushing ones.

centerline's picture

Millions of years of eating certain diets, and only in the last 100 years we change radically what we eat.  The last 50 or so mainly on manufactured food.  Yeah, evolution just loves turning on a dime like this!

 Nuerological, degenerative, and other diseases are increasing at alarming rates - even relative to population growth.