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Guest Post: Why We May Not See 4% GDP Growth For A Long Time

Tyler Durden's picture




 

Submitted by Lance Roberts from Street Talk Advisors

Why We May Not See 4% GDP Growth For A Long Time

gdp-realvspotential-032012For a third year in a row mainstream economists and analysts are once again planting the seeds of hope for a return to stronger GDP growth.  The White House, if you look at their budget estimations, are banking on it as part of their long term deficit reduction plan.  Unfortunately, it is highly unlikely that we will see growth in the economy return to 4% for a very long time.  

Currently, the deficit between real GDP and the CBO's estimated potential GDP, is at the greatest deviation on record.  However, that data point really doesn't tell us much other than the economy is currently operating well below its potential level.  While most economists will point to the likely culprits of employment, wages, industrial production and consumption as the problem, which is correct, those issues are byproducts of the 50-Trillion pound Gorilla that sits quietly in the corner.  That seemingly invisible Gorilla is simply - debt.

To get a better idea of what I mean let's take a look at economic growth in relation to debt levels.   Prior to 1980 it took on average, beginning with 20 cents in 1952 and rising to 80 cents at the end of 1980, 37 cents of debt to finance $1 of GDP.   Today, that same $1 dollar of GDP growth requires a little more than $4 dollars to finance it. That's right - $4 of debt to finance $1 of GDP. 

debt-to-gdp-032012-2Therein, of course, lies the problem of returning to 4% economic growth in the foreseeable future.   With real GDP currently  at $13.4 Trillion and debt at $54.1 Trillion the ratio is 4:1 debt to GDP.   In order for GDP to reach 4% growth in 2012 - GDP would have to expand to roughly $13.97 Trillion.  This means debt would need to expand to $56.3 Trillion or a whopping $2.17 Trillion in the coming year.  

To repeat that process in 2013 GDP would need to expand to $14.5 Trillion.  In order to achieve that growth debt would need to expand further by another $2.25 Trillion.  So forth and so on.   Are you seeing the problem here?

The problem is simply the math.  Furthermore, the current economic malaise is not something new that was caused by the financial crisis in 2008.  The reality is that economic growth has deteriorated consistently since 1980.  Economic growth cannot be supported by debt growth.  Increases in debt reduce savings and productive investment.  Debt, like a cancer, consumes income which detracts from consumption and investment.  The larger the debt the more consumption it requires.

As interest rates began their long march lower in the 1980's so did economic growth.  As growth began to slow the need to maintain higher standards of living required a reduction in the personal savings rate and increases in debt.  In turn there was less available for productive investment.   As each year passed quietly by the cancer of debt spread, undeteceted and ignored, until it became terminal.  What we now realize, yet still try to ignore, is at the very heart of Austrian economic theory.

austrian-economic-cycle-032012As we stated in "The Breaking Point"  the Austrian school of thought views the current cycle “as the inevitable consequence of excessive growth in bank credit, exacerbated by inherently damaging and ineffective central bank policies, which cause interest rates to remain too low for too long, resulting in excessive credit creation, speculative economic bubbles and lowered savings.”

In other words, the proponents of Austrian economics believe that a sustained period of low interest rates and excessive credit creation results in a volatile and unstable imbalance between saving and investment.   Low interest rates tend to stimulate borrowing from the banking system which in turn leads, as one would expect, to the expansion of credit.   This expansion of credit then, in turn, creates an expansion of the supply of money and, therefore, the credit-sourced boom becomes unsustainable as artificially stimulated borrowing seeks out diminishing investment opportunities. Finally, the credit-sourced boom results in widespread malinvestments.

Does any of this sound familiar?

The problem is that today exponential credit creation can no longer be sustained.  The process of a “credit contraction” which will continue to occur in fits and starts over a long period of time as consumers, and the government, are ultimately forced to deal with the leverage and deficits.  The good news is that process of "clearing"  the market will eventually allow resources to be reallocated back towards more efficient uses and the economy will begin to grow again at more sustainable and organic rates. 

Today, however, expectations of a return to economic growth rates of the past are most likely a just a fairy tale.  The past 3 years of stock market returns have been fueled by trillions of dollars of support and direct injections into the financial system - that support is not sustainable in the long run.  While the injections have kept the economy from falling into a depression in the short term - the unwinding of that support will suppress economic growth for many years to come. 

Furthermore, the impact on the psyche of the consumer will continue to be impared much to the same degree as those that survived the depression era.  The mantras for frugality and conservatism are very hard to reverse and have economic consequences.  With the economy mired at lower growth rates likewise the stock market, which is ultimately a reflection of the economy and not vice versa, will remain mired at lower rates of growth. 

The processes that fueled the economic growth over the last 30 years are now beginning to run in reverse, and when combined with the demographic shifts in the U.S., the impact could be far more immediate and prolonged than the media, economists and analysts are currently expecting.

 

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Tue, 03/20/2012 - 12:07 | 2273527 GeneMarchbanks
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No need to tap into Austrian theory to understand that even 2% 'growth' will be a stretch with energy costs set to go parabolic.

Tue, 03/20/2012 - 12:27 | 2273614 kridkrid
kridkrid's picture

Energy costs are set to go parabolic in part due to monetary policy... Austrian theory helps to explain this.  I get the finite resource side of the equation as well... it's an ugly combination.  Inflation in the things you need (energy) and deflation in the things you own.

Tue, 03/20/2012 - 12:34 | 2273643 Arthor Bearing
Arthor Bearing's picture

This was all set out fortyish years ago in The Limits of Growth. Perpetual exponential growth will eventually hit an insurmountable limit, whether economic, agricultural, environmental, or a limit of physical resources. The race is on! It seems like we are approaching all of these limits at around the same time.

Tue, 03/20/2012 - 12:43 | 2273688 JPM Hater001
JPM Hater001's picture

There is something not right in the formula here John.  Come take a look at this data...

Keynes: "Animal Spirit Bitchez"

Tue, 03/20/2012 - 12:51 | 2273726 tiger7905
tiger7905's picture

Latest from Don Coxe...
March 2012 Basic Points highlights

http://goldandsilverlinings.com/?p=1934

Tue, 03/20/2012 - 13:12 | 2273740 Die Weiße Rose
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Australia Passes 30% Tax on Iron-Ore, Coal Mining Profits

Tue Mar 20 03:52:26 GMT 2012

Australia passed legislation that will reap about $11 billion in taxes within three years from BHP Billiton Ltd. (BHP), Rio Tinto Group and other iron-ore and coal miners as the government seeks to turn its budget to surplus.

Prime Minister Julia Gillard’s Minerals Resource Rent Tax was passed in the upper house yesterday and will become law on July 1 after receiving backing from the ruling Labor party and the Greens, who hold the balance of power in the Senate.


  Play Video

Feb. 23 (Bloomberg) -- Grant King, managing director at Origin Energy Ltd., Australia’s largest electricity retailer, talks about the company's financial results, business outlook, and the nation's new carbon legislation. Origin had a first-half profit after acquiring energy assets from the state of New South Wales. King also discusses the dispute within the nation's ruling Labor party. He speaks from Sydney with Rishaad Salamat on Bloomberg Television's "On the Move Asia." (Source: Bloomberg)


  Play Video

Nov. 29 (Bloomberg) -- Sam Walsh, chief executive officer for iron ore at London-based Rio Tinto Group, the world's second-biggest mining company, talks about the potential impact of Australia's planned taxes on resources companies and carbon emissions on the mining industry and economy. Walsh also discusses the outlook for acquisitions, iron ore demand, and Prime Minister Julia Gillard's plan to allow exports of uranium to India. He spoke yesterday with Bloomberg Television's Shraysi Tandon in Sydney. (Source: Bloomberg)

 

Passing the legislation is a success for Gillard, whose predecessor Kevin Rudd was ousted amid a campaign by mining companies against a broader 40-percent levy that he initially proposed. Gillard, the country’s first female prime minister, is trying to hold together a minority government that relies on the support of independent and Green party lawmakers.

“It’s a victory for Labor and will help the nation’s bottom line,” said Norman Abjorensen, a political analyst at Australian National University in Canberra. “Most Australians probably believe the big miners can afford to pay more tax.”

The levy will aid the prime minister’s bid to return the budget, to be announced May 8, to surplus.

“We’ve got a spectacular resources boom,” Gillard said in an interview with Channel Nine television today. “It makes sense to take some money from the turbo-charged section of the economy and share it more broadly around the nation and that is what the mining tax does.”

‘Complex, Inefficient’

Fortescue Metals Group Ltd. (FMG), the nation’s third-biggest iron-ore exporter, said the tax was “unfair, narrowly based, complex, inefficient and will reduce investment and future jobs in the Australian mining industry.”

“As Fortescue has previously advised, the company has engaged senior counsel and will commence legal proceedings after the legislation has been enacted and legal opinion has been finalized,” it said in an e-mailed statement today.

Fortescue shares were 1.2 percent lower in Sydney trading at 3 p.m. today, compared with a 0.4 percent decline in the benchmark S&P/ASX 200 Index. BHP declined 0.1 percent and Rio Tinto stock fell 0.6 percent.

The expansion of China and other emerging economies has boosted demand for resources such as iron ore and coal in Australia, the largest shipper of the steel-making and energy- producing materials.

Gillard, 50, won support from independent lawmakers for the measure in the lower house last November after agreeing to set up a committee to examine coal-seam gas projects and to increase the threshold at which companies will be subject to the tax to A$75 million (US$79.4 million) from A$50 million. The Greens backed the bill after reaching an agreement with the government on offsetting any resulting shortfall in revenue.

Corporate Tax

Gillard has proposed that proceeds from the levy on mining profits will be used to reduce the corporate tax rate to 29 percent from 30 percent. The government’s plan to cut the corporate tax rate for businesses with annual revenue of more than A$2 billion may be blocked in the upper house after the opposition coalition and Greens said they opposed the measure.

The government also won backing for the laws by promising to provide A$6 billion in spending for roads, rail and ports, and increase the amount paid to people’s retirement savings to 12 percent of their salary by 2020 from the current 9 percent.

Labor sank to a six-week low in an opinion poll released March 13 after Rudd, who was ousted as prime minister in a June 2010 party coup by Gillard, stepped down as foreign minister on Feb. 22 to challenge her for the nation’s top job. He was defeated 71 to 31 in a Feb. 27 party ballot.

Trade Deficit

Australia posted its first trade deficit in 11 months in January, as weaker shipments of iron ore and coal contributed to the biggest drop in total exports in almost three years. The nation’s economic growth slowed to 0.4 percent in the fourth quarter from the previous three-month period, according to figures released on March 7.

The mining tax will raise A$10.6 billion in the three years after being implemented from July 1, according to government estimates.

Parliament goes on hiatus from March 22 and resumes May 8, when the government will announce its annual budget that it says will return to surplus. Under laws already passed, the government will put a tax on carbon emissions from July 1 by charging about 500 polluters A$23 a ton for discharges until the set price gives way to a cap-and-trade system in 2015.

To contact the reporter on this story: Jason Scott in Canberra at jscott14@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

http://www.bloomberg.com/news/2012-03-19/australia-passes-30-tax-on-iron-ore-coal-mining-profits.html

posted by wr;) 

Tue, 03/20/2012 - 13:46 | 2273959 Nobody For President
Nobody For President's picture

This could have (should have) been a separate article, rather than a 'comment' -

Good post. Thanks

Tue, 03/20/2012 - 14:53 | 2274245 BooMushroom
BooMushroom's picture

Their mining exports are declining, so they're raising prices (by raising the taxes on the suppliers!)? THAT'LL fix it. I know whenever Walmart wants to sell more of something, the first thing they do is jack the price way up...

Oh wait, no they don't. Idiots.

Tue, 03/20/2012 - 12:08 | 2273533 Sutton
Sutton's picture

End the Welfare State(sorry bro's), end the Fed(sorry useless  nerdy economists) and end the Military Industrial Complex and GDP will grow 10% a year.

Tue, 03/20/2012 - 12:37 | 2273654 Arthor Bearing
Arthor Bearing's picture

No, GDP will shrink 10% per year and there will be millions of corpses rotting in the streets of major cities, but ultimately the world will be better for it a quarter-century from now. You can't win an election with a platform like that though.

Tue, 03/20/2012 - 12:45 | 2273697 JPM Hater001
JPM Hater001's picture

"... there will be millions of corpses "

Don't you think you're being too optomistic?

Tue, 03/20/2012 - 13:48 | 2273972 Nobody For President
Nobody For President's picture

"...rotting in the streets..."

 

"...rotting in the burning streets..."

Fixed it for yah

Tue, 03/20/2012 - 14:54 | 2274250 BooMushroom
BooMushroom's picture

"...burning in the rotting streets..."

Tue, 03/20/2012 - 15:57 | 2274541 ultraticum
ultraticum's picture

Sutton is right.  IMHO, your comment reflects MSM propaganda:  "You can't win an election with a platform like that though."  O'Reilly or Hannity or any other of the blow-hard big government establishment neocons say things like that all the time.  So, we're just supposed to sit back, focus on MSM's bullshit version of "electibility", compromise with the devil (the Fed, Israel, the mega-state) at every difficult juncture, and let FEAR of the collapse of the welfare/warfare state SCARE us into not trying to unwind the tyranny (in a way that might unleash prosperity)? 

Rummy and Hank would be proud.

Tue, 03/20/2012 - 16:06 | 2274572 Arthor Bearing
Arthor Bearing's picture

I said something that I think is basically irrefutable, that you cannot win an election running on a platform that will inevitably lead directly to massive death. And we live in a democracy. So what's your solution? Nothing I said implied resignation but you have to admit that holding an unelectable position in a democracy creates a very real and significant stumbling block.

Tue, 03/20/2012 - 12:59 | 2273770 michael_engineer
michael_engineer's picture

But the Fed was even mentioned in the recent EO :

 

My take is that it could be preparation if the world economy ever slows down due to resource constraints or depletions or due to a banking reset, or due to the combined effects of both.  It's a way to provide continuity and some kind of stability.   I found it interesting that the Federal Reserve was mentioned as shown below.


Sec301.  Loan Guarantees.  (a)  To reduce current or projected shortfalls of resources, critical technology items, or materials essential for the national defense, the head of each agency engaged in procurement for the national defense, as defined in section 801(h) of this order, is authorized pursuant to section 301 of the Act, 50 U.S.C. App. 2091, to guarantee loans by private institutions.


(b)  Each guaranteeing agency is designated and authorized to:  (1) act as fiscal agent in the making of its own guarantee contracts and in otherwise carrying out the purposes of section 301 of the Act; and (2) contract with any Federal Reserve Bank to assist the agency in serving as fiscal agent.

Tue, 03/20/2012 - 14:58 | 2274277 BooMushroom
BooMushroom's picture

We'll gladly PROMISE to pay you Tuesday for a hamburger today!

Tue, 03/20/2012 - 12:10 | 2273535 SheepDog-One
SheepDog-One's picture

They blew out US manufaturing and jobs for NAFTA and GATT for EZ borrowing to run the '75% Borrow and Consume' economic model...now the borrowing has been replaced by FED printing and monetizing the debt, something they said they;d absolutely NEVER ever do...so now the economy is dead due to their own design, and now theyre looking for GDP growth? Give me a break we're bankrupt and whats next is the big WW3. 

 

Tue, 03/20/2012 - 12:20 | 2273585 Bluntly Put
Bluntly Put's picture

We came out of the malaise following the first great depression via WWII not because of some flawed broken window theory but simply because our main economic competitor, Europe, was bombed out of its manufacturing capacity. The industrial war machine in America was simply re-tooled from making war widgets to consumer gadgets.

So, really, to make it work again the same result would be necessary that is to obliterate the main competition's industrial capacity. I suppose that means all those aging nuclear weapons will finally find a use.

Tue, 03/20/2012 - 12:11 | 2273536 sbenard
sbenard's picture

I know very few Communist-lead countries that get 4% GDP growth, and I have serious doubts about the other one -- China!

Oh, but I forgot! We can PRINT prosperity now!

Tue, 03/20/2012 - 12:09 | 2273539 Shizzmoney
Shizzmoney's picture

Remember what happened in the UK when Cameron entered office.

Cameron: What we need to do as a society is cut down on debt, and pay it down.  Especially consumer debt.

Banks: "No!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!111111111111111111111111111"

Next day, Cameron:

"Completely ignore what I said.  Swipe away!"

Tue, 03/20/2012 - 12:10 | 2273543 Quinvarius
Quinvarius's picture

I think we will get way more that 4%, but only because a stick of gum will cost $1.75 in a few years.

Tue, 03/20/2012 - 12:12 | 2273546 A Lunatic
A Lunatic's picture

I'll be in the corner, curled up in fetal position, chain smoking cigarettes and mumbling incoherently if anyone needs me.

Tue, 03/20/2012 - 12:46 | 2273703 JPM Hater001
JPM Hater001's picture

Looks like I picked the wrong week to quit Sadism

Tue, 03/20/2012 - 12:12 | 2273554 Stuck on Zero
Stuck on Zero's picture

Rhetorical question: If 80% of the money bouncing around in the economy is debt service does that count for a big GDP?

Tue, 03/20/2012 - 12:40 | 2273670 Pairadimes
Pairadimes's picture

I see ZH has moved to the 'ridicule' stage of Ghandi's quote on civil disobedience.

Tue, 03/20/2012 - 12:14 | 2273561 bob_dabolina
bob_dabolina's picture

Correction - 

Guest Post: Why We May Not See 4% GDP in our life time

 

Tue, 03/20/2012 - 12:24 | 2273597 Bam_Man
Bam_Man's picture

When Uncle Shithead runs a budget deficit that is 15-20% of GDP we might see 4% GDP growth.

Tue, 03/20/2012 - 12:23 | 2273598 Dr. Engali
Dr. Engali's picture

I can simplify the answer.....We are bankrupt that's all you need to know.

Tue, 03/20/2012 - 12:38 | 2273603 Spacemoose
Spacemoose's picture

an increase in the average standard of living of a typical american can go UP if GDP goes down.

as an example, assume the example of an employee of the dept of energy who is employed for $100,000 per year, writing oil company regulations (which increase the expense of producing energy). in an effort to decrease government regulations, that employee is laid off (this is just hypothetical. we all know that no such thing would ever happen). the ex-gov employee then goes to work for an oil company, for a salary of $50,000 per year. what is the effect on the economy? the standard of living of the ex-gov employee declines by $50,000. the standard of living of the taxpayers who were supporting the ex-gov employee increases by $100,000. the employee increases the productivity of the oil company by an unknown amount Y and the oil company, free from some regulation, increases productivity by X amount, also raising the standard of living of all of us (in the form of cheaper energy for instance). thus, the net increase in the american standard of living has increased by $50,000 plus the value of whatever net increases the additional employee adds to the productivity of the company. the absence of regulations also adds to the productivity of the oil company thus increasing our standard of living. (this would be net of any decrease to our standard of living caused by the absence of the regulations. however, i am assuming, perhaps incorrectly, that the 75,000 pages of rules and regulations in the federal register are a net drag on our average standard of living). thus, GDP down, but standard of living up. (multiply this effect by at least some portion of the over 22 million people who work for federal, state and local governments, and pretty soon we're talking about a real difference in our standard of living).

note that at the beginning of the preceding paragraph, i said "an increase in the average standard of living of a typical american can go up if GDP goes down". i'm not certain that's wholly accurate. it may be that we have gone so far down the road in putting our human assets in non-productive work (like community outreach coordinators for instance), that an increase in the average standard of living of a typical american can go up ONLY IF GDP GOES DOWN.

some might argue that a community outreach coordinator working for $100,000 per year could easily increase the standard of living in a poor community by an amount greater than $100,000 per year. this is undoubtedly true. however, in most situations this is done by decreasing the standard of living of taxpayers by an amount greater than the benefit given to the community. no new goods and services are created in such an endeavor and the net is an overall decrease in the average standard of living in an amount equal to (at least) the salary of the coordinator.

there are only two ways out as i see it. either increase real productivity (i.e. production of goods and services people really want, as opposed to midnight basketball programs for disadvantaged youth) or reduce consumption. look as i may, none of the statements of our rulers imply that they understand this in the least and a neutral observer might go so far as to say that the current administration is actually trying to supress productivity. it's like they are obsessed with treating the symptoms and not the underlying cause. is the problem that difficult to understand?

the problem is not the deficit, the deficit is a symptom. the problem is not debt burden, the debt is a symptom. the problem cannot be solved by printing or by not printing. it cannot be solved by tweaking the rates. as i see it, the problem is that WE ARE CONSUMING MORE THAN WE PRODUCE, AND WE HAVE OBLIGATIONS COMING DUE IN THE FUTURE, WHICH WILL RESULT IN AN EVEN GREATER GAP BETWEEN CONSUMPTION AND PRODUCTION. what part of that do you not understand, ass hat leaders? this is the fundamental economic problem facing the country and it is rarely expressed as such, in the discourse. why is that? is it because stating the problem in this way also defines the solution and the solution is something that cuts against the power and wealth of too many of TPTB? or is it that we believe there exists some alternate dimension solution which would allow us to retain a "business as usual" lifestyle and still pay ever increasing monetary tribute to the government and its private industry enablers? i think not.

so what we see now is the end game, whereby one group fights for a decrease in productivity through enviromental regulations and other groups fight for a decrease in productivity through the transfer of human capital into non-productive uses such as working at the dept of energy, or as a diversity outreach coordinator or as a hedge fund broker and yet another group lobbies for additional laws to reduce productivity by walling out competitors through excessive government regulation (such as monsanto and the food safety bill) and yet another group lobbies for a decrease in productivity by redistibuting wealth from investment (creating new factories) to consumption (food stamps and unemployment benefits).

now, obviously, there is a "sweet spot" with respect to how much government services and wealth redistribution society needs for efficient functioning not to mention the moral component of not allowing our fellow fellow citizens to die of starvation. however, the fact that today we have more government employees than manufacturing employees certainly implies that not only have we traveled past that "sweet spot", we've thelma and louised ourselves right off the edge of an economic cliff. if we are to stop what appears to be an inexorable slide into third world status we are going to need an attitude shift among our leaders. they immediately need to recognize that productivity is a greater virtue than charity.

thus, reductions in FIRE and government payrolls, although resulting in a nominal decrease in GDP, could actually result in an increased standard of living in the long run as allocation of human resources are shifted away from non productive activity and towards production. why is there so little analysis along this line of thought?

Tue, 03/20/2012 - 12:24 | 2273604 peekcrackers
peekcrackers's picture

" Unfortunately, it is highly unlikely that we will see growth in the economy return to 4% for a very long time.  "

some take  this guys keys . wtf

Tue, 03/20/2012 - 12:26 | 2273610 Thorny Xi
Thorny Xi's picture

Since the planet can no longer support 4% energy production growth, there's little chance it will see 4% GDP growth.

Tue, 03/20/2012 - 12:30 | 2273626 WTF_247
WTF_247's picture

We can look at it another way.

The US has moved more and more to a consumer/retail based economy rather than a production economy over the last 30+ years.

The more we move in this direction, the more "retail" jobs created.  These jobs do not pay even $50,000 per year - most are $9-$12 per hour.

How would you expect the economy to grow when the wages are in continual decline do to offshoring and a continual shift toward consumerism.  At some point you will reach the breaking point where the number of retail jobs are so large that most of the population cannot afford to "shop" anymore and the whole thing implodes.  

As more and more of these jobs are created, the average wage decreases because high paying jobs out, low paying jobs in.

There is almost no way to "make" these jobs high paying - the margins are not there to do that nor are most of them even skilled jobs - if you can read at a 5th grade level you can do many of these jobs.

Tue, 03/20/2012 - 13:09 | 2273693 lolmao500
lolmao500's picture

Easy! Grow the deficit by 5% of GDP... there ya go, growth of more than 4%... :)

Tue, 03/20/2012 - 12:49 | 2273709 EmileLargo
EmileLargo's picture

Base money should continue to grow at anywhere between 40-80 percent per annum. With that happening, who needs real GDP growth?

Tue, 03/20/2012 - 12:51 | 2273728 daxtonbrown
daxtonbrown's picture

Another way to look at this is that we are in a biflationary depression. Everything the central banks and Fed do is pushing on a string. Indeed, physics tells us you can't get something for nothing and since we all know the central bankers are dumb as fuck everything they do is counterproductive.

But instead of getting simple inflation from the money infusion, you get a combination of inflation AND deflation. The rise in M inflates some sectors, but you get a drop in V as everyone realizes their money is worthless and trust is loss. Hence Biflationary Depression. http://www.futurnamics.com/biflation.php

Tue, 03/20/2012 - 12:55 | 2273747 Spacemoose
Spacemoose's picture

as the money comes back, we will get inflation in those products which can be exported.  we will get deflation in those products (like massage parlors) that can not be exported.  it's as simple as that.

Tue, 03/20/2012 - 12:58 | 2273766 LawsofPhysics
LawsofPhysics's picture

Yes, in layman's terms, "There is a very real cost for creating capital and not creating anything of real value."

 

Push the reset button, push it now!

Tue, 03/20/2012 - 13:01 | 2273780 Silveramada
Silveramada's picture

INSOLVENCY BITCHEZ!

Tue, 03/20/2012 - 13:04 | 2273794 Eric L. Prentis
Eric L. Prentis's picture

Quantitative easing and LTRO, used by the status quo 1% elites, is causing a bubble in the equity and commodity markets, but is the equivalent of “eating our seed corn.” The real economy will be screwed for decades to come, just so the rich can go on a last, orgasmic spending spree with taxpayer money. The future is being ruined by these greedy, selfish, psychopathic criminals.

Tue, 03/20/2012 - 13:06 | 2273802 Seasmoke
Seasmoke's picture

but lets keep public pensions @ 7.5%

Tue, 03/20/2012 - 13:09 | 2273811 oleander garch
oleander garch's picture

Listen.  If me and my friends on Wall Street and the bond firms can get our 1% for handling the flow of debt turning over, then what is the worry what the economic growth rate is?  We will get our slice.  The more the pile of debt grows to the sky, the more our 1% of the public sector debt issuance is worth.  In fact, this scenario sounds bullish to me!

Tue, 03/20/2012 - 13:35 | 2273908 AndTheRest
AndTheRest's picture

We are past the apex of American civilization.  It's all down hill from here.

Tue, 03/20/2012 - 14:02 | 2274024 Nobody For President
Nobody For President's picture

The apex of American 'civilization', when individuals were still civil with one another in their dealings, trusted the government, and elected politicians that could get along well enough to get stuff done; and had good roads and public servants that still believed in service - stuff like that - was probably in the early (pre-VietNam) 1960's.

You may pick a later date, but the apex was almost certainly in the 20th century, and not this century.

Tue, 03/20/2012 - 13:53 | 2273993 Dingleberry
Dingleberry's picture

We haven't had legit growth numbers in at least a decade, probably two. Lowballing inflation being the main reason, but there are others. We 99% are paddling faster and still not even treading water. The only question is when does this crap really come to a head. I thought it would have happened by now, so my predictions are shit. I won't make anymore. Just prepare myself for the inevitable financial fecal storm that approacheth.

Tue, 03/20/2012 - 14:08 | 2274054 Hohum
Hohum's picture

Oh, we can have 4% real GDP growth.  Only problem is that total credit market debt will go up much faster.

Tue, 03/20/2012 - 15:26 | 2274390 OC Money Man
OC Money Man's picture

Since 2000, the level of savings deposits has increased 600%, but the level of interest paid has remained approximately the same.  This game has been powered by a ZIRP that began in 2000 after the tech crash, then the 9-11, then credit crisis, and still today.  Savers are betting on capital gains, because real returns after inflation are negative.  

The problem with using monetary policy to bail out fiscal policy is that politicians after 10 years start believing ZIRP will always be here.  The Fed is afraid to let rates go up, because there will be panic in the debt markets by the weak holder public participants and prices will over-shoot on the downside.       

Tue, 03/20/2012 - 15:37 | 2274440 tony bonn
tony bonn's picture

even though this material is old, especially the negative mpd, it is never tired...thank you for enlightening the rare soul who will see the wisdom of your analysis....

Tue, 03/20/2012 - 16:34 | 2274677 cranky-old-geezer
cranky-old-geezer's picture

 

 

America won't see any real growth ever again.

Any apparent growth is from inflaiton and higher prices. 

Tue, 03/20/2012 - 20:03 | 2275315 Blue Horshoe Lo...
Blue Horshoe Loves Annacott Steel's picture

This should be filed under:

"No shit Sherlock!"

GDP numbers are the reverse ivory soap - 99 and 44/100ths fake.

Wed, 03/21/2012 - 00:50 | 2275856 StockMarketBott...
StockMarketBottom.com's picture

How to Know When the Stock Market's Hit Bottom 

http://stockmarketbottom.com

Wed, 03/21/2012 - 07:03 | 2276138 cnhedge
cnhedge's picture

i agree, let the market awaken. 

http://www.cnhedge.com/

http://www.jinrongbaike.com/

Do NOT follow this link or you will be banned from the site!