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The Post-World War II American Renaissance Lightning Will Not Strike Twice

Tyler Durden's picture


There have been quite a few stories comparing the post-WWII American economic "renaissance" with expectations that the same confluence of beneficial circumstances may repeat now, resulting in the same benign outcome. Many of these stories touch upon the key points debated in today's everyday politics: taxes, massive debt overhang, and the treatment of private business. Sadly, most of these stories are also just that: mythical representations of an idealized reality, which however have no analogy to what actually happened in the 1950s. In other words, none of the conditions that were in place in 1950 which allowed net US debt to decline from 80% of GDP to just 46% in one decade, are here now.

JPM's Michael Cembalest opines on how the US dug itself out of wartime debt levels after WWII.

I find that there is a lot of misreporting about how US debt levels were halved during the 1950’s. As shown in the table below, government spending was not cut sharply; there was no radical increase in tax collections, either from businesses or from households; and the Fed did not engineer negative long-term real interest rates to jumpstart growth. In addition to the competitive advantage the US had over recovering Axis Powers, the US of the 1950’s benefited from pro-business policies that resulted in over 4% annualized GDP growth throughout the decade. This approach is not in play now, raising questions about how the US will deal with 80% net debt to GDP for only the second time in its 200+ year history.


His conclusion:

1950’s time capsule: taxes were regarded as a greater cause for small business failures than tight money. Eisenhower championed legislation which eased tax burdens on small business and which culminated in a bill eliminating double-taxation (Subchapter S); he also eliminated wage and price controls. In the 1950’s, the private sector accounted for a post-war peak of 86% of all employment, a level not seen since.

Of course, much of the Keynesian miracle of 1950-1960 had to do with the "broken window" that was Europe, and specifically its rebuilding. Which means that one key variable that is missing is a continent full of destruction that just needed America's helping hand and some Brady Bonds, leading to America reaping a disproportionate share of the benefits. We are confident the American Military-Industrial complex is well aware of this and is already on top of things.


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Tue, 07/17/2012 - 14:43 | 2625148 LawsofPhysics
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Simple questions;  1)  what was the tax rate structure post WWII, 2) what were the available resources and what was the cost to recover those resources?  and finally, 3) what are the current expenses (including ALL military operations) on the U.S. government?

No shit, this time is "different".  Tell us something we didn't know and something we can trade on, sheesh.

Tue, 07/17/2012 - 15:13 | 2625306 AustriAnnie
AustriAnnie's picture

4) What did the demographic curve look like then vs. now?

5) When did the average household begin to take on debt for purchases, starting the debt bubble we see popping today? 


"Ralph Schneider introduced the all-purpose credit card in the 1950?s to give a solution to carrying around a credit card for each store or merchant. Diner’s Club, American Express and Visa came into existance around this time, gaining popularity over the decades. Diner’s Club, for example, started in 1950 and was used for entertainment and travel. Diner’s Club claims it’s the first credit card that gained widespread use and had 20,000 cardholders by 1951. The cards were originally cardboard and were replaced by plastic in the 60?s. American Express, formed in 1850, didn’t get into credit cards until 1958 when they introduced the world to a purple charge card. A year later they introduced the first plastic credit card.

In 1966, Bank of America started their BankAmerica Service Corporation and a national credit card system was formed and called the InterBank Card Association. ICA is now Mastercard Worldwide."


Tue, 07/17/2012 - 15:16 | 2625327 LawsofPhysics
LawsofPhysics's picture

Yes!!  Credit expansion is a bitch, especially if no real value is created.

Tue, 07/17/2012 - 15:36 | 2625447 The Monkey
The Monkey's picture

If we did not have good urban myths, then we would not get awesome tops to short.

Tue, 07/17/2012 - 16:09 | 2625643 zaphod
zaphod's picture

The government did not actually pay off that debt. Look at the money in vs money out. The government still ran deficits as always.

The only thing that happened is the debt was inflated away. Just look at nominal GDP, doubled in that time period. That was what halfed the debt.

The inflationary aspects didn't kick in until later in the 60s and 70s, but the seeds were already sown.

Anyone buying bonds today is a monkey.

Tue, 07/17/2012 - 18:02 | 2626112 The Alarmist
The Alarmist's picture

"Anyone buying bonds today is a monkey."


Anyone doing so voluntarily ...  you might see another article nearby which discusses the severe underfunding of defined benefit pension plans, and you might sense where a likely source of capitve funds will be sourced.  

"Sure, Pension Fund fiduciaries, we will hold you harmless for the severe damage you have done to the fund with your poor investment choices ... your safe harbor will be to invest in our new perpetual paper.  Sign here."

Wed, 07/18/2012 - 00:32 | 2627026 FreedomGuy
FreedomGuy's picture

What is the government's credit card made out of?

Tue, 07/17/2012 - 14:41 | 2625151 GeneMarchbanks
GeneMarchbanks's picture

We are confident the American Military-Industrial complex is well aware of this and is already on top of things.

That is scary stupid.

Tue, 07/17/2012 - 14:49 | 2625193 Ghordius
Ghordius's picture

scary stupid or stupid scary?

Is it me or are we often seeing statistics from the good 'ol times? though what I am missing is the US corporate taxes %ofGDP and the US personal tax rates of the '50s and '60s.

Nobody will ever make the unpopular statement that this "golden age" was financed with a marginal rate of 70% for the highest bracket - at a time when US MegaCorporations still paid taxes. Upps!

Tue, 07/17/2012 - 14:52 | 2625217 LawsofPhysics
LawsofPhysics's picture

You are correct sir.

Tue, 07/17/2012 - 15:16 | 2625321 FreedomGuy
FreedomGuy's picture

Those were the marginal rates and not the actual percentages collected. Deductions and non taxable benefits were far more common. There is a tax on virtually everything you can name, now, along with fees, special fees and taxes by other names. Social Security alone was only 1.5% to the individual. I can still remember deducting credit card and all loan interest payments. All are gone, now.

I submit that the real tax rate is all of government spending as the private sector, whether citizens or businesses must carry this burden. Right now government has swelled to nearly half the size of the private sector ($5t vs $10t). When you look at that it is obvious that taxes have never been higher regardless of rates. With Obamacare they will be stratospheric..and the books still won't balance.

If your ridiculous assertion is that higher rates are good, go for it and start ssending the extra checks to the treasury.

Tue, 07/17/2012 - 16:01 | 2625611 Ghordius
Ghordius's picture

No, my (albeit foreign) assertion is that having CEOs paying less percentages than secretaries, or the great corporations paying less percentages than the small and medium companies is (the technical term is regressive) NOT sustainable. And very deleterious for the moral fibre of any nation engaging in such policies.

In itself, the effect is worse than austerity (which usually hurts non-productive people most), because it hurts the *growing* part of the population and economy most.

Since technology, efficiency, quality, profitability and entrepreneurship are interwined and spring usually out of small/medium companies and the middle class, it's also quite...daft, in the long run.

Wed, 07/18/2012 - 00:43 | 2627048 FreedomGuy
FreedomGuy's picture

Ghorius, I will meet you halfway on this. In terms of fairness I do not agree with loopholes allowing anyone to escape. I saw that Buffet paid an effective tax of 11%. I would cautiously support higher taxes IF the dividends from which he derives his income become tax deductible to the business and are not double taxed. I would support eliminating loopholes...real loopholes as well. In a fascist state, though you get favors from government through influence and power.

The other side of this where I categorically disagree it that the wealthy by any measure, including their share of the total national revenue  disporoportionaltely carry the tax burden. Also, regardless of how much we want to shake Buffet, Gates, or anyone else down for it really doesn't help you, me and the 99% of us workers who are employees get a raise or a better job. If Buffet has to pay tens of millions more to government then he ain't puttin' that into a new business, updating the machinery in a factory or even giving you and me a measley 2 or 3% raise. In fact, there is more pressure to do with less of us and flatten our salaries and move stuff to China or a friendlier climate.

I say this as one who has been through more layoffs and restructurings than you can imagine.

So, my best rational answer is that government first has to get way smaller, cheaper and with less graft like Solyndra. All of us, including Buffett can then pay less. When tax rates are 5, 10 or even maybe 15% no one spends a lot of time and energy trying to avoid them. Even Confucius noted this hundreds of years ago.

Wed, 07/18/2012 - 02:36 | 2627167 Ghordius
Ghordius's picture

+1 I agree in principle

I was already thinking I would have to make a big post about how size matters - i.e. big companies and big wealth has all the loopholes in the international environment as I noticed there is a whole new article on ZH on this matter:

Tue, 07/17/2012 - 16:12 | 2625664 sschu
sschu's picture

The answer to the rates question is right there in the table.  Government receipts have been pretty much about 18% of GDP since 1950.  The problem has always been spending, which now is over 25% IIRC.

Raise tax rates too high and people will figure out how not to pay.  Why is this so hard to comprehend, it has only been true for about 60 years.


Tue, 07/17/2012 - 16:40 | 2625794 Ghordius
Ghordius's picture

This means that if we were talking of balancing the US budget in the manner of Russia, or many other eastern european countries which have a flat tax rate, both private and corporate US taxes would have to be in the ballpark of 35-40%? Without any excemptions or rebates, of course...

Tue, 07/17/2012 - 16:44 | 2625817 sschu
sschu's picture

No, what it means is that federal expenses need to be kept within the limits of revenue.  Attempting to increase revenue (as a percent of GDP) has been a fools game.

You really do not think corporations pay taxes, do you?  Taxes are an expense, to be minimized, but ultimately passed on to buyers.  


Tue, 07/17/2012 - 17:31 | 2625946 Bring the Gold
Bring the Gold's picture

Perhaps, but the immediate benefits of low taxes for the great corproations and financial entities allows them to plow that money into the most profitable sector of all...political donations.

Tue, 07/17/2012 - 18:08 | 2626123 The Alarmist
The Alarmist's picture

But all of this ignores the simple reality that taxes on corporations/businesses/etc. are passed through to the end consumer by being built into the price.  In the never ending quest to "stick it to someone," all we have done is added to the complexity of the system and thereby empowered and enriched the political class, the lobbying class, the tax practitioner class, and an army of swat-team-armed agents.  I'd just as soon go for a consumption tax, scrap the income tax, and be done with it.

Tue, 07/17/2012 - 17:11 | 2625937 Bring the Gold
Bring the Gold's picture

Pretty sure they are talking about taxation on the wealthiest and corporations, not small businesses i.e. the engine of REAL growth.

Tue, 07/17/2012 - 18:09 | 2626125 The Alarmist
The Alarmist's picture

Small businesses are the hardest to manipulate and police, so they will be destroyed.

Tue, 07/17/2012 - 15:29 | 2625407 AustriAnnie
AustriAnnie's picture

Interesting that Ron Paul's heroes include the likes of Mises, who also warned about/predicted the end of the bubble in the 1920's.  Mises, too, was ignored.  Still is.

Same as it ever was: extraordinary popular delusions and the madness of crowds.

Tue, 07/17/2012 - 14:42 | 2625157 Winston Churchill
Winston Churchill's picture

Rehearsing in the Gulf as you speak.

Tue, 07/17/2012 - 14:42 | 2625159 asteroids
asteroids's picture

Of course it won't happen. Don't be stupid. Look up demographics. I see a LOT of people retiring into poverty in the next decade.

Tue, 07/17/2012 - 14:42 | 2625160 tony bonn
tony bonn's picture

the cancer upon the economy is irremediable with the present buffoons, kleptocrats, and bush crime syndicate in power.

Tue, 07/17/2012 - 14:43 | 2625163 dbTX
dbTX's picture

Another world war may be just what's needed

Tue, 07/17/2012 - 14:46 | 2625184 insanelysane
insanelysane's picture

We don't need another world war.  We just need a few well placed missiles and bombs that wipe out our industrial rivals infrastructure; China, Germany, etc.  Of course they can be accidentally launched/dropped onto these targets.

Tue, 07/17/2012 - 15:12 | 2625295 Bunga Bunga
Bunga Bunga's picture

We only need to wipe out those criminal war fucktards along with all the psychopaths and sociopaths in governments and corporations.

Tue, 07/17/2012 - 14:44 | 2625168 BillyBoy22
BillyBoy22's picture

I think we should wage war on Europe, I think we'd do pretty well.  And then we could rebuild it again.  Problem solved!

Tue, 07/17/2012 - 14:45 | 2625173 mrktwtch2
mrktwtch2's picture

dont forget that the industialized world of europe was left in ruins..there weren't any factories or industrial base left..nobody had the ability to build anything for 25 yrs so who did the building of machninery?? the usa of course..why is this FACT  never mentioned??

Tue, 07/17/2012 - 14:55 | 2625232 Whoa Dammit
Whoa Dammit's picture

And after globalization, the industrialized nation of the USA was left in ruins, without the ability to build anything.

Tue, 07/17/2012 - 15:02 | 2625254 duo
duo's picture

we have to import the presses used to print our money.

Tue, 07/17/2012 - 15:21 | 2625354 FreedomGuy
FreedomGuy's picture

They actually PAID for their own rebuilding, too. Iraq, Afghanistan and others will not.

Tue, 07/17/2012 - 20:15 | 2626429 Stoploss
Stoploss's picture

Because we started the PONZI WAR to make that happen.

We're just out of shit to blow up right at the moment...

Tue, 07/17/2012 - 14:48 | 2625177 Chuck Walla
Chuck Walla's picture

After WW2, there were a lot of people who wanted to go back to work.  That is antithetical to Obama who needs masses dependent so that they can be antithetical subservient down the road.  Thats a good explanation for the continuing mal-allocation of capital to the rats and not the productive.



In politics, few talents are as richly rewarded as the ability to convince parasites that they are victims. ... generosity is seen as an admission of guilt, and the reparations as inadequate compensation for injustices – leading to worsening behavior by the recipients.


~ Thomas Sowell 


Tue, 07/17/2012 - 15:24 | 2625366 FreedomGuy
FreedomGuy's picture

Excellent quotation by Sowell! It is why no one in the "hood" ever says "Thanks!" but instead carjacks you. Redistribution by a more efficient method.

Tue, 07/17/2012 - 17:19 | 2625975 Bring the Gold
Bring the Gold's picture

Right because people in the "hood" aren't dealing with structural repression to go along with internal oppression. Should they work hard and learn? Absolutely! Do they have the same chance of doing well as someone born in New Haven Connecticut? Fuck no!

The biggest group of people in this country with entitlement mentality are the upper crust...period.

If you have no chance (live in the hood) and someone gives you free stuff, you're gonna fucking take it then look around at all the crack/meth houses and female family members who are prostitutes and perhaps, just perhaps you might STILL feel a tad angry. Unlike most people on this board I've lived in wealthy areas, and in third world countries and in shitty parts of the US. I've interacted with children of trust fund types and hood rats. Hands down the elite kids are far FAR more insufferable in their prickishness and have far less respect for their fellow human beings. Hood rats are just desperate and angry at not ever having a chance. The others are angry that they don't have EVEN MORE control over other people up to and including wiping out the hood rats. The difference is, the upper crust kids might very well be in position one day to do the harm on others that they so freely talk about.

Tue, 07/17/2012 - 17:22 | 2625984 Bring the Gold
Bring the Gold's picture

BTW rich folks, feel free to take away entitlements from poor people. See what happens I'm sure that will work out great. Its not like entitlements began as a cynical attempt to placate active and restless minority groups right? Oh wait...

Let them eat cake.

Wed, 07/18/2012 - 00:56 | 2627070 FreedomGuy
FreedomGuy's picture

Well, I grew up poor along side the hood, dude! I have lived in the Caribbean and I have been to third world countries.

I do not disagree with the fact that people will take free stuff including Social Security, Medicare, farm subsidies, etc. It is natural and it has its consequences. That is what Sowell is saying.

What I DO disagree with is the results the centrally planned welfare state gets. That is my point about the "hood". It does not produce anything useful. In fact, it subsidizes dysfunction. Without a centrally planned state the economy can breathe in and out on its own and individuals can find their space in it without automatic resort to any sort of crime.

As far as the rich go, I have met many and the first generation wealthy are not bad. They made their way to wealth and are often rather nice no nonsense people. It gets lost in the following generations and what happens is human nature. Kids suppose they are superior because of a status and wealth they did not earn. Statistically, they will lose it by the third generation. Think Paris Hilton if you will.

Last, men always and everywhere try to exert power and advantage over their fellow men. Men love power more than sex and fame. The genius of our nation is that we gave government only limited power because we know powerful men are easily corrupted. We specifically stated the purpose of OUR government was to protect the citizenry and our civil rights...NOT to be our rulers as the monarchs and privelaged classes of old.

We have decided that is no longer a good idea and now we give government nearly unlimited power because somehow people in government are closer to the angels than citizens in the private sector. This is the statists' dilemma that they never answer.

Tue, 07/17/2012 - 14:51 | 2625180 Landotfree
Landotfree's picture

It's over.  The world is seeking yield which can't match the amount needed by the equation.

It's an unwinable war against basic Math, all victories against the equation are only battles... the equation always wins.

WW2 was the forest fire which allowed new growth to rise, unfortunately you are going to have to light a fire bigger than Europe and parts of Asia like last time.   100 million had to go last time, you are probably talking 1-2 billion this time.   Most of the world will have to go up in flames this time.

All I see are 7+ billion unfunded liabilities walking around, to the system that is dead weight once peak has occurred.



Tue, 07/17/2012 - 15:01 | 2625247 LawsofPhysics
LawsofPhysics's picture

And people call me cynical.  But, alas, a correct and truthful assessment in the absence of a change in work ethic and social attitude.

What cannot be sustained, won't.  Nature does not give a shit, period.

Tue, 07/17/2012 - 15:05 | 2625267 Landotfree
Landotfree's picture

"Nature does not give a shit, period."

Damn straight.  It's over and all the lemmings are pointing their fingers on their march to the dark pit.

Tue, 07/17/2012 - 17:23 | 2625993 Bring the Gold
Bring the Gold's picture

Even if everyone in the world was allowed to work for wages (unemployment is key in wage suppression FYI) it wouldn't make a difference. There are too many of us and too few resources, arable land, fresh water, energy etc. etc.

We're at Peak Fucked.

Tue, 07/17/2012 - 14:47 | 2625192 dannynewmexico
dannynewmexico's picture

the end to all this shennanigans will be when war breaks out in the middle east...



the big one is coming soon

Tue, 07/17/2012 - 15:03 | 2625259 kito
kito's picture

danny from new mexico, how does one survive survivalism?..... is that like capitalizing capitalism?...............or cannibalizing cannibalism?.....

Tue, 07/17/2012 - 14:49 | 2625197 Snakeeyes
Snakeeyes's picture

Funny, M2 Money Velocity is at post WWII levels. Will there be a renaissance in bank lending? PROBABLY NOT! And capacity utilization stuck under 80%? We werent as massively regulated post WWII as we are now.

Tue, 07/17/2012 - 15:16 | 2625330 Bunga Bunga
Bunga Bunga's picture

Food stamp usage is at much higher now then post WWII = renaissance!

Tue, 07/17/2012 - 14:54 | 2625224 Yancey Ward
Yancey Ward's picture

Sheesh.  That table should go back to 1944 or so.  The stage for the 50s was set as WWII ended- not 5 years later.  In other words, government spending fell rapidly after 1945.  By 1950, the hard part of "austerity" was done.

Tue, 07/17/2012 - 15:01 | 2625252 LawsofPhysics
LawsofPhysics's picture

correct, and what were the tax rates again?

Tue, 07/17/2012 - 15:27 | 2625388 FreedomGuy
FreedomGuy's picture

Marginal rates at the top only were higher, taxes were lower. But hey, Sunshine, you go pony up more to the treasury and see how that works out.

Tue, 07/17/2012 - 15:27 | 2625389 FreedomGuy
FreedomGuy's picture

Marginal rates at the top only were higher, taxes were lower. But hey, Sunshine, you go pony up more to the treasury and see how that works out.

Tue, 07/17/2012 - 15:35 | 2625441 LawsofPhysics
LawsofPhysics's picture

I already "contribute" 45% of my income, so go fuck yourself.  

Wed, 07/18/2012 - 00:58 | 2627022 FreedomGuy
FreedomGuy's picture

I don't need to dumbass. I pay the same rate, just paid off a fucking audit from a layoff and fought off a second audit, not too mention the property taxes on my cars. So many taxes I decided to sell one to pay the first audit. I got radar detectors to avoid the highway tax men called cops and the new redlight revenue cameras. Got my new transponder to pay the toll roads. Every damn thing in life including driving to work comes with a tax!

The difference, asshole is I do not defend MORE taxes. You should be proud! You should say, "I am proud to pay 45% and I should pay MORE, like Obama says!" Theoretically, to balance the last two years budgets, you, me and all the remaining taxpayers should be paying 40% MORE! YOU support this shit. You should voluntarily pay more! Be consistent! I advocate less! I advocate liberty! I assert we get poorer and wreck the economy when government confiscates, borrows and prints more!

All democrats, socialists and statists should pay an extra 10% to prove they believe in ever bigger government. When I believe in something I do not wait for others to contribute.

Tue, 07/17/2012 - 15:35 | 2625430 Dr. Engali
Dr. Engali's picture

I'm sure you meant to say what where the effective marginal tax rates again?

Taxes are for little people.

     ~Leona Helmsley~

Tue, 07/17/2012 - 15:36 | 2625443 LawsofPhysics
LawsofPhysics's picture


Tue, 07/17/2012 - 14:55 | 2625229 DavidC
DavidC's picture

" key variable that is missing is a continent full of destruction that just needed America's helping hand and some Brady Bonds, leading to America reaping a disproportionate share of the benefits".



Tue, 07/17/2012 - 14:56 | 2625237 kito
kito's picture

80% net debt?, as in subtracting 24% from the real debt to gdp ratio????................

Tue, 07/17/2012 - 15:01 | 2625240 jplotinus
jplotinus's picture

The Cembalast propaganda piece is atrocious. It is yet another attempt to assert corporations should not have to pay taxes and/or that low taxes cause businesses to grow and jobs to flourish.

Both propositions are either false or ,at best, unreliably proven. The statistics on the relatiomship between taxes and job creation are notoriously biased and are about as reliable as BLS or NAR numbers Businesses can create jobs, but what is more correct at present is that they can also destroy jobs.

That is what corporate America has done on a relentless basis over the last 25+years. Yet, unlike the mantra that "business creates jobs" we almost never hear the truth acknowledged in corporatist circles that "business destroys jobs".

Tue, 07/17/2012 - 14:59 | 2625242 Bunga Bunga
Bunga Bunga's picture

One picture explains it all, why there will be no 50s "renaissance" anytime soon:

Only a massive GDP growth 10% higher then debt growth over a period of 10 years can bring the debt/GDP ratio down to the 1950s level. Then we could see a 50s "renaissance. But please, try this without war!

Tue, 07/17/2012 - 15:05 | 2625256 Herodotus
Herodotus's picture

The top marginal tax rate needs to be raised to 91% on any income over $100,000 and kept there for about 8 years like it was under President Eisenhower.  Also, cut the Defense Department and CIA budgets by 75%.  These folks need to be put on a strict diet.





Tue, 07/17/2012 - 15:05 | 2625268 lasvegaspersona
lasvegaspersona's picture

The rest of the world will not allow us the advantages of Triffin's Dilemma again. From here on out we (and I expect everyone) will pay for their net imports with labor and not just paper (Treasuries). The economic world is changing and this will be the focal point of the change. The new reserve curreny will not be bound to any nation/state. No one will be allowed the 'exorbitant privelege' again.

Tue, 07/17/2012 - 15:11 | 2625289 LawsofPhysics
LawsofPhysics's picture

Yes, but it will not matter one bit, unless the new currency is pegged to something fucking real.  If the "new" monetary unit can be easily gamed or printed, then it will be just as useless.  The monetary vehicle itself must insure real consequences for bad behavior, at least at some level.  Now you tell me, what monetary vehicle or store of wealth/value has done just that for over 2000 years?

Tue, 07/17/2012 - 15:12 | 2625294 kito
kito's picture

america 1950: CREDITOR

america 2012: DEBTOR

america 1950: industrious self reliant population

america 2012: gelatinous welfare induced population 

Tue, 07/17/2012 - 15:14 | 2625318 Hype Alert
Hype Alert's picture

Exactly.  Things are no where near the same.

Tue, 07/17/2012 - 15:17 | 2625336 wcvarones
wcvarones's picture

How convenient of that ratbag to leave out the inflation years of 1946-48 from his little table:


Year Inflation 1946 8.43% 1947 14.65% 1948 7.74%


We got out of WWII two ways: balancing the budget and letting inflation rip.   We are nowhere near balancing the budget with serial deficits of 8% - 10% of GDP now.  So pick your poison: inflation or default.


Tue, 07/17/2012 - 16:35 | 2625777 kito
kito's picture

ha, inflation. yes. release the kraken!!!!

Tue, 07/17/2012 - 18:09 | 2626129 The Alarmist
The Alarmist's picture

There's inflation, and there's official inflation, and rarely do the twain meet.

Wed, 07/18/2012 - 01:04 | 2627080 FreedomGuy
FreedomGuy's picture

Inflation (like unemployment) was calculated somewhat differently, then. But what is your point; that we SHOULD do inflation or a default?

Tue, 07/17/2012 - 15:22 | 2625361 Patriot Eke
Patriot Eke's picture

When America needs to be rebuilt, Russia and China will welcome the opportunity.

Tue, 07/17/2012 - 15:28 | 2625391 Flakmeister
Flakmeister's picture

Wow, could it also be that increasing the supply of oil without significant increases in price like in the 50-60s ain't going to happen again, ever?

Tue, 07/17/2012 - 15:29 | 2625403 miker
miker's picture

Huge difference back then.....dirt cheap AMERICAN oil.  Hadn't even reached peak yet.

Also, regarding inflation in late 40's; that was a result of stored inflation from the war.  Not a policy during post war; at least until Kennedy got into office. 

Tue, 07/17/2012 - 15:34 | 2625435 Solon the Destroyer
Solon the Destroyer's picture

Three huge things Cembalest misses:

1. There was a gold standard then, at least for international trade

2. There was no derivative pyramid

3. The liquidation value of that debt was significantly smaller than today's debt, because of the Fed's present low interest rate policy, a function of points 1 and 2 above.

So we are even worse off today than even he thinks.

Tue, 07/17/2012 - 15:35 | 2625436 Bicycle Repairman
Bicycle Repairman's picture

There is a way out of this.  It has been imagined, so it will be.  The truth of the way out will not be foretold, nor will it be admitted later.  It will remain hidden even as it is unfolding. 

You'll have to find a path through it. 

White skin, a high IQ and a fierce allegiance to the flag may not be enough.

Tue, 07/17/2012 - 15:43 | 2625497 tdogg
tdogg's picture



How is the "Net Debt" to GDP calcluated?  The last time I looked Fed deficit to GDP itself was 1:1.  This does not including state/local/personal debt which would take it to 3:1.

Can anyone enlighten me?




Tue, 07/17/2012 - 16:30 | 2625758 BurgundianRon
BurgundianRon's picture

I believe net debt backs out intragovernmental debt (guarantees and non-marketable securities - like IOU's to the Soc Sec Admin) and only looks at the net public debt (i.e. money that people, corps and countries actually expect to get repaid.

Just balance sheet manipulation. Everyone else does it, why should the feds not play too! :-)

Tue, 07/17/2012 - 16:06 | 2625633 Totentänzerlied
Totentänzerlied's picture

Calling the post-war boom a renaissance is insulting to actual renaissances.

Tue, 07/17/2012 - 16:23 | 2625719 cocoablini
cocoablini's picture

It wasn't a business renaissance really-the country went into a massive debt deflation event as it has today.

After trying to restart the economy fiddling with taxes, monetization and trickery(social security) and totally failing what happened? We went to WAR and we were the last industrial nation standing.

Listen up folks-it's not that massive Keysian spending helped, it's that the rest of the world had to BUY from us to recover. We made a fortune selling to the French, British, Japanese,Germans etc. Plus Russia was "offline" and China was in chaos.

We helped destroy the competition and we had full employment in financials, manufacturing, cosntruction, reconstruction and commodities.

Think about it. We would be in great shape if we spent a little to wipe out China and Russia and India and Brazil and Europe and the MiddleEast...

Spool up Iran.


Tue, 07/17/2012 - 16:45 | 2625818 Fubared
Fubared's picture

Funny. No one seems to care about history.  US history is at best 300 years old. very successful in the short term. Chinese history is +3000 years old. Cycling back and forth, still with some major inventions as the centuries goes by. European history created the USA. What plausible factors are there for a continued US empire? If history has something to say, very few actually. The biggest irony is that the whole mess is mostly home made in the US itself.

But I wish you the best of luck.

Edit: spellcheck




Tue, 07/17/2012 - 17:06 | 2625911 Winston Smith 2009
Winston Smith 2009's picture

Immediate post-WWII advantages for US:

1. All major industrial competitors were in rubble.

2. Brainiacs from same wanted to escape the rubble and come to the US.

3. Modern US industrial plants built up during the war rebuilt the world.

4. US was an oil exporter.

5. Dollar became the world reserve currency.

No, that set of circumstances will never repeat itself.

Tue, 07/17/2012 - 18:11 | 2626138 The Alarmist
The Alarmist's picture

Yeah, let's all ponder that "never" while our dear leaders continue to stoke the flames in Southwest Asia.

Tue, 07/17/2012 - 22:21 | 2626734 TheObsoleteMan
TheObsoleteMan's picture

This piece is very narrowly focused. The larger reason why the US will fail to climb out of it's hole is mostly due to the fact that we are a far differant people than we were during the post war era. The contrast is quite stark actually. Most americans today are socialist and don't even know it. And even if they did, would'nt consider it a bad thing. Our culture {if you can call it that} has gone to seed. Our political landscape rivals ancient Rome.  But they say this is the natural progression of things. I don't buy that. People have a choice, and they chose to hand over their inheritance to people who had just as soon see them dead.

Wed, 07/18/2012 - 07:23 | 2627419 EmileLargo
EmileLargo's picture

American post-War "miraculous" growth seems that way because for four years Americans spent absolutely nothing on any items that were non-essential and everything else was diverted to war production. When the war ended, the Keynesians were actually concerned that there would be a massive "spike" in unemployment as the returning GIs would not be able to find employment after demobilisation.

What happened instead is that wasteful spending due to the war disappeared at the end of the war and resources were diverted to the production of goods that were demanded by consumers rather than generals. This combined with the deleveraging of private balance sheets dueing the 30s and 40s created an environment in which the only large debtor was the government. But because private households and corporations were not massively levered, a new credit boom could begin. In the early years, due to low levels of leverage $1 of credit produced $5 of GDP.

Assuming that the US can reproduce that performance today is foolhardy to say the least. The only common factor is the sovereign debt to GDP ratio. None of the other factors obtain. Also, the population had a tiny number of elderly people and a massive demographic boom in the form of the baby boomers was underway. A useful contrast to the US was post -War Britain. Saddled with lousy policies and too much war debt, Britain did not enjoy anything like the growth that the US or West Germany enjoyed after the war. If anything, post-War economics completely refutes Keynesianism. West Germany and Britain's contrasting performances completely refuted the effectiveness of Keynesian policies. Some myths die hard though. I doubt Keynesian nonsense ever will.  

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