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In Q2 America Added $2.33 In Debt For Every $1.00 In GDP

Tyler Durden's picture




 

As noted before, courtesy of the GDP revision, all the kneejerk reactions in the past 3 years to various GDP headlines (preliminary, first and final revisions at that), were all for nothing. In fact, today's GDP number will be revised and re-revised in the next two months, then re-re-re-revised at the annual revisions in 2013, 2014 and 2015. In other words, the number after (and likely before) the decimal comma is irrelevant. One thing however stands, and that is the trendline change in actual GDP compared to the change in debt used to "buy" said GDP. Which is why we present our favorite chart showing how much more total federal debt was added per quarter over the GDP. Bottom line: in Q2, the US added $274.3 billion in debt while adding $117.6 billion in GDP (from the revised data: Q1 GDP of $15,478 billion rising to just $15,595 billion in Q2). Probably what is more indicative, is that in Q2 the delta change between debt and GDP rose from 2.28x in Q1. But that too is largely noise and will be revised. What won't be revised is that over the past two years, the US has added 2.42x more debt than it has added GDP.

Another way of visualizing the above courtesy of two trendlines- that of US debt and of GDP:

And that is all that matters (and all who say corporations benefit from the relevering of the sovereign host due to some wrong equation they learned in Econ 101 may want to take a long hard look at Q2 corporate revenues and then explain why it has just printed the first year over year decline since the Lehman collapse).

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Fri, 07/27/2012 - 10:45 | 2656501 LULZBank
LULZBank's picture

Dont be so pessimistic. We will then start a new Dollar and restart from Zero!

And then the party will just carry on... to maternity!!!

Err or was it eternity? Doesnt matter, you know what I mean.

Fri, 07/27/2012 - 10:52 | 2656529 DOT
DOT's picture

Punch to be replaced by Kool-Aid.

Fri, 07/27/2012 - 10:55 | 2656543 overmedicatedun...
overmedicatedundersexed's picture

OT but we had a large number of posts about this topic:

- A citizen with a gun stopped a knife wielding man as he began stabbing people Thursday evening at the downtown Salt Lake City Smith's store.

of course for all those saying an armed audience at bat man would have never helped stop that nut..hmmm

Fri, 07/27/2012 - 11:11 | 2656606 eclectic syncretist
eclectic syncretist's picture

Ever diminishing ROI (return on issuing more fiat debt)

Fri, 07/27/2012 - 11:37 | 2656728 JR
JR's picture

Time isn't buying the Fed courtiers a solution, it's buying them cement shoes.

Fri, 07/27/2012 - 10:28 | 2656429 toady
toady's picture

I can already feel the hangover. It's gonna be a mother.

Fri, 07/27/2012 - 10:30 | 2656443 TrumpXVI
TrumpXVI's picture

Tomorrow never gets here; tomorrow is always tomorrow.

Party onward.

Fri, 07/27/2012 - 10:33 | 2656457 t_kAyk
t_kAyk's picture

Party on, Garth.

Fri, 07/27/2012 - 10:43 | 2656494 akak
akak's picture

Gold says: "QE3 --- SHWING!"

Fri, 07/27/2012 - 10:33 | 2656458 Cursive
Cursive's picture

@TrumpXVI

Tomorrow dawned in 2007/8.

Fri, 07/27/2012 - 10:18 | 2656396 Jason T
Jason T's picture

We're the only major economy that still has twin deficits over 10%  ...Britain at 9.9% a close second.  

We'er a basket case. http://www.economist.com/node/21559356

Fri, 07/27/2012 - 10:18 | 2656397 Sancho Ponzi
Sancho Ponzi's picture

Don't worry, it's transitory. <snark>

Fri, 07/27/2012 - 13:38 | 2657323 jerry_theking_lawler
jerry_theking_lawler's picture

so is life...

Fri, 07/27/2012 - 10:19 | 2656400 FieldingMellish
FieldingMellish's picture

Just wait until interest rates rise and the debt then has to be serviced... it will be impossible. Therefore, either rates will never rise again or the debt will never get serviced (default). Enjoy.

Fri, 07/27/2012 - 13:40 | 2657329 jerry_theking_lawler
jerry_theking_lawler's picture

heh heh....he said SERVICED.....

Fri, 07/27/2012 - 10:19 | 2656401 johnQpublic
johnQpublic's picture

transitory

Fri, 07/27/2012 - 11:28 | 2656680 Poor Grogman
Poor Grogman's picture

It's not your debt anyhow.
Someone else did that...

Fri, 07/27/2012 - 10:20 | 2656402 PulpCutter
PulpCutter's picture

The old "you can't borrow your way out of debt" argument, chanted 24x7.  Maybe if you repeat a lie endlessly, some idiots will believe it?

"You can't fix debt with debt" is false, and the reason is that it depends on the category of debt; private versus public.   After a private debt bubble (aka, Minsky moment), public debt can step in and provide demand until the private debt is deleveraged, and private demand picks back up again.  America did it after 1938, and that's also how the world has gotten out of most recesssions since then.

America's TOTAL (public and private) debt to GDP ratio has been dropping since 2009.  While you're waiting for the Apocalypse, America is paying down private debt at the fastest rate since the 1950s.

http://articles.marketwatch.com/2012-06-08/commentary/32103077_1_debt-pr...

 

Fri, 07/27/2012 - 10:23 | 2656413 azzhatter
azzhatter's picture

Ridiculous argument. People have to delever so they can lever up again? Government has to lever up so it can delever later?

Fri, 07/27/2012 - 12:19 | 2656943 fresno dan
fresno dan's picture

its levers all the way down...

Fri, 07/27/2012 - 12:29 | 2656997 Messianic
Fri, 07/27/2012 - 10:25 | 2656416 Tyler Durden
Tyler Durden's picture

 

 

When presented with math and facts does socialism spontaneously combust like antimatter?

And of course this:

Granted, a bulk of the surge above is due to the epic levering of students whom the administration has decided to make the next generation of debt slaves.

Fri, 07/27/2012 - 10:30 | 2656444 Buckaroo Banzai
Buckaroo Banzai's picture

Unfortunately not, it seems. In fact, socialists just seem to dig in their heels when their stupid ideas get knocked down by reality.

It is a mental disorder.

Fri, 07/27/2012 - 11:16 | 2656536 Comay Mierda
Comay Mierda's picture

they also forget there are never enough FRNs in existence to pay off interest on the principal lent out to the economy.

Therefore the only way for the economy to stay "solvent" is through a ponzi scheme of more and more printing to pay off interest and principal from past loans

the exponential decay in the value of the dollar since 1913 is proof of this

the socialists LOVE this because eventually the living standards will be eroded so much that all the serfs will be dependent on the government for sustenance

then the Hunger Games  becomes reality. along with 1984, Brave New World, Atlas Shrugged, etc

the socialists only have one job to do - keep 'mericans IGNORANT of this fact until it's too late

and they are doing a fine job at this, with support from all major media outlets - CNBC, FOX, MSNBC, CNN, NYTIMES, etc

they will just keep baffling you with bullshit to keep you ignorant while they slowly, but surely, rob you of your wealth

Fri, 07/27/2012 - 11:19 | 2656636 Hype Alert
Hype Alert's picture

The truth is such a buzz killer on a Friday, we will choose to ignore it.  Same with every other day of the week.

Fri, 07/27/2012 - 13:45 | 2657368 Anusocracy
Anusocracy's picture

Socialism is how the hunter-gatherers survived.

Their world is gone but their socialism is still here.

Fri, 07/27/2012 - 10:40 | 2656487 Central Bankster
Central Bankster's picture

TD

Link your article discussing why real gdp is negative when debt is saturated, so these trolls can finally understand why we get nominal gdp growth and exponential debt growth.

Fri, 07/27/2012 - 11:52 | 2656800 JR
JR's picture

We enter the black hole of debt, not casually, but at warp speed.

The disordered domination of finance, the dictation of finance, over industry and the acquiescence to that reversal of order, promotes the return of the Servile State. (paraphrased from Money Manipulation and Social Order)

Fri, 07/27/2012 - 12:01 | 2656850 PiratePawpaw
PiratePawpaw's picture

"I reject your reality and substitute my own"...Socialism

 

P.S My reality is having a hard time right now, can it have some more of your money? Thanks

Fri, 07/27/2012 - 10:28 | 2656427 Buckaroo Banzai
Buckaroo Banzai's picture

Bullshit. This is the wrong place to be publishing dopey Keynesian crap like this. Go back to DailyKos, or HuffPuff, or whatever stupid liberal website you came from.

The world hasn't "got out of" a recession since 1913. The recessions just get papered over, and the negative effects are pushed into the future.

Son of a bitch, people like you are fucking ruining this country.

Fri, 07/27/2012 - 10:59 | 2656559 TruthInSunshine
TruthInSunshine's picture

So, what you are saying is that the entirety of economic growth statistics in a fiat-debt-credit based economy, where no inherent value underlies the currency used in commerce, is dependent on the ability of radical central planners of fractional reserve banking to create bubble after bubble, regardless of the sector or segment it's in, and that these bubbles are literally the only way that what is a Ponzi of an economic system can perpetuate itself?

 

I agree.

Fri, 07/27/2012 - 10:32 | 2656451 SheepDog-One
SheepDog-One's picture

Fucking azz hatter.

Fri, 07/27/2012 - 10:34 | 2656463 LULZBank
LULZBank's picture

You people talk about this debt as if it will actually be paid off.

What do you think wars are for? Just fun??

Fri, 07/27/2012 - 10:37 | 2656468 youngman
youngman's picture

My father lived thru the Great Depression...he saved everything and never had a loan after that...it affected him greatly...and he always talked or lectured about the GD.....he never talked about WWII

Fri, 07/27/2012 - 10:55 | 2656544 Whoa Dammit
Whoa Dammit's picture

My dad was bron during the depression, and never would buy stocks, because he was taught by his parents that stocks were just to make the rich richer by funding the companies that the rich own.

Fri, 07/27/2012 - 11:21 | 2656652 TPTB_r_TBTF
TPTB_r_TBTF's picture

Well ... my Dad was born during the Depression and he bought Fund shares because his financial adviser told him to.  He rode the waves in the 80s and 90s, cashed out and is enjoying retirement.

 

Fri, 07/27/2012 - 10:40 | 2656485 Paul Atreides
Paul Atreides's picture

Ask Greece and Spain how that's working out...

Fri, 07/27/2012 - 10:46 | 2656505 FieldingMellish
FieldingMellish's picture

Ratchet effect. Public debt rarely, if ever, gets paid down. When gov'ts have had chances to pay down debts, they usually go the opposite direction and load up. This debt will HAVE to be serviced. 

Fri, 07/27/2012 - 11:18 | 2656633 eclectic syncretist
eclectic syncretist's picture

Yeah!  Paying down debt via defaults, bankruptcies, and write-offs.  But hey, what's wrong with that in your bizarro world with Rex Nutting there.  It's the same as using the profits of productive capital enterprise to pay down debts right? lmao

Fri, 07/27/2012 - 11:22 | 2656660 monopoly
monopoly's picture

Speaking of idiots. I think Pulp is MDBonus in disguise. Debt has never allowed any country to sustain itself. You cannot grow on debt. Sure, short term it may "look good" but the more debt you incur the more pain you must sustain when there is no one left to take on your debt. This country is NOT growing, it is festering on false hope. The only way for a country to grow is by investment of real money. Not the crap we pull in from thin air. 

Never in the history of Man has a country survived long term by creating debt. It never has worked and it will not work now here in America or Europe, China or the Middle East.

Please, go troll on a site where there are no individual thinkers and they drink whatever is given to them. It will not work here.

Fri, 07/27/2012 - 11:30 | 2656697 Inthemix96
Inthemix96's picture

This has to be said pulpcutter, sorry if someone posted something similar,

What in fucking gods green earth do you not understand about 16 TRILLION in debt and growing?

Remember, they only created the principal, not the fucking INTEREST?????????

If you cannot wrap you're small mind around that sunshine, you seriously need to fuck off and do a bit of research,  its called a ponzi FIAT game for a reason you fucking clown????????

Fri, 07/27/2012 - 11:40 | 2656741 piliage
piliage's picture

Interesting thesis. From your link...

"Cecchetti and his co-authors found that growth can be impaired once nonfinancial corporate debt hits about 90% of GDP, or when household debts hit 85% of GDP, or when public debts hit about 85%.

 later, in the same article...

"In the U.S., household debt has now fallen to 84% of GDP from a peak of 98%. Nonfinancial corporate debt has fallen to 77% from a peak of 83%. Financial sector debt has plunged from 123% of GDP to 89%. Public debt has risen to 89% from 56%."

So, by your own link and argument, US growth is now officially impaired by public debt. Do you care to revise your bullshit argument?

 

 

 

Fri, 07/27/2012 - 12:58 | 2657104 A Nanny Moose
A Nanny Moose's picture

Here we go again. What ultimately sustained our exit from TGD 1.0, was the obliteration of the productive capacity of every major industrialized nation on the planet. We were the only nation left with the industry required to replace all those Broken Windows.

There was a similar impact after the Japan disasters. GM's sales improved because there was nothing to buy from Japanese makers. GM even state as much in its 2Q12 (IIRC) report.

Let's not forget the two US insolvencies (FDR gold confiscation, and Nixon gold elimination), and utter destruction of the USD purchasing power. In fact, we have been little more than a string of insolvencies since 1913.

Fri, 07/27/2012 - 10:24 | 2656415 PaperBear
PaperBear's picture

Ponzi pyramid economics.

Fri, 07/27/2012 - 10:26 | 2656419 barwar
barwar's picture

Lovely money multiplier we got going there.  .4x is slighly shy of the 1.5x Romer and Bernstein predicted...

http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf

Bwaahaahaahaaa....

Fri, 07/27/2012 - 10:29 | 2656434 kraschenbern
kraschenbern's picture

All right guys.  So we're losing $1.33 cents on every $1.00 we make on GDP.  But we'll make it up on volume!

Fri, 07/27/2012 - 10:29 | 2656440 inkarri9
inkarri9's picture

On analyst estimate of $2.34...see, the government can play the one cent beat game too....rally on!

Fri, 07/27/2012 - 10:39 | 2656441 SheepDog-One
SheepDog-One's picture

OH so then obviously what we need is even MORE debt here with stawk indexes flirting around all-time record highs!! 

QE-NEW YAY!! FREE MONIES YAY!! Buy STAWKS!!

Fri, 07/27/2012 - 10:38 | 2656462 LouisDega
LouisDega's picture

I know this is infintile, But the Beaver made me do it..

dow_13000_embroidered_hat-p233122193355283430bzjgs_152.jpg

Fri, 07/27/2012 - 10:36 | 2656471 Weisbrot
Weisbrot's picture

digital currency is the future ultimate gloabl fiat

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