Loading ...Re-post by Richard at Rambus
Ten years into this monetary experiment, central banks did create growth…US Gross Domestic Product (GDP) was about $15 trillion in 2008.
Current GDP is about $22 trillion. That’s $7 trillion of economic growth.Impressive… until you figure the cost of that growth.
Over the same period, the US national debt increased from $10 trillion to $22 trillion.So, it took $12 trillion of debt to create $7 trillion of economic growth.
The marginal utility of all of this new debt is decreasing And it’s the same story all over the world.The US economy is so dependent on cheap money, it can’t even handle 2% interest rates (the Fed hiked rates from 2.25% to 2.5% last
December and stocks fell 20%).But Europe is even worse. Europe has negative interest rates. And the European economy is so weak (it grew 0.2% in Q4), it can’t even handle ZERO percent interest rates.
Gabby Hayes
Interest rates Ha! what about Oil lol……Seems like $75 WTIC is a strain according to the POTUS……..Oh wait $60 WTIC is maybe is now the straw? TPTB probably starred in Bird Box, not that I’ve seen it lol…..
Anybody get the feeling we are not in Kansas anymore folks……..Fully any chance of a Poll on what Tenter’s think (of any sort) can weather another 2008 GFC? Maybe a list? Like a combo platter list even. I’ll have the #3 special CuZn coated Pb with a side order of Physical Au some crisp Benjamin’s and side of luck to go………Thanks
They will just print and print if there is another 2008 financial crisis. Everywhere. I mean the US dollar index is higher now than it was at any time 2008 right? In 2008 it had its low around 70 then spiked to 90. Now it’s in the 90-100 range. Probably because the economies of Europe, Japan and UK are inworse trouble. However I would have expected emerging market currencies to have started an upward march against these dead first world currencies but it hasn’t really happened, at least not to any great extent. The monetary debasement has been a merry go rdoung USA to UK to Japan to Europe and back again and they all got away with it.
I wonder if in the next crisis, one of them will crack. Let’s say the pound suffered a massive drop or even a hyperinflation. It just seems that, so far, the central bankers have micro-managed it so one of these four units does not completely fail. So many people are betting on Japan to be the first one to go but I’m not so sure. I was thinking the UK is more likely, perhaps because of the Brexit conflict and the accelerating loss of faith in the rule of law in the UK, it’s unsustainability as a union of 4 incompatible countries and the loss of democracy. This incompetence and dysfuncionality of governance has to have a long term impact on the status of the city of London as a place to park money sagely. So my bet has been on the UK for a while to be the first to collapse if any of the big 4 does.
Greenspan talked of inflationary instability as a consequence of QE but it has not happened yet. How that bullet has been dodged, who can know? Maybe the central bankers have been clever – but they will have to be more clever next time around, I think.
Got gold ? 😉
Hang on though. The economic growth is measuring the annual GDP so over several years you have more than that $7T. Over 10 years if that goes up at 0.7T a year for instance, you would have about 55×0.7 or $35T of economic output to measure against your $12T of additional debt. I’m not justifying it but you could look at it in this other way. Like you have to add the incremental GDP increases each year to get a total output figure, like 0.7 + 1.4 + 2.1 + 1.8 + 3.5 + 4.2 + 4.9 + 5.6 + 6.3 + 7.0T and that’s going to give you 35T more $$ over what you would have had if the GDP had been stuck at $15T/annum instead of rising to $22T/annum in the 10 years.
However, you could say what is the incremental debt (ie the annual deficit vs the in economic growth per year.
Again 0.7T of annual increase in GDP for about 1.2T of addition additional debt per year, which is more like the way you are counting it. And that is the way it really is I guess because the economic growth is critically dependent on the constant increase in the debt.
I mean if the debt of the US never increased above $22 trillion the economy would collapse by next year, right?
So actually you are right. I was just trying to see it another way but since the economic growth is dependent on the debt increase