Wednesday , 26 October 2016

Piling On Debt Has Destroyed the “American Dream” – Here’s Why

The American Dream–characterized by plentiful jobs offering living 25-Questions-To-Ask-Anyone-Who-Is-Delusional-Enough-To-Believe-That-This-Economic-Recovery-Is-Real-300x300wages, security and opportunities to get ahead–is over…. Piling on debt is not a solution; it’s simply a politically expedient method to forestall the crisis, while guaranteeing the eventual repricing will be even more severe because the debt load is then so much larger. [If you think otherwise,] I strongly recommend that you reduce your dosage of Delusionol.

World Debt Escalating
Adding more debt to a weakening base of real productivity and income yields diminishing returns. Seven years of strong, widely distributed global growth before the 2008 global financial meltdown required $15 trillion in additional non-financial global debt. Seven years of tepid, fragile expansion since 2008 required $40 trillion in additional debt. That is the definition of diminishing returns:
Piling more debt on a base that isn’t expanding fast enough to support skyrocketing debt leads to a collapse of the feebly supported debt: borrowers default, asset prices crash as buyers vanish and lenders go bankrupt as the assets held as collateral are repriced….but enabling more debt does not reverse supply-demand imbalances or create income out of thin air.
GDP Has Expanded Only Modestly
In the U.S., debt has completely outpaced the expansion of goods, services and income for years: look how debt has soared while GDP has expanded only modestly:
Total Credit Has Skyrocketed
GDP (not adjusted for inflation) is up 282% since 1990, while total credit skyrocketed 444%. The tiny decline in credit in the 2008 global financial meltdown almost destroyed the entire credit-bubble dependent economy:
Wages & Salaries as %GDP Declining
Meanwhile, earned income as a percentage of GDP has been falling for decades. How can an economy support additional debt if earned income is declining as a percentage of economic activity? It can’t.
Here’s another look at wage stagnation:
Does the trendline of federal debt look remotely sustainable to you? [I]f so, I strongly recommend that you reduce your dosage of Delusionol.

The original article was written by Charles Hugh Smith ( and is presented here by the editorial team of (Your Key to Making Money!) and the FREE Market Intelligence Report newsletter (see sample hereregister here) in a slightly edited ([ ]) and abridged (…) format to provide a fast and easy read.]

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