Bill Bonner here at The Daily Reckoning pretty much nailed the problem when he
said that "During the 2001-2007 period, credit in the United States increased
by $22 trillion. The nation's GDP increased only by $4 trillion.”
The ugly result was that, dividing one into the other, "For every extra dollar
of output, Americans took on $5.50 of debt" which is the same as me stupidly
taking a part-time job in addition to my regular job when I hate working my
regular job because I hate working, just to make a few extra dollars because
all of my income from my regular job (which, if you remember, I hate) is
already used to pay debts, and then I used this "extra income" to borrow 550%
of the extra income! Hahaha!
Now, I admit that "total national credit" and "gross domestic product" (GDP)
are pretty difficult concepts of the kind that have
no meaning to a guy like me just trying to get enough money together to buy
some gasoline and maybe a couple of tacos, a fact made more difficult by the
fact that GDP is now, in July 2009, stuck at $14 trillion, and which now
supports total debt of around 300% of GDP, which means that total public and
private debt is a staggering $42 trillion, almost doubled from 2007!
And in the meantime, non-farm payrolls have been stuck at 131 million the whole
time since 2001!
As I am finishing pumping the gasoline into my car, I notice that he is only
talking about a six-year period, yet in that time, this means that 140 million
total workers in this country took on ANOTHER $157,142.87 in debt! Each! EACH!
My trembling hand gingerly shook the last few precious drops of gas from the
nozzle into my tank, like some bizarre scene from the movie Mad Max, as
some economic facts flashed into my mind, and I mused out loud, "You know, the
national debt on January 1 of 2001 stood at $5.663 trillion, whereas on January
8, 2007 it stood at $8.667 trillion. So only $3 trillion of that $22 trillion
in additional credit came from the profligate deficit-spending federal
government in those six years! Yow!"
My wife, waiting in the car, suddenly wants to know how come I can remember
those old facts and figures, but yet I can't ever seem to remember the dates of
our wedding anniversary or the kids' birthdays?
The answer, of course, instantly flashed into my mind, and I thought to myself,
"The reason, you old bat, is that such crushing federal debt, especially now
that it is being monetized by the filthy Federal Reserve creating the money and
credit to buy the gobs of government debt, is Very, Very Important (VVI), and
if you had any idea what that kind of rampant money creation is going to do to
ruinous inflation in consumer prices, and thus do this country, and do to you
and those bratty kids you are always yammering about, then you would not
compare such monetary and fiscal stupidities to the scant importance of the
birthdates of some idiot kids that nobody ever heard about and who will
probably end up marrying badly and living their entire lives in some
incomprehensible, hellish Theater of the Absurd, just like their cursed father!
Oh, Death, where is thy sting?"
But, older and wiser, I did not say that out loud, and I just pretended that I
didn't hear her, continuing ominously, "If the socialist/commie-think federal
government only borrowed and spent $3 trillion in those six years, who borrowed
and spent the other $18 trillion?"
My thinking was that this question would generate some thoughtful discussion
about the Austrian school of economics, which agrees that massive increases in
the money supply is a Bad, Bad Thing (BBT), or maybe bring up a reference to
Milton Friedman, who correctly said that "Inflation is always and everywhere a
monetary phenomenon" upon which she which would contemplate and come to the
correct conclusion, which is that we need to buy as much gold and silver as we
can, to protect ourselves against the guaranteed damage to the buying power of
the dollar from all of this monetary and fiscal malfeasance and malversation,
and to hell with the kids and their damned birthdays!
Alas, it was not to be. Instead, it only generated a lot of yelling about how I
am the worst husband and father in the whole world, which then generated a lot
of other voices in my head screaming, "We're freaking doomed!" because I know
for a fact that the national debt is now, a lousy two and a half years later,
over a whopping $11.6 trillion, which is a few trillions more! Trillions!
Like I said, we need to buy as much gold, silver and oil as we can, and doing
anything else would be another Big Stupid Mistake (BSM), a phenomenon which
most of us have made too many times already, making the buying of gold, silver
and oil that much sweeter.
Whee! This investing stuff is easy!
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2009, The Daily Reckoning.)
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