Send a Tweet
Most Popular Choices
Share on Facebook 5 Share on Twitter 1 Printer Friendly Page More Sharing
Exclusive to OpEdNews:
OpEdNews Op Eds    H3'ed 3/9/12

David Stockman: More Reasons to Be Pessimistic About the US Economy

By       (Page 1 of 5 pages)     (# of views)   8 comments
Author 8235
Follow Me on Twitter     Message Richard Clark
Become a Fan
  (109 fans)
- Advertisement -

What follows here, initially, is my synopsis, simplification and interpretation of some remarks by David Stockman.   Following that is my interpretation of some remarks by market analyst Charles Biderman, as reported by economist Mike Whitney.

 

Stockman says the reason he is so down on the U.S. economy is that it's become super-saturated with debt.     He explains:

 

- Advertisement -

Typically the private and public sectors would borrow $1.50 or $1.60 each year for every $1 of GDP growth.   It had been at that ratio for 100 years save for some minor squiggles during the bottom of the Depression.  

 

However, by the time we got to the mid-'90s, we were borrowing $3 for every $1 of GDP growth.   And by the time we got to the peak in 2006 or 2007, we were actually taking on $6 of new debt in order to grind out $1 of new GDP.

- Advertisement -

 

People were taking $25,000 - $50,000 out of their home for the fourth refinancing.   And that's what was keeping the economy going -- it created jobs in restaurants, retail, garden care, and Pilates instruction, all of which jobs were not supportable by way of income from the production of essential goods and services.   Why not?   Because there was a grave shortage of such work!   In other words, people were paying for luxuries with money they had borrowed, which was money that was readily available to them because of the expanding bubble in the ever-inflating prices of real estate -- which of course couldn't last.   (But few people wanted to (or did) think about that at the time.)

 

In any case, this is what is known as a bubble  

 

It was simply spending borrowed money to pay others to service you in one way or another.   Problem was, the vast majority of the people who were spending this money did not produce anything of fundamental value for others to purchase.   Instead most of them simply borrowed much if not all of the money they needed.   And the Fed created money out of thin air at an unprecedented pace.

- Advertisement -

 

Therefore, even the alleged GDP growth of 1.6% (annual GDP growth over the past decade) is overstating what was really going on in our economy, and encouraged blindness as to what is about to happen.   How so?    Because, when a country's citizens are finally forced to stop borrowing at this tremendous frequency (and amount) of borrowing, the rate of GDP "expansion" inevitably stops as well.

 

Next Page  1  |  2  |  3  |  4  |  5

 

- Advertisement -

Rate It | View Ratings

Richard Clark Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)
 

Go To Commenting
The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.
Follow Me on Twitter     Writers Guidelines
Contact AuthorContact Author Contact EditorContact Editor Author PageView Authors' Articles
Support OpEdNews

OpEdNews depends upon can't survive without your help.

If you value this article and the work of OpEdNews, please either Donate or Purchase a premium membership.

STAY IN THE KNOW
If you've enjoyed this, sign up for our daily or weekly newsletter to get lots of great progressive content.
Daily Weekly     OpEdNews Newsletter
Name
Email
   (Opens new browser window)
 

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Was Pat Tillman Murdered by an American Sharpshooter to Shut Him up?

New JFK assassination bombshells

Two U.S. presidents implicated by ex-CIA black-ops assassin

The cholesterol - heart disease scam: How the medical-industrial complex is raking in billions at our expense

Four Ticking Time Bombs That Will Soon Ignite a Revolution

The Ultimate Goal of the Bankster-led Political-economic Warfare Being Waged Against Us Is . . . ?