So, How Do You Think This Movie Will End?

[Soul Crusher]

So, How Do You Think This Movie Will End?
Henry Blodget | Jan. 30, 2010, 12:06 PM | 1,957 |  26

www.businessinsider.com
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PrintTags: Economy, Debt, Stocks, Mortgages, Financial Crisis, Recession
These two charts tell you pretty much all you need to know about the state of the US economy.  They also, unfortunately, provide some clues as to how this movie will end.

First, from John Mauldin, the state of the U.S. government's finances.  The red line is spending.  The blue line is tax revenue.

Can you imagine if that was your household?

Second, from Ned Davis, the state of our country's debts, as measured by debt as a percentage of GDP.  The little peak to the left was the debt mountain we accumulated during the Great Depression, which took a decade to work off.  The, um, bigger peak to the right, is the one we've accumulated now.

So how will this movie end?

Well, in the near-term, we can try to borrow more to fill the hole between the red line and the blue line in the chart on the top.  That will postpone the ending and give us a chance to kickstart the economy again.

Of course, every dollar we borrow will also drop down to the chart at the bottom, making the mountain even taller (unless private-market debt shrinks by an offsetting amount--this chart includes both government and private debt).

If we're lucky, in the intermediate term, the economy will start growing more rapidly (blue line turns up) and the government will be able to ease off on spending (red line turns down), making it so we can borrow less every year.  If that happy trend continues, we'll eventually only have to deal with the nasty looking chart at the bottom: The debt mountain.

As to that...  The accumulation of the debt mountain is what has fueled the impressive GDP growth we've enjoyed for the past 30 years.  It's fun borrowing more money, because when you borrow more money, you can spend more money, which is fun!

Of course, in the end, when you've borrowed as much as you can, you have to start paying some of the money back (or, at the very least, borrow less each year than you used to).  And to pay the money back, you have to start spending less.


So, again, how do you think this movie will end?

If we're lucky, it will end gradually, in a long, boring couple of decades in which we gradually get our discipline and competitiveness back and bring our finances under control.

And if we're not lucky?

Well, then, the movie will have a more exciting ending.

See Also: We Are So Screwed

[Ganuvanx]

The looting of the people/treasury, the chronic and undeniable signs of the end of an empire. There’s no way out of this. Watch out, they are coming for our 401k’s and retirement money now.

[Soul Crusher]

The looting of the people/treasury, the chronic and undeniable signs of the end of an empire. There’s no way out of this. Watch out, they are coming for our 401k’s and retirement money now.

Funny you mention that, I have been reading a lot of articles on business websites on this issue and what the govt has planned.  Scary shit! 

[Mons Venus]

Amazing how spending increased from 2001 -2008 under George WMD Bush

[Soul Crusher]

Amazing how spending increased from 2001 -2008 under George WMD Bush

Who ever defends that?

This graph is a disaster. 

[Straw Man]

also interesting how revenue steadily increased during the Clinton years and eventually exceeded spending

then a nice big drop in revenue (Bush Tax Cuts perhaps) following by huge increase in spending

[Soul Crusher]

also interesting how revenue steadily increased during the Clinton years and eventually exceeded spending

then a nice big drop in revenue (Bush Tax Cuts perhaps) following by huge increase in spending

Yeah but it spiked up rapidly again after bottoming out.  I think that was when the stock market went up so the capital gains receipts were high.

Who knows.  This graph is pretty good though.  W was a disaster and it looks like they kept the spending going even as tax receipts came in.  Bad move.   

[Mons Venus]

Yeah but it spiked up rapidly again after bottoming out.  I think that was when the stock market went up so the capital gains receipts were high.

Who knows.  This graph is pretty good though.  W was a disaster and it looks like they kept the spending going even as tax receipts came in.  Bad move.

No doubt. W initiated our current financial mess.

[Soul Crusher]

No doubt. W initiated our current financial mess.

W was a get along - go along President and never vetoed a single bill, signed every bullshit budget by both the GOP and the Dems.  He never once made spending an issue and made it a priority.

Sadly, when you see a graph like this, you almost wish you could go back and scream "Fire".  However, no one would have listened most likely. 

To me the phoney bogus RE boom fueled by cheap money and fraud was one of the worst things to happen to our country.   

[Mons Venus]

W was a get along - go along President and never vetoed a single bill, signed every bullshit budget by both the GOP and the Dems.  He never once made spending an issue and made it a priority.

Sadly, when you see a graph like this, you almost wish you could go back and scream "Fire".  However, no one would have listened most likely. 

To me the phoney bogus RE boom fueled by cheap money and fraud was one of the worst things to happen to our country.    

The US has become nothing more than a bubble economy since our manufacturing base began heading East. One new bubble after the next to spur additional tax receipts. RE boom was just another one of those bubbles.

[Soul Crusher]

The US has become nothing more than a bubble economy since our manufacturing base began heading East. One new bubble after the next to spur additional tax receipts. RE boom was just another one of those bubbles.

Yeah, no doubt, but it had many negative social consequences as well.  The horrible financial impact was one thing, but think of the negative social impact on the insane RE boom.

1.  Many young people moved from their childhood homes seeking cheaper homes because homes became too expensive.  I.E. NY, CA, etc. 

2.  Many families split up because everyone was seeking second homes in Florida etc.   

3.  Many younger people put off having families because the cost of housing was consuming so much of their budgets. 

4.  Many local govts got so bloated because their budgets are fueled mostly by RE taxes and now they have to eitrher lay people off en mass or massively raise taxes.

5.  Many people left productive employment to become flippers, contractors, mortgage brokers, etc.  Where are those people now? 

6.  The RE boom fueled illegal immigration to the USA.  Now we have millions of illegals with no work either in Mexico or the USA, but we do have all the kids they fathered over here and have to pay for them. 

7.  We have millions of people who now cant spend money in the economy because they are so under water in their mortgages, etc. 

     

[Mons Venus]

Yeah, no doubt, but it had many negative social consequences as well.  The horrible financial impact was one thing, but think of the negative social impact on the insane RE boom.

1.  Many young people moved from their childhood homes seeking cheaper homes because homes became too expensive.  I.E. NY, CA, etc. 

2.  Many families split up because everyone was seeking second homes in Florida etc.   

3.  Many younger people put off having families because the cost of housing was consuming so much of their budgets. 

4.  Many local govts got so bloated because their budgets are fueled mostly by RE taxes and now they have to eitrher lay people off en mass or massively raise taxes.

5.  Many people left productive employment to become flippers, contractors, mortgage brokers, etc.  Where are those people now? 

6.  The RE boom fueled illegal immigration to the USA.  Now we have millions of illegals with no work either in Mexico or the USA, but we do have all the kids they fathered over here and have to pay for them. 

7.  We have millions of people who now cant spend money in the economy because they are so under water in their mortgages, etc. 

     

I agree. The RE boom was a huge clusterfuck 4 everyone. Problem is our country spends out of control with nothing more than a service economy as its backbone. This system cannot last forever and is destined to fail.

[240 is Back]

I think the movie isn't a movie, but a soap opera.  We'll spend our days saying the world is gonna end, but there will always be another season.  Sure, ratings may suck for a few years, but new exciting characters will arrive and it'll be interesting as long as we can watch.  In 2011, Palin will flirt with running, Levi's new explosive book will come out with all sorts of claims, Some exciting Dem will flirt with challenging Obama, A few cool repubs will arrive and 1 or 2 will have some sweet ass sex scandal... it's how it's always been.  Gary Hart is John Edwards + 20 years.  Palin is Dan Quayle... a "WTF" pick.  Etc etc. 

Enjoy the show, cause you can't change it, no matter how many letters you write.  And when it gets boring, watch SportsCenter or the Bread & Circus channel.

[Mons Venus]

I think the movie isn't a movie, but a soap opera.  We'll spend our days saying the world is gonna end, but there will always be another season.  Sure, ratings may suck for a few years, but new exciting characters will arrive and it'll be interesting as long as we can watch.  In 2011, Palin will flirt with running, Levi's new explosive book will come out with all sorts of claims, Some exciting Dem will flirt with challenging Obama, A few cool repubs will arrive and 1 or 2 will have some sweet ass sex scandal... it's how it's always been.  Gary Hart is John Edwards + 20 years.  Palin is Dan Quayle... a "WTF" pick.  Etc etc. 

Enjoy the show, cause you can't change it, no matter how many letters you write.  And when it gets boring, watch SportsCenter or the Bread & Circus channel.

LOL! 

[Soul Crusher]

I think the movie isn't a movie, but a soap opera.  We'll spend our days saying the world is gonna end, but there will always be another season.  Sure, ratings may suck for a few years, but new exciting characters will arrive and it'll be interesting as long as we can watch.  In 2011, Palin will flirt with running, Levi's new explosive book will come out with all sorts of claims, Some exciting Dem will flirt with challenging Obama, A few cool repubs will arrive and 1 or 2 will have some sweet ass sex scandal... it's how it's always been.  Gary Hart is John Edwards + 20 years.  Palin is Dan Quayle... a "WTF" pick.  Etc etc. 

Enjoy the show, cause you can't change it, no matter how many letters you write.  And when it gets boring, watch SportsCenter or the Bread & Circus channel.

Bro - you make me laugh.