For anyone on this board calling me a doomer & gloomer - check out this graph.

[Soul Crusher]

A Quick Reminder: Here's The Real Problem
PrintHenry Blodget | Mar. 13, 2010, 2:59 PM | 550 |  13
Tags: Economy, Debt
www.businessinsider.com
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Here's one of the only economic charts that really matters: Total U.S. debt to GDP (from John Mauldin).

This chart shows the trend from the end of the Civil War until now.

Maybe it can just keep going up forever?

Image: John Mauldin

Note two things:

There may be a general upward trend, but there are two clear aberrations: One in the 1920s and early 1930s, and one now.
The aberration now is vastly higher than the one in the 1920s and early 1930s, which preceded the Great Depression.
Unless "it's different this time" (unlikely), the second aberration is going to end up the way the first one did--by returning to the mean.

How will it return to the mean?

One of two ways.

Either we'll have hyper-inflation with relatively little new borrowing, which will rapidly increase the size of GDP while holding the debt load steady.  OR we'll have gradual growth of GDP combined with a gradual reduction in debt.

Neither will be a particularly happy outcome, though the level of unhappiness in each scenario will vary depending on your circumstances.

If you have a job and owe a boatload of money, root for hyperinflation: It will make your salary go up fast (in nominal dollars) while your debt load stays the same.

If you've saved a bunch of money, root for slow growth of GDP and gradual debt deduction: This will preserve the value of your hard-earned savings.

In either scenario, though, don't expect a strong recovery of REAL GDP (inflation adjusted).  What has fueled the rapid GDP growth of the past 25 years has been the borrowing binge that began in the early 1980s (it's easy to spend and produce more when you borrow more).  It's unlikely that debt-to-GDP can increase forever, especially from this level.  So that particularly GDP driver is going away.

Unless it's different this time.  (Pray hard.)

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[doison]

What the fuck do I care? 
Pretty soon I get to quit my job to work on my painting while gobbed up on the vicodin I get from the government run healthcare visits to local "pain clinics."

Like I'm going to give a shit about a graph when living in a world like that.

[SAMSON123]

What the fuck do I care? 
Pretty soon I get to quit my job to work on my painting while gobbed up on the vicodin I get from the government run healthcare visits to local "pain clinics."

Like I'm going to give a shit about a graph when living in a world like that.

WOW...I hope you are/were joking when you posted that....

[SAMSON123]

A Quick Reminder: Here's The Real Problem
PrintHenry Blodget | Mar. 13, 2010, 2:59 PM | 550 |  13
Tags: Economy, Debt
www.businessinsider.com
________________________ ________________________ ____

Here's one of the only economic charts that really matters: Total U.S. debt to GDP (from John Mauldin).

This chart shows the trend from the end of the Civil War until now.

Maybe it can just keep going up forever?

Image: John Mauldin

Note two things:

There may be a general upward trend, but there are two clear aberrations: One in the 1920s and early 1930s, and one now.
The aberration now is vastly higher than the one in the 1920s and early 1930s, which preceded the Great Depression.
Unless "it's different this time" (unlikely), the second aberration is going to end up the way the first one did--by returning to the mean.

How will it return to the mean?

One of two ways.

Either we'll have hyper-inflation with relatively little new borrowing, which will rapidly increase the size of GDP while holding the debt load steady.  OR we'll have gradual growth of GDP combined with a gradual reduction in debt.

Neither will be a particularly happy outcome, though the level of unhappiness in each scenario will vary depending on your circumstances.

If you have a job and owe a boatload of money, root for hyperinflation: It will make your salary go up fast (in nominal dollars) while your debt load stays the same.

If you've saved a bunch of money, root for slow growth of GDP and gradual debt deduction: This will preserve the value of your hard-earned savings.

In either scenario, though, don't expect a strong recovery of REAL GDP (inflation adjusted).  What has fueled the rapid GDP growth of the past 25 years has been the borrowing binge that began in the early 1980s (it's easy to spend and produce more when you borrow more).  It's unlikely that debt-to-GDP can increase forever, especially from this level.  So that particularly GDP driver is going away.

Unless it's different this time.  (Pray hard.)

________________________ ________________________

There is a financial analyst named Larry Parks who shows a graph almost exactly like this when he does his talks detailing the problems in america. the aberrations on this graph happened in the time of the great Depression which lasted from 1929 to the beginning of WWII. The collapse of the dollar, the business closures, the loss of homes, jobs, retail spending all accounted for the upswing shown in that graph between the twenties and early forties. Afterward there is a downward trend where because of the WWII and the boom in manufacturing to make arms/weapons for war the economy of america began to improve. Further improvements came when the war ended and the soldiers returned to america and a campaign of house building and suburban development came into being so the need for tradesmen and skills of all type came in need. Civil projects like dams, roads, bridges etc etc also came into being which further lessened the effects of the debt/financial difficulty america was in. Things then smoother out until america entered into foolish wars with Korea and Vietnam and to make money available (turn on the printing press) the dollar was detached from GOLD (later 60s early 70s). With that came the massive printing of money and a breaking of all regulations that controlled printing and spending. As you can see on that chart from the early 70s till today the debt and the amount of money in circulation has increased tremendously. At this point it is impossible for america to get itself out of that financial trouble....