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The Hidden Depression of the 2000s 52 comments

by: John Lounsbury September 20, 2009    
About this author:
For several weeks I have been working on the analysis of economic activity from the point of view that without some temporary, artificial and unsustainable factors, the U.S. would not have had what appeared to be prosperity during the years from 2002 to 2007. This article is the result. However, rather than providing answers, I think this piece just raises more questions. I have come to realize that this is the start of a research process, not the culmination. I am indebted to private discussions with Seeking Alpha contributor Steve Hansen, who has helped clarify my thoughts about how much more needs to be done.

The U.S. has been living on borrowed time, literally. In the past several years we have run up federal deficits at a record rate. We have expanded commercial credit far more in proportion to growth of the economy than previously. We have also used rising home equity as personal piggy banks. If we had not taken these reckless actions, we would have been in almost continuous recession since the third quarter of 2000. There would have been only one quarter that did not have negative GDP growth and that quarter (first quarter 2005) would have seen 0.1% GDP growth.
The Rationale
I have focused on three expansions of debt. Let’s view the overall economic picture of the situation as a cash flow. I have identified three cash outflow items that have exceeded historical norms: federal deficits, commercial loans (which includes credit card debt) and net home equity withdrawals. I have identified one “cash” inflow item, GDP. This is not really cash inflow, but the cash value of economic activity measured under the GDP formula.
Clearly these (cash outflows and inflow) are not related through any cause and effect. Debt was not taken on for the purpose of purchasing GDP. But, if you consider the economy before the bursting of the dot.com bubble “normal”, then expenditures in excess of what occurred prior to 2000 should be considered in excess of normal. For the purpose of this analysis, I have subtracted the total of those excesses from the nominal GDP each year from 1998 through 2008. In other words, the basis of the analysis is that the national “wealth” was changed positively by GDP growth and diminished by debt incurred above the normal baseline.
I have identified four possible inaccuracies of my approach in Appendix I. There may be more factors that readers can identify. If there are suggestions, it will help my further efforts on this topic.
Even recognizing these potential inaccuracies in the analysis, I believe it does put us in the ballpark, if not actually on the pitcher’s mound. The four factors identified act in opposing directions (two would affect the adjustments to GDP positively and two negatively), but I do not want to try to estimate to what extent they might be self-canceling.
Excess Commercial Credit
The following graph compares the growth of total commercial credit and nominal GDP.


The following table was prepared using the data from the above graph. It defines the “normal” level of commercial credit growth compared to GDP growth for the 27 years 1974-2000. It compares that to the higher commercial credit growth rate for 2001 through 2008.


For 2001-2008, growth of commercial credit above 0.4% per year was considered excess, an average of 2.9% per year.
Home Equity Extraction
The home equity piggy bank was used to support higher consumption in the face of stagnant and declining incomes in the past several years. This was defined in a Federal Reserve Bank paper by Alan Greenspan and James Kennedy (here). The following graph was prepared by Calculated Risk Blog (here) from the Kennedy-Greenspan data.


For the five year period 2003-07, from 6% to 8% of disposable income was obtained from the home equity ATM. For most of the 1990s, this source was 1% or less of disposable income. With the collapse in home prices, this source of money essentially dried up by the middle of 2008.

Federal Deficits
The Federal deficits used in this analysis are the on-budget deficits, which ignore off-budget offsets, such as Social Security fund surpluses. These deficit numbers were obtained from the U.S. Government Budget for 2010, Historical Tables (here). The annual deficits were divided into four equal parts for each quarter.

GDP Net of Excess Debt
The data and results of calculation are given in the table in Appendix II.
The graph below compares the changes quarter to quarter for Real GDP and Nominal GPD adjusted downward by the amount of excess debt. The gray shaded areas indicate the official periods of recession. The pink shaded areas indicate the areas of negative adjusted GDP growth.

The Stock Market Peak of 1999-2001
The most dramatic picture of the catastrophic decline in the U.S. stock market is shown in the following chart from www.chartoftheday.com . Charts could also have been drawn valuing U.S. stocks in a number of non- U.S. dollar currencies with similar, but less dramatic, declines. We have a depression-like stock market decline which has lasted more than ten years so far.

Depression of Personal Income
For the first time since the Great Depression we have a ten year time span with declining median income. From a 1999 high of $49,244 (2006 dollars), 2008 saw a 4.3% decline in median household income, as shown in the following graph.


Using the decline in payroll taxes as a guide, it can be anticipated that the median household income will have another significant year over year decline in 2009.
Note: The data displayed in the above graph was collected from three different U.S. Census Bureau sources and merged. This is described in Appendix III.
Depressed Employment
From an all-time high in April, 2000, full-time employment per capita has dropped approximately 10% in just over nine years. This is another depression-like economic parameter. There was an increase in full-time employment per capita 2004-2007, but it never regained the previous high. See the following graph.


Poverty
The years starting after 2000 and through 2008 constitute a period of time without a decrease in the poverty level of 0.5% or more. Only the “mini depression”, encompassing the 1980 and the 1981-82 recessions, has had a larger increase in poverty, but that increase spanned five years and this spans eight years so far. In the following graph, periods of rising poverty are shaded gray.


Conclusion
Whether you look at stock market values, personal income, poverty, employment, or GDP relative to newly acquired debt, we have had a depression for most of the early twenty-first century. It has been masked by unprecedented borrowing. Commercial credit and credit cards have been used at an unsustainable level. Home equity has been used like an ATM. Federal spending has been put on the tab. If you look at the U.S. as a black box, we have borrowed trillions of dollars, poured the money into a hole in the box, and gotten far less in value out the other side. That is what happens when you borrow for consumption, rather than for production. We have been on the mother of all consumption binges and now we have a colossal belly ache and hangover. How depressing!
Appendix I
There are four criticisms I can make of this analysis at this point in time:
1. The implicit assumption is that, by subtracting a dollar of GDP for each dollar of “excess” credit, the two dollars are equal. In fact, in the past few decades a dollar of increased debt (total debt, not just the three categories included in this analysis) has correlated to much less than a dollar of increase in GDP. In fact, the effect of “excess debt” on our national wealth and GDP decline may be greater than assumed in this analysis.
2. The “normal” assumed for federal deficits is the near zero values of the late 1990s. If the baseline were to extend further back in time, “normal” could be some value (for annual deficits) larger than zero, but still far below the deficits since 2000. If this higher normal baseline for annual deficits were selected, the effect on GDP decline would be less.
3. The entire full value of net home equity withdrawal was assumed to be excess. It might be appropriate to define some low level of net home equity withdrawal as normal. If this were done the effect on adjusted GDP would be less negative.
4. The calculations were all done with nominal values (not adjusted for inflation). If they had been adjusted for inflation (to obtain the so-called real values), the GDP declines would have been greater.
Appendix II
The following table is presented as two images to fit image editing size restrictions.


Appendix III
The median household income for the ten years 1999-2008 was obtained from three separate U.S. Census Bureau sources. These are shown in the following table, along with the deflators calculated from the data and the 2006 dollar values calculated for 2007 and 2008.



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This article has 52 comments:

  •  
    Great article and very insightful.
    I was at a meeting in January where an over-lunch exercise was proposed: Pick 3 years, historically, where you would consider credit to have been reasonable, adjust for population, inflation, etc., and return with a predictied current value of the S&P if we return to that credit level. The results? 550 to 750.
    Sep 20 05:05 PM | Link | Reply
  •  
    Thanks for the report as firm statistical confirmation that the false 2000 recovery was not a recovery as much as a debt fueled bubble. In the context of regulatory and accounting easing compounded by a lax low interest rate easy money policy by an indigent Federal Reserve, we can see that easy solutions only mask over the eroding fundamentals. Seeking to reverse them is much harder and not something being done today.

    Today our easy money policy is at zirp, even worse than before. Our off book accounting is still around along with an even more lax accounting standard. And our national debt has not only skyrocketed but under Bush Jr. and Obama is encouraging the worst, most counter productive allocation of resources in history by rewarding failed banks and quasi-public institutions with not only money but letting them eat marketshare and starve out any legetimate competition.

    Eventually this will stop. Most likely it will end, sooner or later,in an austerity program for the US that will put this downturn to shame.
    Sep 20 05:20 PM | Link | Reply
  •  
    John-
    This is very provocative data in another well written article. The unasked question is: What comes next after the hangover?

    So far, all the consumption you describe has been replaced by Federal stimulus spending. This is unsustainable and everyone is waiting for the next shoe to drop, which will probably take the stock market with it again.

    After ten years of hidden depression, one could assume that the only direction left to go is up. Except that what was actually hidden in the depression was the decimation of the US manufacturing base. A form of capitalistic cannibalism. Which leaves very little to fall back on when the "recoveryless" recovery gets real. Certainly not jobs.

    So the theory is the stimulus spending is buying time and providing capital for this country to rebuild. While the infrastructure may need help, it does very little good if there's no industrial base left to use it.

    The real bellyache is going to be taking back all those Chinese and Indian jobs we lost while on a level playing field. Either the jobs will pay $10 a day or the goods and services will cost a lot more than now.
    Not very enticing options. And that's if we don't run out of time first and the other shoe drops.
    Sep 20 05:32 PM | Link | Reply
  •  
    The problem is that the Keynsians have totally misunderstood the problem. Bernanake might have studied the Great Depression but he seems to have come to the wrong conclusion and when the Medicine does not work, he just ups the dosage. It never seems to occur to him or the rest of them that the patient is being given the wrong medicine.

    In the 1930s the problem was solved by the Second World War. Effectively, the depression ended when their was an external stimulus to the Supply side of the economy. This created jobs, lots of jobs which in turn boosted consumer spending power. Japan by contrast has been moribund for nearly two decades despite stimulation of the demand side through low interest rates and QE.

    The hard truth is the way out of this mess, other than starting another Global War and hoping it leads to a sustainable trade advantage, is to work on the Supply side at the expense of the Demand side much as Thatcher did in Britain. Once the supply side is reinforced over a period of sustained inward investment then the Demand side will pick up because the consumer is generating his own wealth. In the short-term this is likely to lead to more pain, but more pain is coming down the pipe anyway. It is just a question as to whether the pain is a means to an end or just mindless misery.

    Believe it or not, what America actually needs right now are higher interest rates. OK, that is just about going to kill of the retail sector and housing market, but is trying to pump them up with endless stimulus going to solve the problem? The bitter truth is that America is going to have to grind its way out of this mess through hard work, but to ensure that the hard work is spent to best effect, capital investment needs to be maximized and this will only be achieved by higher interest rates which will increase savings and attract and retain capital into the US economy.

    The alternative is to follow Japans example as a Carry Trade economy where investment capital has bled out around the World which has left the domestic economy on life support. It has taken twenty years for Japan to go nowhere and Japan started in a much healthier position that the US does now. The bitter truth is that Obama might be a nice guy, but he is never going to drag America out of this mess.
    Sep 20 05:48 PM | Link | Reply
  •  
    Economists like Bernanke seem happy just to see low interest rates, scads of fiat money and spending. Doesn't matter enough to them all the misallocation they have built since WWII with their policies, which have had such awful long-term effects that it sure appears to some, that it's main purpose has been fraud and theft.
    They have enabled unaffodable, bloated government, Wall St. and grossly inefficient healthcare sectors which are bleeding us dry, along with the other propped failures government now runs. These sectors have grown so large and influential, it seems the only question what the policy mix and timeframe of inevitable default will be and what this once prosperous, free country will look like after all the debasement runs its course.
    Maybe there is another "recovery" here anyway. James Grant writes in the weekend WSJ he thinks an unexpectedly strong snapback is possible. That, to me, would only enhance the crony power of already bloated nonproductive sectors and our march to serfdom.
    Sep 20 06:43 PM | Link | Reply
  •  
    Great article. Any chance you can expand the scope of your research to incude the impact of the credit bubble on global economic growth over the same period?
    Sep 20 06:55 PM | Link | Reply
  •  
    Dave Wrixon wrote:

    >>In the 1930s the problem was solved by the Second World War. Effectively, the depression ended when their was an external stimulus to the Supply side of the economy.<<

    Huh? Why (economically speaking) was the massive government spending for WW2 different (again, economically, not "morally") from any other massive government spending? In fact, one could argue it was economically LESS productive than a well-designed (if there is such a thing) peacetime stimulus program, as guns, bullets, tanks, etc.-- while absolutely necessary-- are not "productive infrastructure". Thus, you can't have it both ways: either WW2 spending DID end the depression, in which case government spending now could do the same thing, or the depression was ready to end anyway, in which case government spending now is a waste of money and a burden down the road on this and future generations.
    Sep 20 07:04 PM | Link | Reply
  •  
    lookingsouth - - -

    I will take note of your request. I will warn you though, I am feeling overwhelmed just trying to make sense out of the U.S. part of things so I may not get to your suggestion very soon.

    logicalthought and Dave Wrixon - - -

    Your comments are on to something that has been bothering me. It is common wisdom that the Great Depression was ended by WW II. However, that event prompted a huge debt bubble and unwinding that credit inflation created some severe recessions in the following years. I want to look at the credit and cash flow balance sheets for that time to see when the Great Depression actually ended based on economic growth rather than credit bubbles. My gut tells me the Great Depression might have lasted 20 years or so, when the proper factors are recognized.

    There is a common saying that "you can't borrow and spend your way to wealth and prosperity". However, I think that there may be more times in our history than realize that we created the appearance of prosperity rather than had the real thing.

    I've got to dig into this idea and see if there is anything there.
    Sep 20 07:40 PM | Link | Reply
  •  
    There was and maybe still is a deep and wide belief that growth was an American prerogative and an entitlement and that the trajectory of individuals and the Nation was always ascending. This belief was justified when growth was EARNED by savings, work, innovation and market driven resource allocation.
    Growth meant that all unfunded obligations, personal, corporate , community and National could be financed by an ever expanding economy and that debt could be accumulated without inhibition by individuals, companies and the multiple political units. This is because wealth and income at very level would expand to create the asset base to support borrowing and the income to service the debt.

    During the last 20 years the expectations and entitlements of growth became decoupled from the work, innovation, savings and proper resource allocation need to produce growth. Thus, the Great Divergence, which is the growing gap between the unwarranted growth expectations and entitlements about income and wealth and the capacity to produce income and generate wealth.

    The appetite to attain wealth and consume income has grown apace while the capacity to produce these outcomes first stopped growing in 2008 and in 2009 is actually atrophying. The gap between hyperbolic fantasy and stagnant actuality is now becoming an abyss.

    For years, the gap was unwittingly or willfully obscured, for most, by the fog of debt and in 2009 by the noxious vapors of criminal fiat money.

    But debt and fiat money are not a bridge across the gap but haze of delusion and deceit.

    Now, more Americans realize that the abyss is real, the facile expectations and avaricious entitlements are both narcotic and neurotic dreams and debt financed spending and consuming are a fog that has prevented them from seeing the chasm.
    The choice is nearly upon us: Increase real capacity and control grotesque entitlements and undeserved expectations so the abyss can be bridged by savings, production and market governed discipline or.....Fall into the abyss.
    Sep 20 07:51 PM | Link | Reply
  •  
    Great Article - Thanks.
    Dave Wrixon excellent comment:
    "The hard truth is the way out of this mess, other than starting another Global War and hoping it leads to a sustainable trade advantage, is to work on the Supply side at the expense of the Demand side much as Thatcher did in Britain. Once the supply side is reinforced over a period of sustained inward investment then the Demand side will pick up because the consumer is generating his own wealth. In the short-term this is likely to lead to more pain, but more pain is coming down the pipe anyway. It is just a question as to whether the pain is a means to an end or just mindless misery."

    My thoughts as well, I see no other way to work our way out of this. Hoping and praying that indirect stimulus and our financial system is going to pull us out is just unrealistic to me.
    Sep 20 08:02 PM | Link | Reply
  •  
    User 353732 - - -

    Excellent comment. It raises a question I keep asking myself and for which I have not yet formulated a list of answers (yes, a list, because I think it is obvious that there are no simple answers). The question : Is growth necessary?

    That one question opens a flood gate: Will our system actually collapse (as you suggest) if growth stops? Or does the nature of our individual existences fundamentally change in that scenario? What would a world be like if existence was subsistence and intellectual?

    That final question is a counter thought to what many have postulated would be an existence of subsistence and primal forces.

    I think that this topic may not be one for SA, but more for a discussion of abstract philosophy. But I will remind you that economics is, at its origins, philosophy rather than science.
    Sep 20 08:06 PM | Link | Reply
  •  
    The problem in quantifying the depression of the 2000's is GDP. This is Frankenstein's child. It is the tool used to quantify growth but does not include elements (such as debt) which were used to engineer that growth. and like Frankenstein, everything you do to try to get it right makes old Frank start to fall apart.

    This was a good tool before 1970 when America was industrial based. Now industry is only 10% of our productive economy.

    We can stand back and ask ourselves if private employment is now lower than it was in December 1999 - where was the growth in America?

    It was a false growth at best, but looking at the infrastructure - i say it was very negative. Only 3rd world countries build things and do not maintain them. Our roads, our bridges, our declining education system.
    Sep 20 08:10 PM | Link | Reply
  •  
    On the question of whether growth is necessary there does seem to be a movement to find better barometers of economic success than GDP growth. I was in Japan last week and despite 20 years of economic stagnation it is still a fantastic place to be - clean, efficient and incredibly polite. Surely the most relevant economic indicator is unemployment, after all a recession hardly matters as long as you keep your job. So the best policy stimulus is to employ people in the state sector, and companies need to think about employment as a goal as well as profits.
    Sep 20 08:27 PM | Link | Reply
  •  
    I don't think it is hidden any more, John. Thanks very much for an insightful piece.
    Sep 20 10:33 PM | Link | Reply
  •  
    Re: growth: from a product management point of view, a system that requires infinite (or even exponential) growth in an environment with finite resources is called a Ponzi scheme.


    On Sep 20 08:06 PM John Lounsbury wrote:

    > User 353732 - - -
    >
    > Excellent comment. It raises a question I keep asking myself and
    > for which I have not yet formulated a list of answers (yes, a list,
    > because I think it is obvious that there are no simple answers).
    > The question : Is growth necessary?
    >
    > That one question opens a flood gate: Will our system actually collapse
    > (as you suggest) if growth stops? Or does the nature of our individual
    > existences fundamentally change in that scenario? What would a world
    > be like if existence was subsistence and intellectual?
    >
    > That final question is a counter thought to what many have postulated
    > would be an existence of subsistence and primal forces.
    >
    > I think that this topic may not be one for SA, but more for a discussion
    > of abstract philosophy. But I will remind you that economics is,
    > at its origins, philosophy rather than science.
    Sep 20 10:45 PM | Link | Reply
  •  
    This is a clear, concise and accurate article. My fellow bank examiners and I have been performing this same analysis for several years (namely deducting the increase in debt from GDP growth) with the same conclusion. Only our superiors in management of the FFIEC regulators and the Federal Reserve System have been reluctant to speak the truth. Thank you so much for declaring that the Emperor has no clothes.
    Sep 20 11:17 PM | Link | Reply
  •  
    Excellent article! Very thought provoking.

    What was done in terms of fiscal and monetary policy was seen as necessary, at the time, to pull the nation out of the recession from 2001-2003. However, the damage had already begun during the roaring 90s. Using the data in the author's first table it appears that the ratio of credit growth to GDP growth was nearly as bad from 1995 through 2000 as it has been during the last nine years. It would therefore seem that the seeds of despair were already being sown during the later half of the last decade.
    Sep 20 11:19 PM | Link | Reply
  •  
    In response to the question of whether WWII ended the recession, I can only postulate from my reading of history. Of course, the increased spending to mobilize the nation for war got things started and the additional spending and employment that resulted from the war effort continued the effort. But the debt might have been crippling had it not been for what happened to sustain us after the war. Our primary industrial competition around the globe at the time: Germany, France, Britain, Italy, and Japan were decimated. Their aggregate manufacturing base was nearly wiped out. Yes, we made investments all around the world as part of the Marshall Plan. But our private sector also made investments that made us more competitive. We had the only manufacturing base left of any consequence on the globe. Jobs were plentiful because demand was plentiful. We came through almost unscathed (except for Pearl Harbor) while much of the rest of the world's industries were destroyed.

    If our trading partners had had their industries intact it would have been a much different story, IMHO.


    On Sep 20 07:40 PM John Lounsbury wrote:

    > lookingsouth - - -
    >
    > I will take note of your request. I will warn you though, I am feeling
    > overwhelmed just trying to make sense out of the U.S. part of things
    > so I may not get to your suggestion very soon.
    >
    > logicalthought and Dave Wrixon - - -
    >
    > Your comments are on to something that has been bothering me. It
    > is common wisdom that the Great Depression was ended by WW II. However,
    > that event prompted a huge debt bubble and unwinding that credit
    > inflation created some severe recessions in the following years.
    > I want to look at the credit and cash flow balance sheets for that
    > time to see when the Great Depression actually ended based on economic
    > growth rather than credit bubbles. My gut tells me the Great Depression
    > might have lasted 20 years or so, when the proper factors are recognized.
    >
    >
    > There is a common saying that "you can't borrow and spend your way
    > to wealth and prosperity". However, I think that there may be more
    > times in our history than realize that we created the appearance
    > of prosperity rather than had the real thing.
    >
    > I've got to dig into this idea and see if there is anything there.
    Sep 20 11:29 PM | Link | Reply
  •  
    Fiat? Didn't they buy Chrysler? they own the currency too?
    Sep 20 11:46 PM | Link | Reply
  •  
    WWII worked on a last man standing basis. The US became the most competitive simply because everyone else took at least three steps backward. This basically only works because of the destruction of the infrastructure of your competitors and the inflow of capital as the World's only safe haven. The Government spending is not really the main mitigating factor here, but it is more than offset.


    On Sep 20 07:04 PM logicalthought wrote:

    > Dave Wrixon wrote:
    Sep 21 12:40 AM | Link | Reply
  •  
    Nice job, John.
    Ask some old folks when the last depression ended. Congressman Roan Paul is on record as saying things were quite depressed well into the early 50's.
    Sep 21 01:02 AM | Link | Reply
  •  
    John posed the question, "The question : Is growth necessary?

    That one question opens a flood gate: Will our system actually collapse (as you suggest) if growth stops? Or does the nature of our individual existences fundamentally change in that scenario? What would a world be like if existence was subsistence and intellectual?"

    Long ago I came to the conclusion that growth is not economically necessary but our financial system will collapse without it. Banks create our money as loans, which is debt to us. We spend our loans into the economy and the people we buy stuff from save some of it, invest some, and spend some. The money that is spent and invested in the real economy all ends up as somebody's income. The money that is saved is removed from the economy and is not available for people to earn as income.

    Banks are not allowed to lend out their depositors' account balances. They can only create and lend out new money. So all the money that is "saved" is now unavailable to the old debtors who originally spent that money into the economy, but the old debtors need to recover that money as incomes in order to repay their debts (i.e. in aggregate, all debtors). The only money that is available to earn as income is the newly created debt-money that is subsequently spent into the economy. And some of that money is saved, too, so more new money, in aggregate, needs to come into the economy in order for ALL the old debtors to have access to enough income to pay back their old debts.

    This is basic arithmetic. All money begins its existence as debt. If some of that money is removed from the economy then there is not enough money in the economy for everybody to repay their debts. Total debts are D; total savings are S; total amount of money in the economy is D - S, which is less than D.

    So the kind of "growth" that is necessary is growth in the circulating money supply. Savings are money that is taken out of circulation and it doesn't matter if you put the savings in a bank or in a sock. That money is unavailable to the economy. Only evermore new money, new debt, entering the economy can keep this system working as long as any money at all is taken out of the system as savings.

    If you ask a financial economist, of the 'apologist' type who believes in the current system, "Where does the money come from to pay interest on bank loans?", he will tell you that the bank distributes the interest received as incomes to its employees and shareholders and so puts it back into the economy for the debtors to collect. When you ask how the borrower can collect his redistributed and respent interest payment before he pays it you get a dumb stare.

    A further problem is when loan money is spent and ends up in the hands of someone who takes it out of the productive economy (where it can be earned back by the debtors) and uses it to buy stocks or other financial investments. Most of this kind of financial investment money stays in investments of one kind or another, circulating among the investor class who comprise a small portion of the population, and is unavailable to be earned as income in the physical economy. This kind of investment money has almost the same effect as saving money. It removes it from the economy where indebted people need to earn it back in order to repay their loans.

    Once you understand that money is created by banks as loans, which are debts to the borrowers, and this is the ONLY source of money in the system, it becomes clear why "growth" is "necessary". It is a necessity caused by the way our monetary system is designed and I will repeat what I said in a long ago comment. It is a piss poor system.
    Sep 21 02:03 AM | Link | Reply
  •  
    Interesting article, I did this same exercise about two years ago, i found that there would have been no growth in gdp without the debt expansion back to the time of Ronald Reagan. There was a brief respite in 1990's, which you have charted following the de-militarisation that followed the decline of the Soviet Union. The growth in the US economy has been an illusion for 30 years.

    The reasons are complex but boil down to the US worker being protected by the competition from the East Asian Labour market. In a sense it has become an unbalanced economy in which consumption exceeds production.

    The real issue is how does the USA get out of this mess. Plenty of Armchair economists can point out the problems, few have ideas on how to fix it.

    There has to be a complete restructure of the US Economy. A move from fossil fuel based economy to renewable energy appears to be the obvious catalyst. 'The war on climate change' instead of the 'second world war'.

    There needs to be a significant devaluation of the US currency and a large reduction in the living standards of most Americans in comparison to the rest of the World. The USA is lucky that most debt is written in US dollars. The International lenders will be the ones that pay for lending to you. Printing money will achieve this quickly. A 30-50% decline will help make you competitive again.

    Expect hyperinflation and devaluation over the next decade. Russia went through it and now its your turn.
    Sep 21 02:10 AM | Link | Reply
  •  
    Fascinating comments.
    In a book entitled "The Politically Incorrect Guide to American History", author Tom Woods claims WWII did not lift America out of the Depression. Obviously, unemployment was rapidly solved, but his point is that war production was neither consumer nor capital based. During the war, there were shortages of many consumer items. A return to normal free market activity after the war and removal of the business uncertainty prevalent during the years before the war ended the Depression.

    To paraphrase Eisenhower, each bomb and tank took food from someone's mouth and reduced economic capacity. Woods quotes von Mises: "War prosperity is like the prosperity that an earthquake or a plague brings." People felt flush during the war because they had a lot of paper assets they couldn't spend which artificially raised the standard of living.
    Wood's arguments may be semantics to some, but it's an interesting perspective. Quite the opposite of the situation we have now.


    John-
    I was shocked when I read in your comment, "Is growth necessary?"
    I've been wondering the same since reading "Money Game" and "Supermoney" by 'Adam Smith' in the 70's.

    I'm very much looking forward to your list on this subject, which I consider to be the most fundamental economics question that never gets asked.
    Instead of an subsistence and intellectual existence, I would propose increased quality instead of growth in consumption.

    A corollary to the question is- what drives growth. One answer from Chris Martenson is that fractional reserve banking debt forces an increase in money supply. The system doesn't work without it. As money supply increases, spending has to increase. I suspect sometimes it's the horse, and sometimes the cart, but either way, it has to grow.

    Also, a word of advice, asking this question of many economists or investment types will invariably bring strange reactions.
    Sep 21 02:44 AM | Link | Reply
  •  
    Actually, growth with debt is part of the equation. Expansion of business activity and expansion of debt/credit are supposed to go hand-in-hand. But, the other side of that is that it assumes the contraction of debt also has to be allowed. The fallacy is of endless expansion (of business and of debt). Expand-contract, expand-contract, that is the business cycle. When the Fed tries to leave out the second part of the equation, you have trouble. That's why the Fed is supposed to be non-aligned politically: to make the hard decisions that slow down the economy and endanger political gamesmanship. But our Fed recently has been ideologically bereft of ideas.
    Sep 21 02:50 AM | Link | Reply
  •  
    What high quality work and it's all free! What a public service you are. Thank you, thank you, thank you.
    Sep 21 11:49 AM | Link | Reply
  •  
    Very insightful.

    One more variable that is missing from the analysis is international trade deficits. Much of our increased debt has gone to purchase cheap goods from developing countries at the expense of US manufacturing base and employment. It would be interesting to see how much of our 'depression' may be attributable to the enthusiastic embracing of globalization in the early 1990s.
    Sep 21 12:07 PM | Link | Reply
  •  
    The real pessimist would have to ask whether a democracy can marshall the discipline needed to put production over consumption for a decade or more. Yes, we are broke; give us healthcare and a cleaner environment.
    Sep 21 01:26 PM | Link | Reply
  •  
    artm - - -

    Actually, that is included indirectly because the value of imports is subtracted in the formula for GDP (value of exports is added).


    On Sep 21 12:07 PM artm wrote:

    > Very insightful.
    >
    > One more variable that is missing from the analysis is international
    > trade deficits. Much of our increased debt has gone to purchase cheap
    > goods from developing countries at the expense of US manufacturing
    > base and employment. It would be interesting to see how much of our
    > 'depression' may be attributable to the enthusiastic embracing of
    > globalization in the early 1990s.
    Sep 21 01:40 PM | Link | Reply
  •  
    Globalization is part of the expansion phase -- the empire of business. But now we are entering the de-globalization phase, otherwise called protectionism. As we contract, global debt begins defaulting, and raising havoc with international finance.

    The international housing bubble has been the bane of the poon in almost every country in the world. The contraction is designed to bring a level of sanity back to the price of housing. Of course, people in power are resisting this, afraid that their piece of the pie will suddenly get smaller (as the pie itself suddenly gets smaller).

    Individual autonomy is the hallmark of the expansion phase -- and social unity and decency has to be the hallmark of the contraction phase, as groups/families/nations take care of each other as matter disappears in to the black hole of deflation.


    On Sep 21 12:07 PM artm wrote:

    > Very insightful.
    >
    > One more variable that is missing from the analysis is international
    > trade deficits. Much of our increased debt has gone to purchase
    > cheap goods from developing countries at the expense of US manufacturing
    > base and employment. It would be interesting to see how much of
    > our 'depression' may be attributable to the enthusiastic embracing
    > of globalization in the early 1990s.
    Sep 21 01:46 PM | Link | Reply
  •  
    Another great piece John. Very insighful comments and one of the more productive conversations I have seen online in years. I go back to the buffalo analogy where America is like the Indians of the midwest whom go out in the fall to gather meat for the winter. They find dead, maggot infested buffalo with the tongues and hides gone. The tribe survives the long desperate winter but it certainly is not enjoyable.

    The quicker people can be brought together to all chip in intellectual and physical capital, the shorter the winter will be and right now Uncle Sam is demanding it's buffalo meat first after selling the hide and tongues. If government wanted to truly help restore some of the major imbalances, it would have invested $2 T into increased energy production on all fronts instead of recapitalizing too-big-to-fail investment banks. The story has already been written, America will have a long winter instead of a shorter one.
    Sep 21 02:04 PM | Link | Reply
  •  
    The 'bane of the poor' I meant to write. I either type too slow or think too fast, or write and think too feebly, perhaps.

    'The bane of the poon' I believe has an entirely different meaning.


    On Sep 21 01:46 PM Michael Clark wrote:

    > Globalization is part of the expansion phase -- the empire of business.
    > But now we are entering the de-globalization phase, otherwise called
    > protectionism. As we contract, global debt begins defaulting, and
    > raising havoc with international finance.
    >
    > The international housing bubble has been the bane of the poon in
    > almost every country in the world. The contraction is designed to
    > bring a level of sanity back to the price of housing. Of course,
    > people in power are resisting this, afraid that their piece of the
    > pie will suddenly get smaller (as the pie itself suddenly gets smaller).
    >
    >
    > Individual autonomy is the hallmark of the expansion phase -- and
    > social unity and decency has to be the hallmark of the contraction
    > phase, as groups/families/nations take care of each other as matter
    > disappears in to the black hole of deflation.
    Sep 21 02:08 PM | Link | Reply
  •  
    Day Cycle of expansion 1983-2001. With this understanding, the Fed should have begun to raise interest rates slowly in 1998 and 99 and eased into the contraction phase that will run from 2001-2019. Contraction means elimination of debt. It means the slowing down of the economic mechanism. It means higher unemployment. It means less money for everyone to play with.

    Amassing of material wealth is only one of the seasons of nature. Amassing of spiritual and intellectual wealth is another season.

    Humanity gets wealth from the Earth and wealth from the Heavens and they do not come in the same season, speaking metaphorically.

    Crank up the interest rates and defend the currency during one season. Crank down the interest rates, expand the economy, and devalue the currency in the next. Only don't forget that there are two seasons to follow -- don't develop an ideology that only expansion is good and necessary, and the other season can be tricked in some way.

    Ben Bernanke is like Faust trying to trick the Mephistopheles who has come to his door, ready to receive his payment.
    Sep 21 02:14 PM | Link | Reply
  •  
    Another great article, John. I'm amazed at how you follow one great article with another, with such consistency.
    Sep 21 02:15 PM | Link | Reply
  •  
    'Is growth necessary' is a wonderful question. We all take growth for granted I think. But there are all kinds of growth. If we look at nature (and we, humanity, we are also nature), growth seems implicit in our experience. I think I'd tend to use nature as the best model -- there is a seed time in nature, a starting again, a spring season, and then there is a growth season, the summer, and then a harvesting season, autumn, and then a time of rest, before planting and germination.

    The problem with this model, as humans, is that we like to be born, we like to grow stronger, we like to become richer, and be powerful in the world -- but that season that insists that we 'empty out', give up our riches -- is not so much fun, and we'd like to find some way to avoid that season. That is what the Fed has been doing since Greenspan became Ahab and began chasing the White Whale, trying to kill it through 'increased liquidity' -- by creating an ocean of debt out of the whole world. It's death we fear, the dark night, the mortality of our ambitions. We can run from it. But we can't outrun it. The Winter comes; but it doesn't last for ever.


    On Sep 21 02:03 AM derryl wrote:

    > John posed the question, "The question : Is growth necessary? <br/>
    >
    > That one question opens a flood gate: Will our system actually collapse
    > (as you suggest) if growth stops? Or does the nature of our individual
    > existences fundamentally change in that scenario? What would a world
    > be like if existence was subsistence and intellectual?"
    >
    > Long ago I came to the conclusion that growth is not economically
    > necessary but our financial system will collapse without it. Banks
    > create our money as loans, which is debt to us. We spend our loans
    > into the economy and the people we buy stuff from save some of it,
    > invest some, and spend some. The money that is spent and invested
    > in the real economy all ends up as somebody's income. The money
    > that is saved is removed from the economy and is not available for
    > people to earn as income.
    >
    > Banks are not allowed to lend out their depositors' account balances.
    > They can only create and lend out new money. So all the money that
    > is "saved" is now unavailable to the old debtors who originally spent
    > that money into the economy, but the old debtors need to recover
    > that money as incomes in order to repay their debts (i.e. in aggregate,
    > all debtors). The only money that is available to earn as income
    > is the newly created debt-money that is subsequently spent into the
    > economy. And some of that money is saved, too, so more new money,
    > in aggregate, needs to come into the economy in order for ALL the
    > old debtors to have access to enough income to pay back their old
    > debts.
    >
    > This is basic arithmetic. All money begins its existence as debt.
    > If some of that money is removed from the economy then there is not
    > enough money in the economy for everybody to repay their debts.
    > Total debts are D; total savings are S; total amount of money in
    > the economy is D - S, which is less than D.
    >
    > So the kind of "growth" that is necessary is growth in the circulating
    > money supply. Savings are money that is taken out of circulation
    > and it doesn't matter if you put the savings in a bank or in a sock.
    > That money is unavailable to the economy. Only evermore new money,
    > new debt, entering the economy can keep this system working as long
    > as any money at all is taken out of the system as savings.
    >
    > If you ask a financial economist, of the 'apologist' type who believes
    > in the current system, "Where does the money come from to pay interest
    > on bank loans?", he will tell you that the bank distributes the interest
    > received as incomes to its employees and shareholders and so puts
    > it back into the economy for the debtors to collect. When you ask
    > how the borrower can collect his redistributed and respent interest
    > payment before he pays it you get a dumb stare.
    >
    > A further problem is when loan money is spent and ends up in the
    > hands of someone who takes it out of the productive economy (where
    > it can be earned back by the debtors) and uses it to buy stocks or
    > other financial investments. Most of this kind of financial investment
    > money stays in investments of one kind or another, circulating among
    > the investor class who comprise a small portion of the population,
    > and is unavailable to be earned as income in the physical economy.
    > This kind of investment money has almost the same effect as saving
    > money. It removes it from the economy where indebted people need
    > to earn it back in order to repay their loans.
    >
    > Once you understand that money is created by banks as loans, which
    > are debts to the borrowers, and this is the ONLY source of money
    > in the system, it becomes clear why "growth" is "necessary". It
    > is a necessity caused by the way our monetary system is designed
    > and I will repeat what I said in a long ago comment. It is a piss
    > poor system.
    Sep 21 02:24 PM | Link | Reply
  •  
    Michael - - -

    It seems that every great economic crisis is preceded by notable people proclaiming that we have reached a new permanent level of prosperity. It happened in the late 1920s and again in the late 1990s, irrational exuberance excepted. (I am sure there were notable quotes of warning from the 1920s, as well.) However, when it is proclaimed that times can never be bad again, lay in extra provisions.


    On Sep 21 02:14 PM Michael Clark wrote:

    > Day Cycle of expansion 1983-2001. With this understanding, the Fed
    > should have begun to raise interest rates slowly in 1998 and 99 and
    > eased into the contraction phase that will run from 2001-2019. ......
    Sep 21 03:00 PM | Link | Reply
  •  
    John: I noticed long ago when I am investing and my stock goes up 30% -- and I began to fantasize it going up 3,000%, that is the actual top of the stock. Something to do with Euphoria being the top of the mountain and the first step down again.


    On Sep 21 03:00 PM John Lounsbury wrote:

    > Michael - - -
    >
    > It seems that every great economic crisis is preceded by notable
    > people proclaiming that we have reached a new permanent level of
    > prosperity. It happened in the late 1920s and again in the late 1990s,
    > irrational exuberance excepted. (I am sure there were notable quotes
    > of warning from the 1920s, as well.) However, when it is proclaimed
    > that times can never be bad again, lay in extra provisions.
    Sep 21 03:09 PM | Link | Reply
  •  
    Michael - - -

    A home run is thrilling, but a flock of singles win ball games. Some of the most successful strategies I know for individual investors involve buying something like 400 shares (maybe not all at once) and automatically selling 100 when you are up 30%, no matter how great the fantasies; sell another 100 when up 60% and another 100 when up 100%. Stay with the last 100 shares with trailing stop loss orders (maybe something like -25%), either forever or until a better opportunity is seen.

    I believe in stop losses, and would never take a loss once a stock is up 10%. Be careful though, as the gains accumulate you can be unhappy by keeping the stop loss orders too tight and getting "whipsawed" out on a temporary pullback.


    On Sep 21 03:09 PM Michael Clark wrote:

    > John: I noticed long ago when I am investing and my stock goes up
    > 30% -- and I began to fantasize it going up 3,000%, that is the actual
    > top of the stock. Something to do with Euphoria being the top of
    > the mountain and the first step down again.
    Sep 21 03:52 PM | Link | Reply
  •  
    Well, I can only assume that Bernanke and his Bankers and our friendly politicians, must have access to some secret alchemy?

    And, the those entrusted with US budgets, as shown in the historical tables must be terribly inept.

    Whereas, Bernanke & Co are suggesting green shoots everywhere and an economy that is springing back, bolder than ever, the 2009 budget shows a drop in 08 to 09 for individual tax receipts of 17% and a massive 48% for the Corporates, followed by an anemic & imaginary minor pick up in the 2010 estimates.

    Meanwhile, outlays are set to jump 34% bewteen the 08 to 09 comparison and the deficit is set increase 40%, to $1.84 Trillion in 2009, up from $458 Billion in 2008, which in turn was up from $160 Billion in 2007.

    So, we have the above, then we have -
    1) Consumers have taken a massive hit, via falling housing equity, lower share values & reduced access to credit.
    2) The economy is deleveraging and will do so, for some time to come. Derivatives is the other Elephant in the living room!
    3) Two of the three major growth drivers (Oil & Population), have Peaked and are heading south.
    4) Unemployment still rising.
    5) Business Earnings are falling dramatically and bankruptcies are rising, which is where the falling Corporate tax receipts com from.
    6) Consummer activity is down.
    7) Massive increases in Health and Social Security Costs, are on the way, again expanding government deficits.
    8) Problems arising from Climate Change and Food Production are also set to interfere with future plans.
    9) Share Markets first fell some 50% and have since increased some 50%, still leaving a massive reduction in total wealth.
    10) Gold is rising & the US$ is falling.

    And yet, we have P/E ratio's moving into orbit, based on what???

    I don't know about alchemy, nor green shoots or whether the government can budget, but I do know where the US & Global economy is likely to go over the next few years and it won't be a place for bulls!
    Sep 22 03:56 AM | Link | Reply
  •  
    That's why I've developed a system that is based on taking profits and moving on to another stock. Falling in love with a stock can be devastating -- because the mind can be very tricky, and is not always your friend.


    On Sep 21 03:52 PM John Lounsbury wrote:

    > Michael - - -
    >
    > A home run is thrilling, but a flock of singles win ball games.
    > Some of the most successful strategies I know for individual investors
    > involve buying something like 400 shares (maybe not all at once)
    > and automatically selling 100 when you are up 30%, no matter how
    > great the fantasies; sell another 100 when up 60% and another 100
    > when up 100%. Stay with the last 100 shares with trailing stop loss
    > orders (maybe something like -25%), either forever or until a better
    > opportunity is seen.
    >
    > I believe in stop losses, and would never take a loss once a stock
    > is up 10%. Be careful though, as the gains accumulate you can be
    > unhappy by keeping the stop loss orders too tight and getting "whipsawed"
    > out on a temporary pullback.
    Sep 22 04:56 AM | Link | Reply
  •  
    Very interesting article and collection of data. I have sensed for a while that a significant portion of our economic growth in the 2000's could be attributed to an increase in personal leverage given the stagnation of wage growth. What facinates me in all of this is what policy decision (tax, labor or otherwise) has lead to the stagnation of wages over the last 10+ years or more. One of the issues that strikes me is the change in the way inflation is calculated has changed a number of times over the last 30 years. In my opinion, that change in the way inflation is calculated served to under state inflation, thereby providing cover for employers to keep a lid on wage growth for decades. This disparity between wage growth and "real" inflation over many years has put significant pressure on households to maintain their standard of living. With a signficant number of households already in the catagory of two wage earner families the only way to bridge the gap between insufficient wage growth was increasing leverage.
    Sep 22 08:49 AM | Link | Reply
  •  
    logicalthought - Your logic fails in that not all government spending is equal in its overall economic effect. War has been an effective course of action in stimulating economic growth because it is essentially a worthless activity. It provides a stimulus to economic growth that can be withdrawn once stability is achieved. Other forms of economic activity, such as workfare, educational & training programs, and other such subsidies can not readily be turned off when the desired growth is achieved. They have a ratchet effect that can not be easily reversed. As such they continue to add fuel to the fire and result in "overheated' economy, with runaway inflation. The only viable options to war as an economic stimulant are programs that can easily reversed without changing the infrastructure to any great extent, however, these programs must possess the element of dire need, as the general population would otherwise resists the costs of such programs. Such programs as economic regulation and sanctions, in which for example, allowable pollution levels can be raised or lowered as stimulation is applied or withdrawn would meet this criteria. Another option might be a threat from outer space, or an international arms race such as the cold war provided. In other words, not all government spending is equal.
    Sep 22 09:40 AM | Link | Reply
  •  
    Thank you Mr Lounsbury, for at least raising the question(s) about the government, business and personal habits of borrowing and spending. I am not a financial or economic expert, but I have friends and family members who are suffering under the employment conditions that exist today.
    Your presentation turns attention to the elephant in the room.
    A large number of people are left behind as just road kill on the 'creative destruction' highway to nowhere.
    Sep 22 10:31 AM | Link | Reply
  •  
    Welcome to the party! Rural America has been in a Depression hidden by massive debt for the last 30 years. Just get off the Interstate and open your eyes, every small town looks like it's 1933 all over again.
    Sep 22 09:18 PM | Link | Reply
  •  
    If I may. WWII took care of massive industrial overcapacity abroad (by turning it to dust). That's what ended up kickstarting the US economy.

    Stimuli/government spending just preserve overcapacity a la Japan and so lengthen the crisis which is one of surplus capacity and capital.

    There's a new angle for you. It's devilishly complex.

    Good luck

    W.

    On Sep 20 07:40 PM John Lounsbury wrote:

    > lookingsouth - - -
    >
    > I will take note of your request. I will warn you though, I am feeling
    > overwhelmed just trying to make sense out of the U.S. part of things
    > so I may not get to your suggestion very soon.
    >
    > logicalthought and Dave Wrixon - - -
    >
    > Your comments are on to something that has been bothering me. It
    > is common wisdom that the Great Depression was ended by WW II. However,
    > that event prompted a huge debt bubble and unwinding that credit
    > inflation created some severe recessions in the following years.
    > I want to look at the credit and cash flow balance sheets for that
    > time to see when the Great Depression actually ended based on economic
    > growth rather than credit bubbles. My gut tells me the Great Depression
    > might have lasted 20 years or so, when the proper factors are recognized.
    >
    >
    > There is a common saying that "you can't borrow and spend your way
    > to wealth and prosperity". However, I think that there may be more
    > times in our history than realize that we created the appearance
    > of prosperity rather than had the real thing.
    >
    > I've got to dig into this idea and see if there is anything there.
    Sep 23 12:05 PM | Link | Reply
  •  
    williamb - - -

    Thanks for your input.
    Sep 23 01:35 PM | Link | Reply
  •  
    It is difficult to believe that the ideology of "supply side" reductionism can be honestly brought up as a serious resolution to the current crisis. Shock therapy and supply side has disproven itself as viscious cycles and political crisis all over the world. Thatcher's adoption of the "success model in Chile" (aka: Hyaek / Friedman/ Chicago School of economics) was an admitted failure (letter from the Prime Minister to Hayek1982) largely because it was inflicted at the cost of democratic principles and established standards of individual rights and consensus that was totally unacceptable in civilized English Society. In other words it was anti-democrocracy (as proven time and time again in Asia, South America, Central America and Russia).

    Perhaps this is part of the reason WWII may have had some austerity and stringent restructuring influences;... but perhaps WWII really only truthfully reallocated and refocused resources away from the elite strata and classes in a way that is entirely anathema to the "Supply Side" methodology. It leveled the class operative constrictions and opened up class defined "barriers to entry" far better through its demands than any supply side contingency could ever formulate.

    Supply side selectively EXECUTES the demand side in a way that mimics the controlled order of a prisoner of war camp. I suppose that works for the Wardens of injustice.
    It might also be argued, by the way, that the post WWII sequences and consequences saw the reemergence of a class factor that gradually captured not only the ideological legitimation of the cold war, but gradually emerged as the capture of capital formation and political convergence in the 1980s from which the seeds and roots of our current distress would propagate into complexity of finance dependencies and what might be called the debt debacle of botched American Ascendency into cheap greed and treacherous deceptions and devisiveness.

    It is a sickning thing to hear this same cancerous dogma repeated here in intelligent circles of America's business elites...and still bedeemed acceptable and appropriate.
    Sep 23 02:03 PM | Link | Reply
  •  
    Sorry for the run-on which seems to have escaped me on the edit. It should read:

    It might also be argued, by the way, that the post WWII sequences and consequences saw the reemergence of a class factor that gradually captured not only the ideological legitimation of the cold war, but gradually emerged as the capture of capital formation and political convergence in the 1980s. The political economy staging from which the seeds and roots of our current distress would propagate into the complexity of today's crisis of financial sector dependency and political capture.

    I would retract the unnceesary irrational "exuberance" of the final line.
    Sep 23 02:17 PM | Link | Reply
  •  
    BRUCE E.W. - - -

    Thanks for commenting. I certainly understand some of the things that you are against, but you could do a better job of identifying what you are for. Or maybe I am just dense.
    Sep 23 07:35 PM | Link | Reply
  •  
    I would certainly reject any notion of your being dense, John, but I certainly do think that a good deal of the repetitive inertia for changes are already identified. In my research I place a good deal of blame on the mesmerizing survivalist doctrines of the University of Chicago's Economic regime. More practically however, Regulations, public transparency, political integrity against duplicity, an invested financial sector in support of our infrastructure and a system of enforcements against blatant error and failures that correct the malpractices rather than reinforce them and basically some guarantees (realistically) that "fair play" is still our standard for best practices in the public interest. I clearly would like to see competition for the aggregate gain (positive & cooperative enhancements) rather than the negative competition that has been rampid and overall destructive. Finally I would like to see a leveling mechanism that creates a balance of power being the public strata of individuals and the corporate "persona" on the other which is progressively imbalanced and unjust.

    On the technical side, however, It amazes me that this sociopolitical and political economic crisis is still assessed as a business model. If we use the health reform arena as a model, it becomes clear that all sorts of modulated distortions appear from self interests that simply drive the problems into emotional appeals to politicized judgements. If you follow the markets and blogs, it is abundantly clear that intensive misinformation and bias is a major contributor to daily flow. The one dimensional flow chart is essentially all we have (figuratively) to assess the "quality of life and the living economy" and that is simply a incomprehensible neglect. What I want is accountability and credibility restored in a system that has been restorative rather than "business as usual and more of the same" = REcovery? To what??? It's regressive horizontally and progressive hierarchically and vertically.
    What bothers me most is that we are selling our freedoms into debt and our entire salaried standards are ultimately subject to the fiat currency values that are being captured in scale, along with the future of the next generation of America. All methodically measured, meanwhile, with these same old models.

    What I would like to see most is a convincing job from the professional community that there is an economic will to support a healthy public interest (while they are in the process of pursuits for private goals) and manage an economy that prioritizes integrated foundations rather than an indentured service economy in America.

    I appreciate your analytical process and the questions you have raised in your blogs. Seeking Alpha, of course, is a market oriented format. It is a credit to this format that it has invited a wider audience into the arena of questioning what's going on. I do think that the health of the market depends on a comprehensive understanding of all this "forward looking statement" process. History and background go hand in hand with prudence and due diligence in the full spectrum.

    In your commentaries I found it interesting that people could comment on the world war and hypotheticals about its influence on the Great Depression era. It doesn;t strike you odd that the War Economy from Bushwacked economics is never mentioned? Why is it that the War Deficit has somehow become a background memory in all this "Recovery"?


    On Sep 23 07:35 PM John Lounsbury wrote:

    > BRUCE E.W. - - -
    >
    > Thanks for commenting. I certainly understand some of the things
    > that you are against, but you could do a better job of identifying
    > what you are for. Or maybe I am just dense.
    Sep 24 12:10 AM | Link | Reply
  •  
    Bruce E.W. - - -

    Thanks for the clarification. The impact of war expenses on economic growth is a topic that I find very interesting.
    Sep 24 02:08 PM | Link | Reply
  •  
    BRUCE E.W., John seems to ask questions about some of the things you mention. I think he sometimes raises more questions than he answers. But it does make for thought provoking reading. And it does elicit interesting comments.
    Sep 24 02:10 PM | Link | Reply
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