One of the best ways to think about public debt is to think of oil extraction. How many barrels of oil are required to extract 1 barrel? Right now we are extracting only $0.64 cents of GDP for every new $ of added public debt. This is a horrific ROI. Can you imagine using 1 barrel of oil to extract 64% of a barrel of oil? To make matters worse it keeps falling and falling for decades now.
Wait it gets even worse! Ask yourselves this. If the US cannot produce at least $1 of REAL GDP (inflation-adjusted) for $1 of added debt while we are at max employment and firing on all cylinders. When will we?
Long gone are the days we used to produce $14 of real GDP for every $1 of added debt. Yet the politicians the MMT crowd (who are really politically driven) keep telling you deficits "stimulate the people's economy" "deficits are a myth" and "do not worry how we are going to pay for it, worry how we will spend it!"
I am sorry to all those who still believe deficits are "stimulative". The data does not agree with your claims.
"Normal" Deficits at max employment used to range around 2 to 3% of GDP. Today we are around 8% of GDP. Sustainable? I don't think so. The more we print the less GDP the more we have to print the less GDP and so on.
This is what happened in Turkey which I have been warning about for years. Sri Lank, Lebanon, Pakistan etc..
As long as we are credit worthy this will go on. The one-trick pony of printing works great until it doesn't. it's the "doesn't" part we should all be worried about.
You may not be able to understand how to use this information in your trading style. But at least you are more informed as to what the reality is the next time you hear a politician say we need to "STIMULATE THE ECONOMY"
Wait it gets even worse! Ask yourselves this. If the US cannot produce at least $1 of REAL GDP (inflation-adjusted) for $1 of added debt while we are at max employment and firing on all cylinders. When will we?
Long gone are the days we used to produce $14 of real GDP for every $1 of added debt. Yet the politicians the MMT crowd (who are really politically driven) keep telling you deficits "stimulate the people's economy" "deficits are a myth" and "do not worry how we are going to pay for it, worry how we will spend it!"
I am sorry to all those who still believe deficits are "stimulative". The data does not agree with your claims.
"Normal" Deficits at max employment used to range around 2 to 3% of GDP. Today we are around 8% of GDP. Sustainable? I don't think so. The more we print the less GDP the more we have to print the less GDP and so on.
This is what happened in Turkey which I have been warning about for years. Sri Lank, Lebanon, Pakistan etc..
As long as we are credit worthy this will go on. The one-trick pony of printing works great until it doesn't. it's the "doesn't" part we should all be worried about.
You may not be able to understand how to use this information in your trading style. But at least you are more informed as to what the reality is the next time you hear a politician say we need to "STIMULATE THE ECONOMY"
Real Macro Economic Investing
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