A Different Angle On the Urgency of the National Debt

THE Most Important Chart of the Century from Nathan's Economic Edge

This very well may be THE most important chart of the century.  Notice how marginal productivity started to take a nose dive around the time that the bottom fell out of the economy (October 2008).  Then, marginal productivity fell off a cliff after the "stimulus."  Here's the author's explanation of THE most Importnat Chart of the Century:

This is a very simple chart. It takes the change in GDP and divides it by the change in Debt. What it shows is how much productivity is gained by infusing $1 of debt into our debt backed money system.


Back in the early 1960s a dollar of new debt added almost a dollar to the nation’s output of goods and services. As more debt enters the system the productivity gained by new debt diminishes. This produced a path that was following a diminishing line targeting ZERO in the year 2015. This meant that we could expect that each new dollar of debt added in the year 2015 would add NOTHING to our productivity.

Then a funny thing happened along the way. Macroeconomic DEBT SATURATION occurred causing a phase transition with our debt relationship. This is because total income can no longer support total debt. In the third quarter of 2009 each dollar of debt added produced NEGATIVE 15 cents of productivity, and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!

This is mathematical PROOF that debt saturation has occurred. Continuing to add debt into a saturated system, where all money is debt, leads only to future defaults and to higher unemployment.

The data for this chart came straight from the U.S. Treasury and the "Federal Reserve."  I put "Federal Reserve" in quotations because it IS NOT federal and there are no real reserves.  Our U.S. Government and its economy are based on Ponzi scheme financing.  In a Ponzi scheme there are no investments made and there are no real returns.  People who put their money in at the early stages get fake return payments from newer investors.  In a legitimate investment, by contrast, there are real returns generated from real investments.  The way that the U.S. government finances the national debt is a Ponzi scheme.  How?  The national debt gets bigger every day.  Every time a bond (debt with interest attached to it) matures, the U.S. government sells another bond to pay it off.  How do we pay interest on the national debt? We borrow that money.

 

So, we’re constantly going into debt!  We count on being able to borrow money, assuming that when the bonds become due we can borrow more money to pay it off.  The whole thing collapses when the creditors need their money back.  The day of reckoning is coming.  Learn more about how to survive the coming economic collapse from Peter Schiff in his new book, Crash Proof 2.0.