KNOWLEDGE IS POWER - IF YOU HAVE IT
When will we be given the truth about our failing economy. Is the reason for so much deception our government on both sides of the house is engaged in due to the Massive debt loads and the way we create money?
The economic purpose of capital markets is to provide a nexus between savers and borrowers for the financing of productive investment. Financial entrepreneurs, such as venture capitalists, traders, and speculators, are essential in forecasting the best uses of available savings and bearing the risk in an uncertain world. But a society cannot prosper by printing ever-increasing quantities of paper tickets representing claims for real goods and drawing more of the population into trading these tickets back and forth among themselves. We cannot all be day traders: someone must produce the goods that are consumed." Debt & Delusion by Robert Blumen for Ludwig von Mises Institute, Jan. 2005
http://www.gold-eagle.com/gold_digest_0 ... 81204.html
America has become more debt-dependent - - than ever before with total debt of $40 trillion, or $136,479 per man, woman and child and each added dollar of new debt produces less increased national income.
The Prime Debt Culprits are:
Federal Government - Financial sector - Household sector - Business sector.
You may have previously viewed the historic pictures in the Federal Government Debt Report, which covers just the federal debt of $7.6 Trillion, or $26,000 per person. This covers all U.S. debt, called America's Total Debt (defined as the sum of all recognized debt of federal, state & local governments, international, private households, business and domestic financial sectors, including federal debt to trust funds - but excludes the huge contingent liabilities of social security, government pensions, Medicare and other government off-budget items).
In 1957 there was $1.86 in debt for each dollar of national income, but today there is $4.37 of debt for each dollar of national income. It also means that this extra $2.51 of debt produces zilch relative national income.
This implies today's economy has more than double the debt load in relation to economy size, as was the 1957 economy. Not only is this ratio difference very large, but the 1957 economy was still paying off World War II debt (and carrying parts of the Korean war).
Restated - it took twice as much debt per dollar of national income in today as was required in 1957.
Total debt allocated on a per capita basis, adjusted for inflation.... shows 1957 debt nation-wide (in today's dollars) was $27,084 per man, woman and child.
If debt per person were only adjusted for inflation over the 47 year period, (2004) should have remained the same as (1957) at $27,084 per capita.
BUT- 2004 debt was $136,479 per man, woman and child - - 5 times higher per capita than in 1957.
Adjusted for inflation, this data shows inflation-adjusted total debt load per person increased $109,395 - - equivalent to an increase of $437,580 per family of 4.
In 1957, 54 cents of national income resulted for each dollar of debt.
But, today only 23 cents of national income resulted per dollar of debt.
That's a 57% drop in national income per added dollar of debt.
The most dramatic & scary is the Financial sector debt
(today at $12 trillion) - a very scary trend!!! The financial sector's debt ratio zoomed from 5% of the economy's national income in 1957 to 131% of today's economy - a debt ratio growth rate 26 times faster than general economic growth - and, pointing upward faster and faster.
The next largest rapidly rising component is Household debt
($10.3 trillion) - from 43% of national income to today's 106%, more than double the prior ratio - meaning it, too, is growing much faster than general growth of the economy.
Household debt is made up of consumer debt plus mortgage debt. The Family Income Report shows real median family incomes stopped growing in 1970, and thereafter families tried to keep up by going deeper and deeper into debt ever since
- at near twice the rate of total economic growth - to an all-time high today. Consumer debt payments % disposable income are at historic highs. The Family Income Report cites the reason, with dramatic pictures.
The fact household debt ratios have reached historic highs during the so-called boom years of the 1990s proves that the economy was more driven by debt than anything else - - and households have excessive debt instead of reduced debt at end of an expansion period.
Next there is the Federal government
sector debt ratios -
We have seen this before. It was pointing downward 1950s to mid 1970s - a period of strong real median family income growth
, stopped dropping in 1974, oscillated, and then took off upward - under the pressure of consumptive social spending rising 12 times faster than the economy as reported in the Federal Spending Report (as family incomes ceased to climb).
Today's ratio (83%) is double that of early 1970s when the Vietnam war and the cold war were in process. The recent short down turn was due to record tax revenues, and a dramatic lowering of national security expense ratios to a near record low as a share of the economy - - but, now reversing to the upside as the reduced military is re-built.
Some of the reasons are in the Social Security Report, which shows how the general government dips into trust fund surpluses, siphons such off for non-pension spending
(leaving behind a few worthless IOUs
), and then does not account for such spending in the way the budget deficit is calculated
. The same siphon and spend approach occurs in other trust funds, such as the federal employee pension trust fund. Together, $3.1 trillion has been siphoned from trust fund, with zero budget to reduce other general government spending to repay.
The business sector
debt of $7.8 trillion increased twice the speed of the economy, increasing from 44% of national income in 1957, doubling to over 86% today - an all-time high.
The debt of state & local governments
is the only component not rising. Although its debt may have moderated, the State & Local Government Report proves spending and headcount ratios are way out of line, compared to the past, and this sector needs major attention.
Debt has risen at rates much faster than growth of the economy, suggesting real equity is not the driving force of economic size - - it is debt driven.
If today's debt ratio (105.6% of net national income) had been the same as in the earlier years ...then today's debt in dollars would have been $5.3 Trillion less than it was in 2004. In other words, 2004 household debt would have been $5 Trillion - - not the $10.3 Trillion that did occur.
This shows that the economy is more leveraged by household debt than ever before. And, households are even more at the mercy of credit and mortgage interest rates than ever before.
Auto loans - In addition to soaring home equity mortgages which consume owner stakes in their homes, according to USAToday (2/16/04) the average automobile loan today is for 63 months, with some going as high as 80 months, compared with an average of less than 48 months five years ago - - and about 24 months in the 1950s. In 1997, banks financed an average 89% of a new vehicle's price. Last year, it was 101% since consumers borrowed to cover the amount they were upside down on their trade-in. And get this…40% of all trade-ins involve upside-down car loans. In the late 1950s normal down payment was one-third cash for a car
, with 18 month financing for the balance. Quite a contrast to current times.
Credit Cards - A massive 42% of Americans
are making just minimum payments or no payments
on their credit card balances, according to the Cambridge Consumer Credit Index in March 2004. Of those respondents surveyed with revolving balances on their credit cards, 39% made only the minimum payment due and 3% made no payments at all last month. Another 39% paid less than half the balance owed but more than the minimum, while 19% paid more than half their balances. In 2003, the average credit-card debt of US households with at least one card was $9,205, up from $2,966 in 1990
, according to the research firm CardWeb.com - - that's 310% higher
The same firm in 2004 said, "About 51 million households carry credit-card debt at an average balance of nearly $12,000."
(http://www.hillnews.com/thehill/export/ ... tcard.html
) - - that totals $612 billion in total debt
for those households.
America, that used to derive strong family incomes and values from producing real goods and savings, even with one bread earner per family
, has moved to a fully consumptive society financed by ever increasing ratios of debt at private and government levels, with nil savings - - with debt ratios reaching new records - - with each added dollar of debt producing diminishing amounts of national income.
AMERICA HAS BECOME LESS A FAMILY-BASED, FRUGAL AND PRODUCTIVE SOCIETY WITH SMALL GOVERNMENT - - AND MORE A CONSUMPTIVE, PERMISSIVE, DEBT-DEPENDENT AND GOVERNMENT-DEPENDENT SOCIETY THAN EVER - - A BECOMING QUITE DIFFERENT THAN THAT ENVISIONED BY ITS FOUNDING FORE-FATHERS. WE ARE AT A CROSS-ROAD. OUR YOUNG GENERATION FACES EXTREMELY SIGNIFICANT CHALLENGES IN THIS REGARD - - AND MAY BE LESS PREPARED TO MEET THE APPARENT FUTURE THAN ANY PRIOR GENERATION IN RECENT HISTORY.
WHAT IS TO HAPPEN TO THE YOUNGER GENERATION AND FAMILIES?
How can such debt trends be sustained - - considering the Grandfather Family Income Report shows 2 ½ decades of stagnant real median incomes for families, as income of full-time working males has fallen for more than a decade?
The Tax Report shows citizens work 3 times longer to pay all taxes
each year - - which depresses family spending options leading to increased household debt to make up.
Most citizens have learned that each working person today supports more seniors than ever before, but few know they also carry on each of their backs 3 times more state & local government employees per head than before.
Additionally, if families are consuming their home equity
(while prior generations saved theirs) yet the Grandfather Social Security Report shows these families can expect much less in pension benefits when they retire
than their elders - - how can this be sustained?
And from where comes family funds to support higher education for the children of younger families - - especially considering college cost inflation and degradation in high school output quality, as covered in the Grandfather Education Report? Tremendous increases in inflation-adjusted public spending per student, while test scores compared to other nations place the USA at the bottom of the heap, waste and drain of individual and national resources.
Net result: families and students take on more college debt than ever before.
Further, said generation faces global competition for their living standards more so than any generation in U.S. history
against many competitors better educated than they as shown in the International Education Report.
AND - - America, that used to be the biggest creditor on earth is now the biggest international debtor
with exploding trade deficits, as shown in the Grandfather Foreign Trade Report,
AS debt soars America's energy infrastructure has deteriorated and especially its independence regarding petroleum and natural gas, as covered in the well-documented Energy Report with extensive graphics of production vs. consumption vs. imports vs. reserves.
Largest borrowers - 'Ford and General Motors are the No. 1 and No. 3
corporate borrowers in the U.S., according to Lehman Brothers Holdings Inc.'s Credit Index.March 2004 General Electric Capital Corp., is No. 2
. GMAC, in addition to financing auto sales is also lending money, writing mortgages and selling securities. If GMAC were an independent company, it would be the eighth- largest U.S. bank
. Ford Motor Credit Co. would be the 10th-largest U.S. bank
if it were an independent company. The loans maintained by GMAC and Ford Motor Credit are relatively unprofitable. In the first nine months of 2003, GMAC's automotive lending unit generated a return on managed assets of 0.75 percent and Ford Motor Credit's auto lending unit generated a return of 0.77 percent. Moody's rates General Motors and Ford debt at Baa1, three ranks above junk. Meanwhile, Toyota Motor Credit has a AAA rating from S&P.' 4/23/2004 Bloomberg http://quote.bloomberg.com/apps/news?pi ... tB6.NTMKBk
INTERNATIONAL OWNERSHIP OF U.S. DEBT - - SOARING
Foreign investors own a larger and larger share of America's debt instruments.
43% of U.S. government Treasury bonds, 27% of corporate bonds and 14% of government agency debt (Freddie Mac, Fannie Mae) -
Total foreign owned US financial assets about $9 trillion per Gillespie Research/Federal Reserve, and GROWING RAPIDLY.
One can ask - what is a major driving force for unprecedented debt growth in all sectors? An answer - the financial industry depends and feeds on a nation addicted to more and more debt, which is organized by its agent, the powerful central planning monopoly Federal Reserve.
This demonstrates a huge catalyst for exploding debt in all sectors since 1980 can be attributed to long-term declining federal fund interest rates set by the Federal Reserve - to but 1%, which is a historic 'give-away, free-lunch, debt-promoting' rate, a historic 'teaser' rate for more and more debt to fuel more and more consumption including more imports, and less and less savings.
This makes the case that the cheaper and cheaper it is to go into debt (declining interest rates) the more will do just that. Its the wishful thinking syndrome to which many worship and the Federal Reserve nurtures. Why consume less today in order to save for tomorrow when one can so cheaply borrow from tomorrow and consume today? Record low interest rates can cause record indebtedness - which is the case today. This indicates the Federal Reserve, a non-government agency run by un-elected officials, that is beholden to the banking industry - centrally-plans the climate for huge indebtedness.
America now depends on more and more debt creation to drive a given dollar increase of GDP - called Debt Productivity. Like a druggie, we need more debt each year than the year before. Additionally, as reported in the International Trade Report, the explosion of debt has generated consumption so far beyond the nation's means (own production and savings) that soaring imports created record trade deficits
- - threatening economic independence and national security.
It is clear GDP has been driven by more and more debt (instead of production and savings
) and this debt explosion was facilitated by centrally planned interest rates. Such rates now are at record lows, as shown on the chart - - and, there does not appear anywhere for the Federal Reserve to go from here to further lower interest rates to drive even more debt creation to keep the debt-economy growing.
With interest rates unable to continue their decline as in the past 2 decades - what happens now? Most likely its 'game-over' unless powers-to-be have decided to centrally-plan ramping-up inflation to all time highs for the next 2 decades while continuing to change how they measure and report inflation to mis-lead the general public, as discussed in the Inflation Report. Time will show.
Why do you think centrally planned economic policy appears aimed at debt-debt-debt, with debt growing faster than the economy, including exploding trade deficits - instead of a policy aimed at savings, domestic production and balanced current trade accounts to meet our needs and protect our independence from others, as was the case in our past? Is this debt-drug policy good for America looking forward? Can we argue that, as a clear expression of intent to have free markets unhindered by central planning monopoly control, the Federal Reserve should by law be denied the power to peg the federal funds interest rate - - and thereby remove it from being an obvious major driving force for America's unprecedented debt explosion?
Where is the Government state of the union address when the truth needs to be told? Where is the public media to tell us this real information?
No longer should supporters of Republicans and Democrats be opposed to each other. This is the outrage that must bring us together. We're being lied to and deceived as to the state of America today. It is time to question what we've become as the reason for who we are and why we do what we do. Trouble is on the horizon and the only thing holding us together is our aggressive stance. When it comes time to pay, will the whole thing fall like the straw house America has become?
Do you think we have no intention of paying and we're just gaming the system?
Who here knows the answer as to how we produce money?
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