Sunday, June 29, 2014

The Great American Economic Growth Myth

Similar trajectories either in advanced economies or in emerging ones.

The case of the U.S. is telling in terms of wage decline, debt expansion, offshoring, financialization, mal-investments,  and so on..

From Zero Hedge:

The end game of three decades of excess is upon us, and we can't deny the weight of the debt imbalances that are currently in play. The medicine that the current administration is prescribing is a treatment for the common cold; in this case a normal business cycle recession. The problem is that the patient is suffering from a "debt cancer," and until the proper treatment is prescribed and implemented; the patient will most likely continue to suffer.


This decline in economic growth over the past 30 years has kept the average American struggling to maintain their standard of living. As their wages declined, they were forced to turn to credit to fill the gap in maintaining their current standard of living. This demand for credit became the new breeding ground for the financed based economy. Easier credit terms, lower interest rates, easier lending standards and less regulation fueled the continued consumption boom. By the end of 2007, the household debt outstanding had surged to 140% of GDP. It was only a function of time until the collapse in the "house built of credit cards" occurred.
PCE-Struggle-To-Live-062614
This is why the economic prosperity of the last 30 years has been a fantasy. While America, at least on the surface, was the envy of the world for its apparent success and prosperity; the underlying cancer of debt expansion and declining wages was eating away at core. The only way to maintain the "standard of living" that American's were told they "deserved," was to utilize ever increasing levels of debt. The now deregulated financial institutions were only too happy to provide that "credit" as it was a financial windfall of mass proportions.

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