Skip to comments.How Long Before Massive Government Debt Buildup Triggers Another Financial Shock?
Posted on 05/12/2012 6:26:52 AM PDT by SteelToe
Stimulus Tactic of Increasing Government Debt to Increase GDP Broken and Unsustainable. How Long before Massive Government Debt Buildup Triggers Another Financial Shock?
Sometimes a picture is worth a thousand words. A recent post on the popular ZeroHedge financial blog compared the annualized growth in federal debt to the annualized growth in GDP in Q1 2012. ZeroHedge reported that while U.S. government debt rose by $359.1 billion in Q1 2012, the U.S. GDP grew only $142.4 billion. Durden noted that, It now takes $2.52 in new federal debt to buy $1 worth of economic growth.
The surprising observation prompted us to examine the relationship between growth in debt and growth in GDP from 1975 through 2012. What we found is both astonishing and frightening.
In Q1 2012, GDP rose $142 billion, while debt rose $359 billion. In other words, it took nearly $2.50 in debt to generate $1.00 in GDP. We wanted to understand how this relationship compared to those that prevailed in previous decades. The graph below shows our findings.
(Excerpt) Read more at zerohedge.com ...
It now takes $2.52 in new federal debt to buy $1 worth of economic growth.
We are throwing money into a back hole.
It depends on what you mean by “shock”.
The ZIRP has destroyed the ability of retirees, pension funds and insurance companies from earning any meaningful interest income. Retirees have suffered massive shock for some time now.
Yes, default, embarrassment are both inevitable.
But we’ve earned that. Troops stationed at 1,000 bases world wide. We borrow from China to keep going in Afghanistan. We borrow from Korea to protect her; the same of Italy. It makes no sense and when your nation begins to make no sense it’s time to withdraw and protect it from what is transpiring on our southern border. In short, we can’t even protect our own country but dash around the world helping everyone else out.........who hates us!
Down with foreign aid and down with maintaining diplomatic relations with nations who despise us! Close the embassies. We need a phony like Obama like we need a phony like Hiterly Klinton! (Or is it that we deserve them as much as we deserve an arrogant Barbara Boxer?
ZIRP has also had the undesirable effect of pushing some retirees into higher yielding, but riskier investments, that may not be suitable for them. This is putting many seniors on thin ice.
A black hole you say?
You’re a racist.
Yep - I took two massive hits with the previous "crashes". Seems my stuff goes down with the ship, but doesn't recover as fast or fully as when the market rises back up. A couple months ago, I moved my investment retirements into Money Market funds to try to salvage the principle when it tumbles again - can't afford to have it cut in half again. Not eraning anything, but hopefully it won't tank with the market.