Updated: Jul 10, 2021
Characteristics of Economic Cancer
Now some of you may be saying to yourself, Carlton, if the economy is so awfully bad and about to collapse in the next 3 - 5 years, shouldn't there be economic indicators that show the economy is distressed and on the brink of collapse? Yes, let's look at a few of these
Record low to negative interest rates over the last 12 years is a very strong indication that the US economy is not being driven by economic fundamentals. In a strong and healthy economy driven by strong underlying economic fundamentals, interest rates sustained at the 5% - 8% would be easily supported in the economy, providing incentives for maintaining a balanced and sustainable economic economy, working best for everyone. Only during periods of severe economic down turn would interest rates be reduced below 2% but not for more than 6 - 12 months, purely for the purpose of shocking the economy back to normal economic conditions. Policy interest rates in the US and around the world have been near zero to negative going on 12 years now. This has never, ever happened in the US economy and definitely not simultaneously with the major economies of the world. How can a market driven economy whose most basic and fundamental economic driver is the value of money as expressed in interest rates, be anywhere near running on economic fundamentals when the value of money in a competitive economic US and global economy is practically non-existent or negative for 12 years? What economic fundamental is driving the economy if interest rates are not??? I think we have answered our own question here. The US and global economy are not being driven by healthy economic fundamentals and have not been so for 40 years now, and especially not over the last 12 years.
So what is so different this time that would explain the catastrophically record low interest rates for such a record long period of time. Record debt levels accumulated over the last 40 years, totaling $5 Trillion in 1980 but now sitting at a massive $80 Trillion today, precisely explains why interest rates must remain low and possibly move even lower, given the US economy's insatiable demand for catastrophically higher levels of borrowing and debt accumulation with the passage of time. If US interest rates were allowed to reprice to their true fundamental levels, reflecting the true economic risk in the US economy, the mother of all recessions would hit the US and global economy within less than a year. Annual interest payments approaching the size of the US economy would not seem unreasonable. Innovative financial engineering is artificially keeping interest rates catastrophically, low, unfortunately encouraging more uneconomic borrowing, making the problem catastrophically worse with the passage of time.
Again, this did not happen by accident or by some financial querk or oddity in the market. This is the result of America's decision back in the early 1980's to financialize the US economy because that was the easiest thing to do, but it was not the right, moral and economic thing to do. These are the perverse, very loud and clear economic fundamentals that are shouting to economist, business men, government regulators, etc…. That the US and global economy are in trouble. The warning signs are flashing brightly, we have time to fix this, but do we want to put in the time, effort, hard, smart and coordinated work to do the right thing, Make the economy right and economic before it is too late??
The velocity of money is another economic indicator which signals how well money is being used and turned over throughout the entire economy. The velocity of money fell precipitously at the start of the global credit crisis and great recession of 2007 - 2009, falling to all time record low levels, even lower than the periods when women were primarily working at home and most of the economic activity was attributable to men. Over the last 12 years the velocity of money has continued to drop and is now at new all time lows, unimaginable by the science. This supports the view that most of the money being spent and invested in the economy is hoarded and controlled by the wealthiest top 10% in the economy, for their benefit, at the direct expense and financial destruction of the bottom 80%. This again is another structural problem in the US economy that is not going to fix itself . The wealthy and well connected have no incentive to disrupt this massive welfare program for the wealthy and well connected.
Consumer purchasing power has declined 70% over the past 40 years, for the bottom 80% in America, Meaning that today, when adjusted for inflation, consumers can only buy about one third of what they could buy forty years ago, in terms of housing, healthcare, transportation, education, retirement, etc…
I could go on but I think you get the picture. There are many other fundamentals that I could continue to show you so that you can see that the US economy is not economic, it is not right, it is not just, it is not an economy. It is a financial system motivated to maximize profits and wealth for the wealthiest top 10% of Americans at the direct expense and financial destruction of the bottom 80%, precisely so that the wealthiest top 10% have the freedom and power to continue to make and control excessively large amounts of wealth for themselves. This is Crony Capitalism or Free Lunch Economics, which we know is not sustainable, because of the Law of No Free Lunch Economics.
If the free lunch does not get paid for, economic cancer will continue to metastasize and extract its payment out of the economy on course to bankrupt the US economy for both the rich and the poor alike, right before our blinded but wide opened eyes in the next 3 - 5 years, if the status quo policies of the democrats and republicans persists on a going forward basis
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