Updated: Jul 9, 2021
LARGE UNLIMITED SUPPLIES OF CREDIT MAKES A SICK ECONOMY LOOK HEALTHY
America's unique ability on the planet, to credibly grow its money supply, with seemingly no limit, extending credit to consumers, business and the world at record low interest rates for as long at it sees fit, gives the US and global economy the appearance of formidable and sustainable economic strength and resilience, supported by robust and balanced supply and demand in the Economy. This is a lie and is not supported by the fundamentals in the real economy:
SIGN POST WHICH SHOW THAT US ECONOMY IS FUNDAMENTALLY & DANGEROUSLY SICK, EVEN WHEN LARGE AMOUNTS OF CREDIT MAKE IT LOOK VERY - VERY HEALTHY
Interest rates in the US and around the world have been at record low emergency or catastrophic condition levels, only meant to be sustained in the marketplace for 6 months to a year. We are going on 13 years at these catastrophically perverse interest rates levels with no signals that the US or global economy have the capacity to normalize interest rates to healthy fundamentals levels needed to support a strong economy based on economics (Not Finance) In a strong healthy economy, long term interest rates should be supportable at rates between 5% - 8%, most long term interest rates today are at -0.5% to 2.0%.
Total Debt to GDP Ratio is 370%, well above the 300% level consistent with start of the Great Depression of 1930s and still remains close to the levels at the start of the Global Credit Crisis and Great Recession of 2007 - 2009. A decade following the 1930s Great Depression, Debt to GDP ratio was more than cut in half. A decade following The 2007 - 2009 Great Recession, Debt to GDP ratio is only slightly lower, but way above Debt to GDP ratio experienced at the peak of the Great Depression of the 1930's. This is why interest rates remain so catastrophically low in US and Global markets. Interest rates cannot normalize back to fundamentally healthy levels because debt levels are so high and fundamental economic growth cannot accelerate to levels necessary to grow out of this debt, because debt levels and high prices in the economy, makes consumer driven, fast economic growth fundamentally impossible, without sustained, fundamental and structural economic reform in the US economy.
Coronavirus Economy Wide Shut Down Demonstrates Thin Economic Margin That Both Have's and Have Not's Are Living On In The US Economy. It's common knowledge in the US economy that between 50% - 70% of American in the US economy are living pay check to pay check and would go bankrupt if they loss their income for more than one or two months. Coronavirus shut down of US economy illustrates how fragile and dependent the US economy is on excessively catastrophic borrowing and financial engineering that is required to keep the US economy solvent. After being shut down for just one week, in the spring of 2020, the US stock market lost $12 Trillion in value, with the Federal Reserve frantically creating "super crazy" record new policy supports for the financial system, committing to buying unlimited amounts(multiple trillions of dollars)of government and private sector debt across all debt sectors of the US economy, to prevent US and Global financial system from having a fatal stroke or illiquidity collapse. If the American financial system is so strong and so resilient and so wealthy, why is the Government through the Federal Reserve needing to catastrophically risk ramping up its balance sheet to new potentially catastrophic record high levels to backstop the US and Global financial system, that would have apparently disintegrated had the Fed not taken these never before seen drastic actions in such a record short period time, ONE - TWO WEEKS!!!!! America has enormous levels of wealth, but a very significant portion of that wealth is dependent on catastrophic levels of debt that has not currently been fully priced into the global financial system. Massive and I mean catastrophically massive demand loss because of coronavirus spread and already record all time high levels of debt in the US and global economy, especially in the corporate sector, could have created the greatest global depression in the history of the world, had not the US Federal Government bailed out the US and Global Economy with $7 - $10 Trillion in liquidity and financing made available during the 2020 - 2021 Covid-19 Pandemic Recovery Period.
Velocity of money remains at record all time low levels in the US economy, reflecting the shrinking pool of market participants who are credit worthy and able to access liquidity required to participate in the US economy. The lion's share of lending and money transfer is occurring between the banking system and business. The share of lending that goes to consumers and small business has declined to record low levels, following the Credit Crisis of 2007 - 2009, with large corporations and investor dominating and benefiting from the easy and preferred access to capital, at a all time low cost of money. This is bad for the economy, because it limits the financial and economic opportunities for the bottom 80% of Americans to participate fully in the US/Global Economy, further exasperating the inequality of opportunity and wealth in the US economy
(Before Covid-19) Real Unemployment rate was closer to 7% - 9%, when you account for the labor force participation rate which is up from its lowest levels but still at a 40 year low. There were about 8 - 9 million people who were qualified and wanted to work, but employers were not hiring them because of age, race, credit risk, healthcare risk, etc... This explains perfectly why the fake official unemployment rate, which was supposedly at record low levels did not cause significant wage inflation in the labor market and little if any price inflation in the economy. US has a labor supply glut where employers have significant, almost absolute market power over workers in US labor markets.
(Before Covid-19) Inflation remains at low to moderate levels even with economic growth and the stock market on rise. Principle reason for this is that consumer prices for the most important products and services in the US economy were already uncompetitively far too high and unaffordable for the bottom 80% of income and wealth holders in the US economy. Supply side economist and financial analyst in our capitalistic society do not recognize this very fundamental and reasonable explanation for why there is not roaring inflation in the US economy. Why would prices be rising rapidly in the economy, when most people cannot afford current price levels for housing, healthcare, education, etc.. An economy that makes its money by increasing market power and raising prices, has an absolute incentive to ignore facts, information or assumptions that would suggest that the inflation problem in the economy is caused by prices in the economy that are already uncompetitively too high for consumers. They do not want to hear this because that would mean that price levels in the economy are fundamentally too high and need to be brought down to much more affordable levels to make the economy fundamentally economic and affordable for market participants.
Income and wealth inequality built up over the past 50 years is the highest in the past century and is the primary reason that growing the US economy is Uneconomical
80% of American will eventually go bankrupt or have to depend totally on government safety net to survive in the economy if the status quo persists.....but this implies the entire economy will go bankrupt because the asset values and wealth of the top 10% will vanish when bottom 80% are not borrowing and going into debt to artificially holds up the wealth of the top 10%
The cost of growing the US economy is far far more expensive than the value of goods and services produced from growing the economy - Meaning Uneconomic or Unprofitable Economy Growth : GDP - C - G - I << 0, where: GDP = Gross Domestic Product; C = Consumer Consumption; G = Government Expenditures; I = Business Investment (I call this US Economic Cancer)
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