Recent Economic Growth Was Funded by Debt

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Over the past six years, the U.S. economy has not grown much.

Relatively little growth of only $3.4 trillion in aggregate gross domestic product (GDP) was created compared with $2.7 trillion in the previous six-year period, when the starting point was much lower.

What growth has occurred has been funded by a $6 trillion increase in household debt and a $3 trillion boost in federal debt. This sort of “debt binging” is unsustainable.

The $5.6 trillion difference between how much our economy has grown and how much consumers and the federal government have borrowed to make it grow is now largely overseas in the hands of our trading partners, mostly the Chinese.

And, those overseas chickens have started coming home to roost.

As a result, the contract with the middle class has been broken.

One Response

  1. In 1989, total federal debt was $800 million. Now, 30 years later, total federal debt has grown 1,400% to $12 trillion. Please provide data showing a 1,400% debt growth in 30 years has been, or is, “unsustainable.”

    Repeating that 1,400% debt growth would put the debt at $168 trillion by 2039. Please provide data showing that debt growth is unsustainable.

    Regarding federal debt being “in the hands of our trading partners,” please recognize the federal government does not even need to borrow. It borrows so by creating T-securities out of thin air, then selling them. It just as easily and prudently could create money out of thin air, dispense with T-securities, and eliminate debt, along with interest payments and worries about our trading partners.

    That being the case, specifically what are the “chickens coming home to roost”?

    The notion that the federal government must borrow U.S. money it already has created, and uniquely has the power to create, is a relic of the gold standard, and currently illogical and unnecessary.

    Rodger Malcolm Mitchell
    http://rodgermmitchell.wordpress.com

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