FEB 12, 2018
What is “Economic growth”? Do you think it would be fair to say that a fair metric when gauging America’s organic growth would take into account the deficit accrued, the debt incurred, to help spur that growth? If so, what a broken-donkey-cart-into-ditch scenario this past decade has been for “American economic growth.”
Yet another chart that shows what unprecedented, crazy territory we are in when it comes to Fed policy and what happens after such wildly accommodative stimulus policy.
This chart shows the annual change in gross domestic product after subtracting the annual federal deficit spending essentially included as part of that GDP figure. The US hit peak growth in 2000, adding a half trillion in economic activity above and beyond the deficit spending incurred that year. Since then, the wheels have fallen off and economic activity (subtracting the annual deficit incurred) has been spectacularly negative. Said otherwise, there is no growth but the growth of debt. And this takes no account of the far larger and more pernicious unfunded liabilities.
All this against a backdrop of a debt-to-GDP ratio now over 100% and population growth near zero. The forces for organic growth are simply not there, and the now the decade-long, Fed-driven, free-money-no-interest party is ending. Is there any scenario where this ends well for risk assets?
ORIGINAL SOURCE: The Federal Reserve and President Intent on "Squeezing Blood from a Turnip"...Or Why Most Americans Are in a No Win Scenario by Chris Hamilton at Economica on 2/11/18