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Smoke and Mirrors: America’s Economic Growth Engine Running on Fumes

Economica  ( Original )
FEB 5, 2018

What do you do when the true engine of organic growth, a larger and more productive underlying population, is tending toward zero, but the only acceptable “reality” is one of unfettered growth and prosperity? This is the conundrum the Fed finds itself in.

The organic basis of growth has slowed in the US (and the world at large). The chart below shows the decelerating growth of annual household creation in the US alongside decelerating annual growth of the US population. The rationale for interest rate cuts and accelerating deficit spending to offset decelerating organic growth and maintain abnormally elevated levels of synthetic "growth" should be plain.

America is already beyond ever effectively repaying its debt and is just realizing the reality of servicing the interest payments. A further jump in debt threatens what remains of the dollar's place as global reserve currency. Whether the weakened system and currency can absorb another bust and subsequent centrally directed boom is a very good question likely to be tested relatively soon.

ORIGINAL SOURCE: America "Needs" More Deficit Spending to Continue "Growing"...But Debt to GDP Needs Austerity to Avoid Disaster by Chris Hamilton at Economica on 2/4/18