consider that the red line, GDP, would be even flatter if a large part of it wasn’t including measuring spending on totally non-productive stuff
This is a short excerpt from Bill Bonner’s “Bonner Private Research”. Bill paints a very insightful fictional story of a boom that was built on credit expansion; not on actual increase of productive endeavors. Everyone in his story used the credit to buy all kinds of stuff and entertainment for themselves. They didn’t use the money to invest or to capitalize more production or research and development. The resulting appearance of wealth was illusionary. The problem with credit and borrowing is that it eventually has to be paid back. (Pray for our grandchildren.) At least when our spending is based on our savings, we don’t have to pay anyone back.
“What happened to the boom? What became of that new wealth?
It was fictitious. Unreal. Transitory. Ephemeral... a chimera... a mirage... a vain and foolish fantasy.
How could that be? The BMWs and sectionals were real, tangible things. The boom was genuine.
But the spark was credit, not savings. Savings can be spent and enjoyed. End of story. But credit comes with ‘the demands of tomorrow’ attached. Successfully invested, it might have created new wealth. But merely consumed... there was no new income to pay off the debt. People just spent money they didn’t have…and got poorer.”
We worked and worked and by the grace of God we were able to mortgage less than $100,000 of our house on a 15-year note to pay off the higher-interest business loan (really a property loan) before its latest 5-year balloon. Then, two or three years later we sold our business, paid our taxes, and stashed the excess. We were officially debt-free. Not rich, but free. So now we're expected to pay the partying expenses of kids who borrowed for a 4-5-year degreed vacation, and send money so Ukrainian people can get slaughtered, and more, all on federally borrowed money. And watch out if and when they come for us when their economy collapses. It would be easy to lose hope.