Once in a while in a news article I see the phrase “the science of economics”. It always makes me laugh.
Currently political economics is no more of a science than astrology.
It has no predictive value when extreme debt is involved.
Economists presently have no way to measure the unsustainable debt in our economy for four reasons:
1. Neoclassical(Wall Street) economists are not trained to look at total debt. They are only able to quantify the debt payment. Therefore if interest rates are placed at zero, then in theory our country can have unlimited debt.
2. To make matters worse, the public sector does not use real accounting standards. Neoclassical economists use Enron accounting to measure the public debt. Economists say that our federal government has about $13 trillion in total debt where in reality the liabilities of Uncle Sam are 4 times this amount.
3. To make this situation even worse, instead of comparing liabilities to income like an accountant, economists compare government liabilities to the total GDP in our economy. This avoids comparing the liability to the income that will eventually pay off the debt.
4. The craziest part of this situation is that Wall Street economists don't understand that the government's Enron liability must be paid off by the private sector in the future. It is indirectly a liability of the taxpayer.
The federal government has $60 trillion in liabilities and real income(without deficits) of $4 trillion. This is liabilities to income of 15 to 1.
Add this to the monstrous liability of our private sector and there is very little hope of taxpayers paying off this debt in real dollars.
This unsustainable debt is a problem. But the bigger problem is that our government subsidized economists don’t see it as a problem.
We are flying toward a mountain in zero visibility without an altimeter. We just asked our navigator how he is planning to circumvent the mountain.
Our navagator responds, “what mountain?"
Our navigator economists have no clue how to measure our nation's mountain of debt. They are blindly flying our economy straight into Mt. Fuji.
Economists are dead set on avoiding the pain of private sector deleveraging. This is exactly the policy mistake that Japan made 20 years ago.
Japan is experiencing 'death by a thousand cuts' instead of the debt amputation that would heal the economy immediately.
We are using the same flight plan. Our nation has incurred 3 years of moderate economic pain and only reduced debt in the private sector by 5%.
The government has increased its Enron balance sheet by 15%. This is trillions of dollars that the private sector will be required to pay in the future.
So after 3 years the mountain has grown larger and our airplane has not changed course.
Instead of looking at our private sector's mountain of liabilities our economists are dead set on keeping us from repeating the Great Depression.
Let me describe what happened during the Great Depression. We had 4 years of pain from 1930 to 1933. Most of the pain was caused by bad economic policy by our government. But even with the extremely bad government policy our private sector was allowed to deleverage.
This directly caused the greatest boom in our nation’s history.
From 1934 until 1953 our GDP grew a total of 580%. This was a compounded growth rate of over 10% a year for 20 years.
Our country has never grown that fast for that long.
Our incompetent economists are desperately trying to keep us from reliving the Great Depression. The goal is to become like Japan.
Their goal is 20 years of economic stagnation.
So instead of recreating the greatest period of growth in our country’s history our economists are intending to lever up our government 30 to one, without deleveraging our private sector.
This will slow the economy to a crawl so it will be impossible to pay off our government’s debt without destroying our currency.
Our private sector desperately needs to deleverage. Economists are manipulating markets to force people to borrow more money and spend it on speculation.
I suggest that we fire all Wall Street economists and hire astrologists to make policy decisions in the future.
Let us not forget,
Astrology worked out pretty well for Ronald Reagan.