Blog: 473 words, 1 to 2 minutes
Linked article: 2,473 words, 6 to 10 minutes
Every so often I come across an article that is so astute and hard-hitting that I wouldn’t dare try to summarize it or extract bits and pieces from it. Instead, I’ve provided a link to the The Burning Platform website’s article below.
I highly recommend The Burning Platform. Also, his Favorite Websites way down the bottom right on his site are some of my favorites as well.
He writes from an American perspective. However, regular readers of my financial commentary know we cannot underestimate what’s happening in the U.S.A. because of the colossal impact the continuing U.S. economic and social collapse will have on the rest of the world. This is especially true for little old Canada whose citizens mistakenly believe they’ll somehow be spared when Canada’s largest trade partner melts down.
Don’t forget, ALL western governments are now out of ammunition. They’ve borrowed and indebted themselves past the 90% debt-to-GDP point-of-no-return ratio. Canadian federal debt is fast approaching (88% and climbing) and Prime Minister Stephen Harper knows it as shown by his last budget. However, all he can do is transfer debt to the provinces, not eliminate it. And, in the final analysis, Canada is but a small cork floating on a storm-tossed sea.
All western governments have lowered central bank interest rates to nearly zero so they cannot go any lower. And, they have done so for so long that we have NEVER seen rates this low for this long at any time in history. Think about that a moment. Unprecedented stimulus, unprecedented debt, unprecedented zero interest over an unprecedented length of time and it has done NOTHING for economic recovery.
There are two graphs towards the end of his article. One is so far beyond adjectives I have reproduced it below.
The graph above shows the debt to GDP ratio from 1915 to 2011. I urge you to compare today’s debt ratio to 1929’s debt ratio. The size of today’s mountain of debt compared to 1929 is hard to miss. Because it’s a percentage ratio not a dollar ratio, no adjustment is needed for the effects of inflation. It compares apples to apples.
One final thing to remember: debt deflation (deleveraging) after a credit boom is inevitable. It has ALWAYS occurred throughout history. It won’t be any different this time no matter what the politicians and ass media try tell us. Notice the upper right side of the graph. This debt deflation already began more than a year ago and it will continue for a long and very painful period of time.
Click on H.L. Mencken Was Right to read the article.
And remember my mantra:
We can’t spend our way to prosperity.
We can’t borrow our way out of debt.
We can’t pretend our way out of trouble.
But those damn fools are trying to do all three!
April 29, 2012
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