The Real Bubble – American Debt

The real reason our economy is so weak today is actually the same reason why it had been so strong over the last 20-30 years. A massive acceptance of debt spurred new jobs, new consumption, but very little in terms of long term investment in education, infrastructure, or really anything that can produce future wealth.


For a better sense of relative debt loads, notice the strong resemblance between our current debt bubble and the last massive debt bubble that kicked off the start of the Great Depression.  This second chart is in terms of GDP percentages, rather than nominal (inflation-distored) dollar amounts.


Unfortunately, we’ve got a tough ahead of us in terms of paying back debt relative to our GDP and income. With government borrowing and creating new debt, the responsibility will be left to private corporations and individuals. Some public debt may help cushion the fall, but at some level we’re going to have to deal with what we already spent and consumed and promised.

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