The Real Citizen Economy Verses the Wall Street Central Banker Derivative Equity ZIRP Bubble Economy: Toward A Qualitative Understanding of The Global Macroeconomic Quantum Asset-Debt System Collapse

Leave a comment

The key to having a qualitative wherewithal about the  large scale functioning of the US macroeconomy is understanding that it is, at its consumer citizen foundation, at its 1:1 leveraged foundation,  primarily a forward consumption based system. In the elementary citizen economy, future earnings of private citizens  are the collateral traded against the real time possession/use of assets or services. Homes and automobiles are generally solid collateral.
In the financial industry world  colluded with former Fed Chairman (who apparently uses the logic that because the equity market valuations  are leading indicators (they are) of economic activity that if the equities are OK, then the economy is OK) the derivative  leverage is 1:10 1:30 and the collateralize assets are murky and amorphous and when the leverage  causes extreme Asset-Debt excessive forward consumption, debtor population depletion, overproduction, and overvaluation, collapse occurs with the above FRED chart consequences.
What are the limitations in the asset-debt macroeconomic system  caused by the total US accumulative debt vice concurrent GDP growth on further citizen based and business based forward consumption growth?  A  look at a window of  5 year periods of history since 1980 of US debt growth cumulativelly relative to GDP growth which services the debt may be  instructive.
The total US debt and GDP growth is in trillions of  same year US dollars.
  Total Accumulative US Debt in 5 year increments in same year dollars

19-                 80       85       90      95   20- 00      05      08      10       12                              Total                                                                                                                                    Debt(T)         4.8      8.6     13.6   18.7     27.2   42.1    53.2    53.2     55.4

%5yr   delta(D)                                                                                08-12D    
 debt growth           80       60       40        50       50               25       03

 US GDP  by 5 year increments in same year dollars(2008 bubble peak included)   1977 to 1985 to 1997 represented doubling of US GDP in same year dollars

 2Q19-       77   80     85      90     95   97   00      05      08      10       12
US GDP
year $(T)   2.1  2.4   4.2     5.8     7.3  8.4  9.8     12.3    14.4  14.4    15.5
Notice that since 1980, total US Debt in same year dollars has increased 1150% while Total GDP has increased by only 600% and with a smaller base 2.4 vice 4.8T.  While total US debt doubled by about 27T from 2000 to 2008, total GDP increased by only 40% and with a smaller base – by only 4.6T: a 4.6T GDP increase to cover 27 trillion of new debt. Since 2008 total debt has increased by 2T while GDP has increased by 1.1T using the 2Q 2012 as an annual average.
It could be explained that all of the new 1.1T GDP increase in the last 4 years was dependent on ‘QE’ black box, a euphemism for the Central Bank placing 2.5T on its books to keep the real economy alive. Nearly all of this QE money could be considered defacto  as paid out directly in the form of  SS checks, medicare payments, military checks, defense contractor jobs, federal employee salaries, welfare checks, et. al.  supporting directly the real citizen economy.

Otherwise considered,  1% of the interest on the  50T  represents 500 billion. This is about the same amount that the Central Bank’s QE program’s have been lending per year to Congress to continue to fund a non-sequestered,  central bank-maintained,  asymptotically-saturated asset-debt macroeconomy.

The citizens benefit by continued employment and obviously the elite creditors and owner’s of the 50T of debt benefit by continued payment. Concern for the US Bond rating is identical to the concern of honoring the Elite’s 50T of debt assets.

And otherwise considered, all of the net US tiny 3 percent debt growth from 2008 to 2013  could be attributed to congressional incurred debt and the Central Bank’s exhilo creation on their books of 2.5 trillion dollars and likely other  zero sum currency/bond exchanges with other central banks.

This exhihilo creation of money happened because mathematically it had to happen.
System interest rates cannot increase appreciably because the saturated asset-debt macroeconomic system mathematically can not allow it and can not pay it.

Sequestration will not happen because the asset debt system mathematically will not allow the US politicians allow it to happen.

Can the citizen consumer based forward consumption economy grow itself out of this 50 T dollar of system debt – all of which is based ultimately a real citizen consumer economy.

Look at the 1980 numbers the 2008 peak numbers and Q3 2012 numbers of US relative group debt.

Cumulative and Individual group debt.

1980           2008               Q3 2012

Total(T)                        4.8               53   (10x)           55
Congressional S/F      1.1               9.3    (9x)          14.3

Citizen                         1.4             13.7    (9x)          12.9

Corporate                    1.5             11.5    (8x)          12.1

Financial Industry        0.6             17.1    30x)         13.8

Foreign                        0.2              1.7     (9x)            2.3

Who are the counterparties to this debt? Who owns the 55 trillion dollars of obligation?  Those who would like continued interest payments on the principal.

Is the math possible for the real citizen based US GDP 15-16T economy to grow itself out of the shadow of the growth of US’s 1980 4.8T total debt, and, in particular, the Financial  Industry’s bubble contribution, to the 1150 increase in US total debt to the 2012  55T, while the US economy’s GDP in same year dollars has increased from 4.8T in 1980 by only 600%  now at 15.5T in 2012.

And here is the answer, the rub, the paradox, the saturation asymptote of the citizen-based forward consumption Asset-Debt Macroeconomic System ….

… in a forward based citizen consumer economy the only way to grow  the economy is to increase the citizen debt load (or congressional debt load) by further borrowing against future earnings.

That consumer borrowing population is simply depleted…

Even with Central Bank QE assistance, the necessary solution to this asset-debt system conundrum is partial debt default and asset devaluation. 

Part of the default at some point in the future, will be the erasure, the debt jubilee on the Central Bank’s black box holdings.  For those who  think the Federal Reserve’s 500 billion per annum QE action will result in inflation, think of the 55 T total debt sink sucking 500 billion, 1 trillion, 1.5T, 2T dollars out of the system each year at 1,2,3 and 4 per cent interest rates.

In the next weeks and months as the asset-debt system mathematically implodes , the above qualitative information may frame a basis for a better understanding about what is happening.

The Pattern Science of The Asset Debt Macroeconomic System

It is, however, in the asset-debt system’s exquisitely precise  time based quantum valuation saturation curves of the US composite equity, east and west major nation composite equity, and commodity asset classes and, oppositionally, the countervailing US hegemonic debt futures and yes the rising US dollar where the footprints of Asset-Debt Saturation Macroeconomics can easily be observed demonstrating a highly organized quantum pattern of the system’s weaker assets’ devaluations – as bad debt which can not be mathematically repaid in a consumer job-earnings collateral forward based and asset saturated economy – undergoes necessary and inevitable default.

 

Leave a Reply