American Solutions For American Problems
And why the "conventional wisdom" won't work
by Karl Denninger (Excerpts)
(...) When one compares the GDP and total US Debt, you find a striking fact – there has been no actual GDP growth at all in the last eight years. In fact, you can go back through President Clinton's second term in office and you will find the same thing – the entirety of so-called "growth" since 1996 was in fact growth in debt, not GDP.
Once we understand the foundation of what has happened, we can then look at the basic facts surrounding our economy. These facts include:
- There has been no actual GDP growth for more than ten years; claiming "growth" from increased debt is exactly identical to my going out and borrowing $200,000 on my credit cards, then claiming to be $200,000 richer. I am in fact poorer than when I started since I must not only repay the $200,000 but must also pay interest on it!
- We have replaced productive output (building cars, computers, TV sets, washing machines, etc) with non-productive output (shuffling paper, creating "financial innovation", etc)
- "Financial innovation" is in fact equity-stripping; if there is 300 basis points of profit available in a bundle of mortgages over the reference rate (e.g. 10 year swaps), that's all there is. You can allocate who gets the 300 basis points but you cannot increase the amount of actual profit available. Financial "innovation" is in fact a fraud as the only means by which you can obtain more than originally existed is through lying; this is typically accomplished through obfuscation and opacity (e.g. CDOs with 100,000 pages of underlying documentation which are flatly impossible to read due to volume before the purchase decision is made.)
- The fiscal and monetary policies of the previous ten years and more have been insanely inflationist, causing the prices of necessary goods and services, such as homes, education and health care, to skyrocket, while global wage arbitrage has caused real standards of living to decline for 90% of Americans. We must stop this now if we are to have a working middle class in this nation going forward.
(...) From this we find the foundation for solutions that are driven first by mathematical necessity, and then by maintenance and improvement of the public weal, both directly and indirectly. These are: (Click here to read solutions)