The Sage Observer

Our False Economy

We continually hear the cry about how our economy continues to grow and expand under the leadership of our exalted leader Donald John Trump. Hogwash! Absolute Hogwash! Our economy continues to grow and expand because it is a “false economy”. It is a false economy because we are and have been since the great depression of the “Thirties” a debtor nation. Our government and our people have lived on borrowed, i.e. printed money above and beyond our income, enjoying a standard of living far in excess of that in the majority of the rest of the world ever since.

Until the administration of the Republican Party, beginning in 1981, our national debt, i.e. that of our Federal Government, was paid down to just under One Trillion Dollars. Since then, our national deficit and debt has “boomed”, slowing to a surplus only at the end of the Clinton administration in 2001 and rebounding to the stars with the advent of George W. Bush, who, when he left office in 2008, bequeathed to his successor, Barack Obama a national debt of Ten Trillion Dollars and a deficit of One and One Third Trillion Dollars as well as a collapsed economy and financial markets (subsequently referenced as the Great Recession). The private debts of our people, i.e. the public, at that time, exceeded One Trillion Dollars. 

That our nation experienced periodic intervening recessions during this period notwithstanding, our economy, overall, sustained exceptional growth as a result of this exorbitant government borrowing. At this point I must also remind you that it was during the “Seventies” that shifts in income from the middleclass to the very rich begun. It is reported that the average income of the middleclass, adjusted for inflation, remains the same through today, the impact on their standard of living masked by their borrowing. In other words if our people weren’t to borrow so heavily to supplement their income, their standard of living would have declined sharply. We are living in a false economy.

There is something else we should understand that we not be misled. The financial markets are not necessarily a reflection of our economy. Financial markets are the reflections of the net results of investor and speculator concentrations on the achievements of profits in trading and operations. The values of securities in the markets are not necessarily their real asset value. Many, if not most, of these values are established by downright gambling and speculation by “so called” investors—not unlike chips in a gambling casino (think derivatives).

No, Mr. Trump, you don’t get credit for our booming economy. The real credit for our booming economy lies in the liability accounts of our people and our government. If you don’t believe me, just wait until we start paying off all this debt and our deficit(s) become a surplus; when our economy goes into a tailspin; when your home goes “underwater” again (do you remember 2008?); and your new car is being towed down the street on the end of a tow truck, viewed by your neighbors. In the subject of accounting there is an axiom: Debits (Assets) on the left; Credits (Liabilities) on the right. Liabilities (Debt) must be paid—now or later.

In the meantime,

this is Ronald Miller at www.sageobserver.blogspot.com