Source: Chart Of The Quarter: $312 Billion In Debt “Adds” Negative $5 Billion In GDP
Zerohedge put out the above chart today showing the Q4 increase in debt versus the “growth” generated from it. Lo and behold… $312 billion of extra and incremental borrowings created a NEGATIVE $5 billion worth of growth. GDP was reported as negative in the last quarter at -.1% (U.S. Economy Unexpectedly Contracts in Fourth Quarter). But but but… how can that be?
Let me put this in perspective for you. This $312 billion of “extra debt” taken on was actually “used.” Whether you believe that it was used “well” or not is in the eyes of the beholder and can be debated at another time. For now, just know and understand that it was “spent”, ALL of it was “spent.” And as it was “spent” it was accounted for as a part of GDP. Whether it went out in SNAP cards, or free phones or to pay for bridges and roads to be built or repaired does not matter. What does matter is that over 3 months it was spent and was part of “overall activity.”
Now let’s do a little back of the napkin math. The US GDP is roughly $15 trillion (I know, it’s $16 T but stay with me), we “spent” some $300 extra billion over 3 months which annually comes out to $1.2 trillion. This “magical” $1.2 trillion is equal to roughly 8% of GDP (total economic activity). So… one might logically ask “What if the government had not borrowed and spent $300 billion over and above what they had without borrowing?” See where this is going? The economy would have had $300 billion less “juice” to it ($1.2 trillion over the course of a year) and the report would have revealed an economy CONTRACTING at over an 8% clip. This would be considered a DEPRESSION rivalling the 1930’s… and yet we are being told daily that these are “better” times?
Please keep in mind that if you listen to the reality of www.shadowstats.com, the composition of GDP numbers are completely fudged and false anyway. For ANY negative GDP number to surface from the “ministry of truth” is absolutely astounding! As I tried to allude to in my last 2 pieces, markets of everything from A to Z have not been forecasting anything out of the ordinary. Certainly not recession! But that was my point, MARKETS absolutely MUST portray that all is well in Stepfordville or else the people will “know” that something is wrong. Let me rephrase this. If the markets, any markets are out of step and portray a problem of any sort… then the people can “point” to something and start asking questions. Questions that have no answers other than … “sumthin’ just ain’t right.”
In any case, today’s report of “contraction” is not a good omen and it tells me just how difficult it is becoming to hide reality. Soon it may be that the “ability” for the Treasury to borrow in “unlimited fashion” becomes inhibited which will blow the entire scam public. Understand this please if you will because it is of the utmost importance, the ability of the Treasury to borrow is the only thing between life as we know (have known) it and reality. Unfortunately, reality awaits!