Ares
8th July 2010, 05:43 AM
Kick-Started US Recoveries No Longer Justify Their Price In Debt.
For all those who need confirmation that i) Keynesianism does not always work and that ii) we are living through an economic outlier, take a look at the below chart. While it is obvious that all previous recoveries used to "bloom" on their own after a modest debt/GDP increase, in essence validating the musing of John M Keynes, this time sure is different: the change in the ISM manufacturing, widely seen as a precursor to economic growth, will just barely surpass the increase in the debt/GDP, confirming that no more marginal debt will stimulate the economy. Extending this chart also shows that shortly the marginal change in the debt will surpass that of the ISM. This begs the question: why keep drowning the country with new and more debt when it is now obvious that incremental debt is no longer creating a virtuous growth loop?
<img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/Recoveries.jpg"/>
http://www.zerohedge.com/article/are-we-keynesian-outlier-event-kick-started-us-recoveries-no-longer-justify-their-price-debt
For all those who need confirmation that i) Keynesianism does not always work and that ii) we are living through an economic outlier, take a look at the below chart. While it is obvious that all previous recoveries used to "bloom" on their own after a modest debt/GDP increase, in essence validating the musing of John M Keynes, this time sure is different: the change in the ISM manufacturing, widely seen as a precursor to economic growth, will just barely surpass the increase in the debt/GDP, confirming that no more marginal debt will stimulate the economy. Extending this chart also shows that shortly the marginal change in the debt will surpass that of the ISM. This begs the question: why keep drowning the country with new and more debt when it is now obvious that incremental debt is no longer creating a virtuous growth loop?
<img src="http://www.zerohedge.com/sites/default/files/images/user5/imageroot/trichet/Recoveries.jpg"/>
http://www.zerohedge.com/article/are-we-keynesian-outlier-event-kick-started-us-recoveries-no-longer-justify-their-price-debt