Charles Hugh Smith: Why The Debt-Dependent Status Quo Is Doomed In One Chart
by Charles Hugh
The global economy is now addicted to debt. Once debt stops expanding, the economy shrivels. But expanding dent forever is unsustainable. Welcome to the endgame.
Regardless of whether you call it debt saturation or diminishing return on new debt, the notion that taking on more debt will magically enable us to “grow our way out of debt” is not supported by data. Correspondent David P. recently shared this chart of Total Credit Market Debt Owed and GDP and this explanation:
The purpose of this chart is to examine the relationship of total debt to GDP. Since Debt is not factored into GDP, just exactly how much debt is being used to create growth, and over what time periods. But absolute numbers don’t work so well, since they don’t let you examine particular years, seeing what the 1950s look like vs the 2000s, for example.