When it comes to explaining the problems with our economy, one of the hardest things to do is to get people to understand that we are living in an economic fantasy world that is completely and totally unsustainable. As a nation we consume far more than we produce, we spend far more than we bring in, our debt is growing much faster than our GDP is, our entitlement programs are growing at an exponential rate, our retirement system is a Ponzi scheme and the Federal Reserve is printing money as if there is no tomorrow in a desperate attempt to paper over all of our problems. But we have all grown so accustomed to the debt-fueled prosperity that we have been enjoying for so many decades that it actually feels “real” to most of us. Unfortunately, history has shown us that it is simply not possible to grow your debt faster than your economy indefinitely. At some point your consumption will drop back to a level more equal to your production. Sometimes that adjustment can be gradual, but other times it can be extremely painful. In our case, we have been living way above our means for so long that it would take a major economic miracle just to keep our adjustment to an “exceedingly painful” level. We are living in the largest debt-fueled prosperity bubble in the history of the world, and our unsustainable economy is going to crash and burn at some point. Hopefully it will be later rather than sooner, but a crash is most definitely coming.
The following are some of the reasons why the bubble economy that we are living in right now is unsustainable….
The Trade Deficit