It's Not Going To Work

Contemplate this chart a bit.

This shows you what the stock market (S&P 500) did, along with the expansion in both GDP and debt (leverage) during that time.  The debt expansion was a geometric series from roughly 1990 forward until it hit the wall in 2007.

It may not be intuitively obvious when you look at that chart, but this is what was happening.  The data is a bit "noisy" as the granularity is quarterly, and of course there are small recessions and such in there, but on balance this entire "expansion" was in fact false -- during this entire period, from 1980 forward until the crash, we did not have one three month period where economic growth occurred at a faster gross dollar amount than did new debt.

To make it easier to see, I took the data and slightly rearranged it.  This is what the data looks like if you take a five year average for both GDP expansion and debt growth, starting with the period ending in the 4th quarter of 1977 and progressing forward in 5 year increments until the end of 2007.

This is the average quarterly growth in debt and GDP during each of those five year periods, and is exactly what happens every single time you try to run two compound growth functions (in this case, GDP and Debt) over a period of time -- the larger growing one always runs away from the slower.

The next point in that series is some $1,800 billion dollars in new debt per quarter, or roughly $7.6 trillion per year.  Incidentally, we're four of the five years into that period, and the rate of debt addition (on average) looks more like 1982 than 2007 - and so does GDP!

The Federal Government has been adding more than $1.2 trillion in new debt per year in an attempt to...

Read the full Market Ticker analysis here.