Depressed About Our Future
by Mark Lutter
broke. We Americans have spent the last 15 years borrowing money
for consumption instead of investment. Because of our high levels
of debt, several prominent economists, including Gerald Celente
who predicted the collapse of the Soviet Union, the housing
bubble and the tea parties and Peter Schiff who predicted
both the NASDAQ bubble and the housing bubble are predicting
a coming collapse that will dwarf the housing bubble.
debt is $12.6 trillion. That amounts to $115,500 per taxpayer. Our
last deficit was $1.8 trillion. Social Security is spending more
money than it is taking in, and Medicare will become insolvent by
2017, if not sooner, because of lower than expected growth.
levels are twice what they were during the Great Depression, and
the American savings rate has been hovering at about 5 percent during
much of the last 10 years. The dollar has lost about a third of
its value over the last decade. Our national debt will be due in
three years, when the Chinese are going to have to decide whether
to continue to finance our consumption binge. If your intuitive
sense is that there is something fundamentally wrong with such high
levels of debt and low levels of savings, then you are right.
How did we
get in this situation? One reason mainstream commentators are unable
to understand what is going to happen is because they do not understand
economics. Modern economics has become so perverted by mathematical
equations that even economists lose sight of fundamentals, not realizing
that their complex models are premised on dubious assumptions. One
such fundamental notion is Says Law, though even Says
Law has been mislabeled by detractors to say supply creates demand.
Jean-Baptiste Say himself stated, Products are paid for with
products. This does not mean we live in a barter society,
but rather that there will always be a sufficient level of societal
income to purchase an economys entire output. This directly
contradicts the conventional wisdom that we must go deeper into
debt to get out of this recession.
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