USA GDP Growth VS Greece With 1 Important Difference

From 1996-2000 USA GDP growth was better than from  2008-2012 but with one crucial difference

grusgdpIn 2000 you can eliminate the boost of increasing government debt and still get GDP growth.

If you use the same measurement for 2008-2012, USA GDP sank by 36%

To put this another way

Even with the massively increasing US government debt load, the US economy can still not replicate the GDP growth of 1996-2000.

When GDP-growth-net-of-government-debt (GDP growth minus the increase in government debt) goes massively negative there are government debt problems in the future, at least if you think Greece is a good example.

Either debt servicing is going to become a problem or inflation is going to become a problem.

When the GDP-growth-net-of-government-debt is hugely negative it indicates a fundamental problem within that economy.

Namely one or a combination of the following.

Government too large, wasteful activities.

Government is bailing out banking sector

Business environment too restrictive

Tax burden too high

External Links

Awara Group has done a much more detailed analysis of the problem.

The summary of this article is that growing debt is hiding the dire state of western economies. Western economies are no longer able to create wealth.

Increasing debt is hiding this core problem and it will inevitably lead to a crisis in the future.

For a more detailed analysis, check this article >>



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