37 Replies to “10 Charts That Embody Everything That’s Wrong With The US Economy”

  2. A simple reality is, there are a whole bunch of people who are living way beyond their means and are enjoying lifestyles that they haven’t earned. Now the bills are coming due.

  4. Before I die of sleep deprivation i’d just like to say of course it makes sense that inflation takes off after abandoning the gold standard. Duh! but “you shall not crucify mankind on this cross of gold.” and all that good stuff. Go back to the gold standard and you’ll still have endless complaining about bankers, jews, bear sterns and crap like that. Plus that erosion of the USD graph is also kind of misleading, becoming a cliche, and is thus boring. A graph of the real purchasing power of households or something would be more interesting. It doesn’t matter if bread costs a million dollars so long as you’re being paid in trillions of dollars.
    Also that price of oil graph/headline is really misleading. Price of oil isn’t strictly driven by USD inflation.
    anyways to sleep! perchance to dream
    glhf :3

  5. The trouble with this kind of stuff is that it always speaks in generalities: “debt cannot be sustained”, “economic collapse”, etc., but until someone spells out precisely how and why this will effect citizens, no one is going to get very excited about it.
    “Who cares if the National Debt is a gazillion dollars as long as I have my lunch and can watch my favorite programs”, seems to be the way everyone feels, from the President on down.
    The numbers have no reality.
    People are going to have to get hungry before any of this sinks in.

  6. With regard to oil, this is not a supply and demand problem. It is a reflection of the long term decline in the value of the US$. I believe that this trend will continue unabated unless the US takes serious steps to rein in their out of control spending and debt. Always remember, equity markets are exciting but bonds rule the world.

  7. Okay the granite counter top gets me. Are you saying people pick an extravagant decor but are afraid to put anything on it because it stains? Thus the counter top becomes an accessory instead of a function?
    Spend lots of cash then eat out, go farther into debt and then say what happened?
    I have no problem with the granite..I’d use the same cutting board I have used for years.

  8. The graphs would have been much more useful had they been adjusted for inflation and population growth. Absolute dollar figures are always difficult to interpret over the long term. A dollar in 2011 simply isn’t the dollar of 1890.

  9. Good analogy Speedy. I volunteer at a public school feeding little brats breakfast. They built a new “Green” School last year. NOTHING warm can be put near the cupboards or on the countertop because the recycled material will melt. Similarily, NO water can be appear on the countertop for the same reason. So, this Green school is all for show and has a non-functional
    kitchen to go with it.
    Same with the granite countertops.

  10. “It doesn’t matter if bread costs a million dollars so long as you’re being paid in trillions of dollars.”
    YES. IT. DOES.
    Because of the implication of hyper-inflation that lies behind million dollar bread.
    Inflation that made all savings worthless, that make all borrowers very happy ( I borrow, $100K- tomorrow 100K is what a cup of coffee is worth. I hand you a bill in line. I the borrower now own a asset, you the lender are destitute. THEFT) Any remaining lenders refuse to lend. Economy stops cold (or gets gold denominated.) Your salary paid on tuesday is worthless by FRiday, your companies exoisting contracts are worth less, no one has clue what anything is worth relative to anything else, so ecopnomic confusion ends.
    I could go on. Have you READ anything about hyperinflation? It’s pernicious. It destroys the middle class. It rewards the WRONG sorts of behaviour.
    Normally this ends like Mugabe misery, incompetence, hungry and violence, if we’re lucky we get a Pinochet, if we’re unlucky we get a Stalin/ PolPot/ Hitler.

  12. Try Quartz counter instead. Looks great and won’t stain! Can put anything you want on it. Its non-poreous so no maintenance either. Just put it on the mortgage. 😉

  13. Inflation is a tax on everyone. The world is on the verge of getting hit with a mammoth tax increase that will obliterate many of the upward swings in those graphs. There is real pain as these taxes (inflation) bite in and there is real pain as interest rate increases ultimately bring back inflation to moderate levels. Just ask paul volcker.
    The bright spot on the horizon is the coming glut of fossil energy that will snuff out a lot of the real inflation pressure, but that could take five to ten years to arrive.
    Also, as mitch daniels and christie and Ryan and Paul and many others have pointed out, a lot of the future debt issues the US has can be addressed and virtually eliminated by ‘fixing’ the three major entitlements – OAS, medicare and medicaid.
    Were i flush enough i would be buying distressed property in RTW states with cash or, if i could get it, long-term fixed-rate mortgages. (that and i would be figuring out a way to short the Vancouver real estate market…)

  14. FRED2
    You’re assuming hyper-inflation though which is undoubtedly bad. The US has had periods of really low inflation and they’ve had periods of really high inflation but they haven’t had a spiral of hyper-inflation. It’s not that I’m saying inflation is not a serious issue. It’s that people [namely gold bugs] keep trotting out that graph and saying “see your life would be better under a gold standard” but you can’t really tell if it makes you worse off. A loaf of bread in the 1920s costs like I don’t know a quarter? Today it costs 3 dollars but a bootblack makes like 2 cents a shine and now the a kid makes $9/hr at McDonalds. All I’m saying is the graph is misleading given what the author wants to convey.
    Gord Tulk
    Isn’t Paul Volcker special economic advisor to Obama right now? I was reading a BMO forecast a few months ago and they said people are in a saving mood and they’re 70% of the US economy if they don’t spend profligately inflation worries are quite low. Seems reasonable I guess?
    Though the unfunded liabilities is a big problem for the US but if the republicans axe Social Security/medicare/medicaid they’re going to lose their entire 50+ tea party voting base I think. A lot of people in general don’t have sufficient savings and Social Security is their bottom line. How are they going to afford it though because they were too dumb to have more kids to add to the ponzi scheme?
    Also what energy glut are you talking about? cuz oil is still like $90/bbl and it doesn’t seem like Saudi has that much reserve capacity left. I think energy will drive inflation going forward. Unless you mean shale gas and we convert our cars into zooming bombs?

  16. M:
    Volcker was head of the fed under Carter and Reagan. He slayed the inflation dragon the last time the US had it. He is little more than window-dressing in the Obama admin (how old is he now?)
    What the reaction of the AARP crowd is re: entitlement readjustments is the great unknown. They were pivotal in creating the teaparty, they so far seem to be supporting fiscally responsible legislation and Christies popularity hasn’t dropped since he spoke frankly about entitlements.
    Inflation hurts retirees the most entitlement reform is the primary way to reduce high inflation. Fixed-income people are thus between a rock and a hard place. It is important that they remember that it is the dems and RINOs who put them there.
    As for fuel costs – take a look at natural gas prices and reserve estimates. NG is in the worst bear market ever. That in time will bring oil prices and energy costs in general down and they will stay there at least until your grand kids have grand kids. No doubt it will be a turbulent ride until we get there.

  20. Gord Tulk
    I hope the “AARP Crowd”, as it were, won’t react like Wisconsin teachers haha. I suspect they might think that “oh I paid my taxes so all that money is stored safely in Fort Knox waiting for me in my golden years” which is not the case. If you’re going to setup a pay-as-you-go retirement plan you should really have lots and lots of kids. I blame the hippies!
    Correct me if I’m wrong but I thought retirement plan payouts would have to be scaled for inflation. I don’t know but it seems like a pretty stupid omission.
    NG is bear in North America because the US is swimming in shale gas maybe some eastern provinces and Quebec too. I hope I don’t sound adversarial but how that will bring oil prices down? It’s not like we drive/fly/sail on natural gas.
    P.S.
    I’ll never have kids so they won’t be slaves in the umma!

  21. Through most of history major recessions have always been followed by war.
    The next few years should be very entertaining.
    Stock up on dry food and ammo.

  22. M:
    70 % of oil used in NA is for transport. Similar ratio in most of the rest of the world. NG is plentiful and cheap pretty much everywhere in the world. Over the mid to long term NG will displace Oil as a transport fuel and thus reduce demand and prices.

  25. Gord Tulk
    I know I’m kind of a huge downer but I’m skeptical of NG vehicles. Most of those applications seem to be for large vehicle use with a base of operations. I don’t think it’s very feasible for small vehicle use not to mention the conversion of existing infrastructure. We’d need pressurization or refrigeration units or both at gas stations if we wanted to liquefy it. Actually Iran is doing that stuff now because their gas refineries suck. We should see how that is going for them.
    I am hopeful that we can transition to a low cost fuel. Even if we can only get the transport trucks to use it. Otherwise fuel cost inflation is just going to strangle the hell out of us.
    On a more upbeat note: http://www.youtube.com/watch?v=vdQj2ohqCBk – Kittens?

  26. How big a NG gas tank for, say a 600 km range in something like a Honda Civic?
    [The only real compromise is the trunk: Most of it is given over to the bulky CNG tank, leaving just 6 cubic feet of space, enough for some heavy-duty grocery shopping]
    [The GX’s engine is basically the same 1.8 liter four-cylinder found in other Civics, but power output is lower: 113 horsepower and 109 lb-ft of torque, compared to 140 hp and 128 lb-ft for gasoline-powered Civics.]
    http://alternativefuels.about.com/od/naturalgasvehiclereviews/fr/2009HondaGX.htm

  27. R in K:
    The NG Honda is very much a cobbled together affair. A car designed from the getgo to run NG would not lose as much trunk space and the engine would be tuned for more power. An added benefit is the big boost in engine life and reduced maintenance costs. The EnCana link I posted above has sOme pretty decent overviews of what lies ahead.

  28. Hello Kate
    On Feb 3 2006 at12.27AM I posted on your blog for the first time to disagree with your post on how Canada owes Alan Greenspan a large debt of gratitude for his work as the Fed chairman for the previous 18 years. I wrote at the time America will eventually collapse and fall into a deflationary depression that was a direct result of Greenspan’s policies that the New Fed chairman will have no choice but to counter by hyper inflating the money supply (example” QE1, QE2, and coming soon QE3) I was attacked by virtually all of the SDA sheep at the time as an leftist idiot that didn’t know what he was talking about. Back then I recommend that SDA readers buy gold when gold was under $600 us an ounce. Today gold is over $1400.00 an ounce on its way to much higher prices. I still read your blog everyday and agree with you on most subjects but I’ve only posted on your site a few times since then as either Denis or Deno because I learnt my lesson back then when you go against conservatives group thinking they act just like Liberals, Attack! Attack! Attack! with very little critical thinking.
    If anyone is interested you can check SDA archive to read the post I made on Feb 3 2006 at 12:27am under the name of Denis.
    Denis/Deno

  29. DrD:
    I’m totally with you. Unless most of these charts are put in relation to nominal GDP, they are useless.
    Particularly hilarious is the assertion that “government spending is expanding at an exponential rate.” Well of course it is. That’s because the nominal GDP expands at an exponential rate, even if is only 5 or 6% per year on average.

  30. Bank bore, here.
    Awfully busy now, but glad to see from a quick peek that the Federal Reserve is included.
    Really, only the one chart was necessary: the Fed’s unrelenting expansion of the money supply and the resultant destruction of 95% of the value of the dollar. Moreoever, booms and busts are caused by the Fed’s distortion of the capital structure (check out Austrian capital theory).
    Four books: (Kate, say the word and I’ll buy and forward the 3 Rothbards to you).
    Murray Rothbard (mises.org book store)
    1. The Case Against the Fed (150 pages)
    2. The Origins of the Federal Reserve (102 pages)
    3. What Has Government Done to Our Money and The Case for the 100 Percent Gold Dollar (186 pages).
    Rothbard da man. Even if you normally shy away from this arcane stuff, you’ll be amazed at what a great teacher Rothbard is. Trust me: you WILL finally understand monetary theory and you will have far less respect from Milton Friedman.
    4. The Creature from Jekyl Island (Griffin). Haven’t read it YET.
    I’ll say it again. Without a separation of money and state these problems are irreversible. Period.

  32. “So MND, do we get inflation or deflation next? WHat do the Austrians say?”
    Skweeker
    If MND doesn’t mind I like to answer your question.
    The debt levels of the US and most of the rest of the world is at a point now that central banks in the words of Richard Russell “must inflate the money supply or die”
    What this means is the worlds central banks have no choice but to hyper inflate the world’s fiat money supply or face a deflationary depression worst then the 1930’s. While hyper-inflating the money supply has and will buy the world’s central banks some time it will only lead to a hyperinflationary depression that is ultimately worst if they had just let the world economy fall into default and deflationary depression years ago.
    Deno

  33. Thanks Deno. Agreed.
    There are three options:
    – Austerity (extreme austerity). Nope. Have a look at what a Republican Congress is looking at cutting — small change.
    – Debt Default: Nope, the US is too proud and it would wipe out the privileged banking system.
    – Inflating away the debt. Check.
    Are we all aware that the biggest holder of US debt is the Fed, not China.
    Also, the FED just introduced a new accounting rule that makes it technically impossible to be bankrupt. Amazing. See mises.org for details. This should tell us that it’s very, very worried. Not surprisingly, the change is marketed as a “transparency” move in its trademarked impenetrable prose.

  34. Can it not be argued that our private sector will bankrupt itself because of 0% interest rates? Competition will drive prices down as companies try to maintain market share. As prices drop and companies go under, massive unemployment results. There’s the deflationary spiral that destroys everything in its path.
    Is it possible?

  35. Skweeker
    A deflationary spiral wouldn’t be caused by low interest rates. It would be started by consumers who basically stop spending or have a money supply that can’t grow as fast as you need it to. Then you would have problems of people paying endlessly expensive mortgages or being unable to raise capital or meet debt obligations.
    If you’re worried about such a thing then you’d do exactly what the fed is doing and pump a whole bunch of money out there. The thing about right now is that for the time being banks and consumers aren’t willing to borrow and spend. You could have a deflationary spiral but it would be pretty hard because under the current system you can essentially create more money.

  36. “Over the mid to long term NG will displace Oil”
    The problem with that is, there are a lot of money out there trying to make you believe this. Follow the money, who is telling you this, and do they have a stake in the industry, I think you might be surprised. Also its untrue that there is lots of NG in the US. If that were true you wouldn’t be importing so much of it from Canada and Mexico already, never mind when all the cars run on the stuff.

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