Study Discovers That If The Debt Machine Was Turned Off, The U.S. Would Immediately Plunge Into A Horrifying Depression

A new study has discovered that we are far more dependent on America’s great debt creation machine than most of us would have ever dared to imagine. Today, debt is involved in most of our major transactions. In order to purchase a home, most of us go into debt. The same thing is true when most of us buy a vehicle. Total credit card debt is well over a trillion dollars, and total student loan debt is now over a trillion and a half dollars. Corporate debt has more than doubled since the last financial crisis, state and local governments are absolutely drowning in debt and unfunded pension liabilities, and the federal government is more than 22 trillion dollars in debt. The Federal Reserve and the “too big to fail” banks are at the core of this insidious debt-based system, and it has been systematically destroying the bright future that our children and our grandchildren were supposed to have. But if we suddenly turned off America’s great debt creation machine at this point, our entire economic system would totally collapse because we have become so dependent on it. In fact, a study that was just conducted by Bloomberg discovered that “gross domestic product per capita would plunge into negative territory” if the ability to borrow was suddenly removed…

The nation’s health as measured by gross domestic product per capita would plunge into negative territory without its dependence on borrowed money, according to data compiled by Bloomberg.

In fact, the U.S. would fall almost to the bottom of a ranking of 114 economies by GDP per capita. Only Italy, Greece and Japan would fare worse. That’s a seismic shift from America’s comfortable No. 5 spot on a list based on conventional measures.

Our massively inflated debt-fueled standard of living is completely and utterly dependent on the continual creation of more debt.

In essence, this study found that without debt we wouldn’t have much of an economy at all. In fact, Bloomberg says that U.S. per capita income would collapse from $66,900 a year to “negative $4,857”

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ANG Traders 1 year ago Contributor's comment

By-the-way, I agree with the the premise contained in the title. Without debt-money from either the private or the monetary sovereign, the world economy would cease to exist. The world economy would be reduced to local bartering.

Bill Myers 1 year ago Member's comment

Good comment thread.

Gary Anderson 1 year ago Contributor's comment

I see no reason why Bloomberg is wrong. China bailed us out of the Great Recession credit crunch. Maybe next time it won't, or will be too weak. Trump is playing with fire.

ANG Traders 1 year ago Contributor's comment

One HUGE flaw (many smaller ones) in your argument:

Federal government budget deficits and the "debt" that they lead to, is NOTHING like household or state budget deficits. In fact, the work "debt" is a misnomer, and should be called the Federal government "funding of the economy".

It has been increasing for 80-years, as has the size of the economy. The Federal government will never run out of dollars...unlike you, me, and local governments.

Gary Anderson 1 year ago Contributor's comment

The government considers debt that is manageable as a percentage of GDP. Your MMT would throw that restraint out. How far out would determine the risk.

ANG Traders 1 year ago Contributor's comment

The point is, the Federal deficit is not the problem. It, in fact, is always the solution. In both 2001 and 2008, it was too much private deficit, not Federal deficit, and it was the latter that had to be increased in order to pull the markets out of the fire.

Note also, that Clinton reduced the Federal deficit for five-years, leading to a Federal government SURPLUS...and a private sector DEFICIT that became too inflated to be sustained. Again, the point is that Federal deficits aren't what historically cause the problems.

Gary Anderson 1 year ago Contributor's comment

No. LBJ fought an expensive war and introduced the Great Society. The result was massive and hurtful inflation in the 70s. So deficits are not always the solution.

ANG Traders 1 year ago Contributor's comment

Yes, the oil embargo was the proximal cause of the inflation. Inflation is always because of a shortage of something. And oil is a key ingredient in the economy, so a shortage of it is guaranteed to cause inflation and stagnation at the same time. When you have a shortage of such a key element, and increasing its production is impossible in the short-term, nothing, not even deficit spending is going to fill that hole. And there was no way of avoiding it either because, unlike today, at that time the US was not self-sufficient in oil which was controlled by one agent (cartel).

Gary Anderson 1 year ago Contributor's comment

The primary cause of 70s inflation was a continuation of Fed easy money that LBJ required.

ANG Traders 1 year ago Contributor's comment

In 1963, Fed rate was 3.5%. By the time LBJ left Office in January 1969, it was7.1%.

So I don't know what " Fed easy money " you mean? That was serious tightening.

Gary Anderson 1 year ago Contributor's comment

The Fed was bowing to politics in those days. LBJ assaulted the Fed chairman in the mid 60s.

Then Nixon came along and the gold standard was abandoned. The Fed was not ready for that.

ANG Traders 1 year ago Contributor's comment

"The primary cause of 70s inflation was a continuation of Fed easy money that LBJ required."

Now you switch to Nixon and the gold standard removal?

The embargo caused a shortage which caused inflation, and because energy is such a basic requirement for the economy that the shortage stopped growth in its tracks...stagflation.

Gary Anderson 1 year ago Contributor's comment

There was not just one reason.