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This site is the inspiration of a former reporter/photographer for one of New England's largest daily newspapers and for various magazines. The intent is to direct readers to interesting political articles, and we urge you to visit the source sites. Any comments may be noted on site or directed to KarisChaf at gmail.

Friday, October 18, 2013

The Most Dangerous Line Uttered During The Debt Ceiling Debate -- By Lance Roberts of STA Wealth Management, Posted at Zero Hedge

Today there is a great sense of relief that has swept the nation as news flowed through the media that the government shutdown had come to an end.  After all, during the 16 days of the shutdown, there was great hardship inflicted on the average American as the stock market rose by 2.4%, government workers that were furloughed received a 2+ week paid vacation and interest rates fell from a peak of 2.65% on October 1st to 2.59% on October 17th.  Outside of the financial markets, which were never concerned of a "default," the reality is that the government shutdown did likely clip up to 0.5% off of 4th quarter's GDP.  While that clip to economic growth created by the government standoff is temporary - the ongoing persistant weakness of economic growth is another issue entirely.  This is the focus of this discussion.

The most disturbing sentence uttered during the debt ceiling debate/government shut down, that should raise some concerns by both political parties, is:
"We must increase our debt limit so that we can pay our bills."
Think about that for a moment.   The U.S. has become the single largest debtor nation on the planet as welfare dependency rises, government spending continues to increase and economic growth slows.  However, what is ironic about this situation, is that it is the continuing increases in debt which is directly responsible for the decreases in economic growth.  The chart below shows government debt as a percentage of GDP as compared to annualized rate of change in economic growth.
Since the beginning of 2009 very little of the increases in government debt, which was used to fill the gap created by excess expenditures, returned very little in terms of economic growth.  In fact, as of the second quarter of 2013, it required $5.61 of debt to create just $1 of economic growth.
(Click link below to read more)
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