An informative post on Reddit conveys the basics:
Below are workings for my claim that most GDP growth since 1980 has been the result of increased financial engineering and credit expansion.
Over the last 30+ years, we’ve taken on 51,893 billions in new credit expansion. On top of that, we’ve increased the money supply from about 2,000 billions to 10,000 billons (in 2006, when the Fed stopped tracking this number), adding an additional 8,000 billions of money to the economy, for a total of about 60,000 billions in new credit or real money created since 1980.
That’s a total of 361,377 billions. If we had of had no growth, the 1980 rate carried forward would be 105,912 billions. That indicates we have increased the product of the country, not annualized, a total of 255,465 billions since 1980.
Of course, that’s almost five times the amount of the expansion of credit since 1980, so I’m obviously wrong, right? Almost. The 1980 GDP of 2862.5 billions in 2016 money is.. 8293.48 billions, and increase of almost three times.
So, I’m still wrong, right? Almost. The other form of “debt” the US has incurred is unfunded Federal and State liabilities, which don’t count as debt, but are future promised spending. If you ran a business and promised to spend money in the future on something, and that promise was binding, that would be listed a liability on your GAAP balance sheet. However, for the US government, that’s not the case.
The Treasury estimates the Federal government has unfunded liabilities in the amount of 55000 billions, due over the next 30 years. It’s impossible to say which of those were “incurred’ during which years from 1980 to 2016, excepting that in 1980 that number was zero, since the primary drivers of this huge unbooked debt – social security, Medicaid, Medicare were all fully funded at that time.
So, between private, public, corporate and consumer debt and unfunded unrealized Federal liabilities which are really debt, the data clearly indicates to me that we have increased our GDP only through the use of increase leverage.
This is borne out by the empirical data which in a wide variety of metrics shows that the average US worker hasn’t made really any gains in quality of life or living standards in that time period, and for many workers, that standard of living has gone down dramatically. Living standard are hard to hide, and the standard of living in the US has improved largely because of technology, not because of increased earnings, buying power, or financial stability.
As noted before, modern government formed itself from mating socialism and capitalism into a circular Ponzi scheme that works by taxing its population, dumping the money on an underclass, and then using their spending to justify a demand-side economic model in which “fast money” bases its value on the sale of debt and loans.
With schemes of this nature, all costs rise because money is skimmed at every level and redirected into the perpetual “pump priming” Keynesian welfare state, and this then subsidizes itself by selling debt and increasing the face value of the money by encouraging borrowing. This results in higher costs and lower quality, but salaries stay stagnant because money is peeled off before it trickles down to the end user, in this case the middle class salary earner and consumer.
When Leftists rage on about the failure of “capitalism,” they are trying to conceal the fact that it is Leftist programs that have engineered this failure, driven by the tendency of democracies to spend Other People’s Money (OPM) until it runs out, then extinguishing themselves in a default or collapse.