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alstry (35.09)

Alstrynomics For Dummies

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August 20, 2010 – Comments (7)

Before we get started, let's destroy the myth that population growth produces economic growth....the only thing that increses GDP growth in a country, as measured by money, is adding more money to the system either by borrowing it or by taking it from foreign nations (ie trade your goods/services for their money or go to war and take their money/goods)......

You could have ten people......if all they had was a dollar between them, the GDP of the group would be very small.....if you had only five people, but each had ten dollars, the GDP as measured in dollars, would be much greater for the five......now let's move forward.....

In 1980....the total debt in America was about $5 trillion dollars......that was also about the time Bernie Madoff started in business and the Individual Retirement Account came into existence.  By 2007, the total debt in America climbed to about $55.

Interestingly, net worth of Americans jumped by almost the exact same amount as the borrowing....

The math isn't hard, if one guy borrows $5 dollars and gives it to another guy, the other guy is $5 richer.  If a nation citizens and governments borrow $50 trillion dollars, among the people collectively, the nation is $50 trillion richer....HOWEVER, if the people imported a bunch of stuff, then much of the money has left the nation BUT THE DEBT BURDEN REMAINS ON THE NATION.

So now we are a nation of $55 trillion of debt......and as we shut down and exported production, we replaced it with borrowing and importing......as a result, our money flew out of the country and we became a nation with much more debt than assets and money.......

For a while, the primary driver of our economy was the bankers loaning money to the private sector....we were borrowing to service ever incrasing debt burdens........the bankers knew this, they are the bankers after all and they know how much money is in the system and how much the system depends on increasing credit to service the debt.......

Once the bankers cut off the private sector to credit, Benny the B and the bankers KNEW the system would crash.....after all, it is their system.......so instead of bailing out the debt, we borrowed even more money and bailed out the bankers.........huh?........even though the bankers continued to cut off the private sector from credit......

instead, the bankers started loaning government and Wall Street trillions..........and kept selling that debt to our retirement, investment and savings accounts.......and despite borrowing and spending trillions, the economy only limped along......and will continue to deteriorate unless we restructure the debt......

So we as a nation got rich because we borrowed OVER $50 TRILLION dollars over a 30 year period........it is that money that is sitting in our accounts collectively........now that we are being cut off of credit, and much of our money was exported, it is mathematically impossible to pay back the debt under the current terms........Alstry knew this, Benny the B knows this, and so does Timmy the G........

Basically, some of us got INDIVIDUALLY rich because we COLLECTIVELY BORROWED $50 trillion dollars over the past thirty years.....now we can't borrow like we used to and the debt can't be serviced............

My guess is we are about to become Collectively poor because Individuals don't have the money to pay back the debt that we accumulated over the past thiry years now that the bankers have started to cut off credit........

Welcome to the world of Collective Interdependence........we were dependent on America to borrow to get rich.......and now, we are about to learn we have to pay it back.......jointly and severally.

Welcome to the Digital Age......

 

7 Comments – Post Your Own

#1) On August 20, 2010 at 9:40 AM, alstry (35.09) wrote:

Don't make Economics too difficult......it ain't physics.......

We became rich because we borrowed $50 trillion dollars and spent it among ourselves and imported a bunch of stuff......and it worked great as long as people were willing to exchange their production for money

The game kept going because the banks kept lending and the debt could be serviced despite the fact we produced less and less..........

Now that the banks have cut back on credit to the private sector, production is collapsing and the debt can't be serviced......and the accumulated debt is the primary value of our retirement, pension, and investment accounts......

Because if you can't service debt, there is no equity......

AND NOW THE ONLY LEGAL QUESTION IS WHO IS RESPONSIBLE TO PAY BACK THE DEBT THAT WE ALL BENEFITTED FROM........

A VERY INTERESTING AND CONVULSIVE QUESTION.....

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#2) On August 20, 2010 at 11:05 AM, PDTBiotech (93.15) wrote:

We actually agree for once - it is for dummies  :) 

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#3) On August 20, 2010 at 11:25 AM, alstry (35.09) wrote:

Here is the fun part....we are all pointing fingers at EACH OTHER on who is responsible to pay back the debt.......

Just wait until the Fools learn we are ALL COLLECTIVELY responsible for ALL OF THE DEBT when our politicians put it on our balance sheet.....and WE simply don't have enough money or dollars to pay it back.

WELCOME TO COLLECTIVE INTERDEPENDENCE.....

WELCOME TO THE DIGITAL AGE....

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#4) On August 20, 2010 at 11:49 AM, oshiri (< 20) wrote:

Comrade Alstrymous . . .

     Two interesting events yesterday . . .

McDonald's executed a Hong Kong bond issue in Renminbi (RMB aka Yuan aka the "People's" Money) http://www.telegraph.co.uk/finance/china-business/7954690/McDonalds-raises-yuan-bond-in-Hong-Kong-to-underline-Chinese-intent.html

Bomb kills seven and injures 14 in Xinjiang, China http://www.bbc.co.uk/news/world-asia-pacific-11021645

      As America declines, the vacuum is filled by others. If you're worried about funding expansion, go to where you get bang for your bu . . . er, um, Yuan.

     And Sempai, as we leave Afghanistan, the Chinese will be forced to go in. Xinjiang is on the Afghanistan border. The PRC has built infrastructure in Afghanistan and is extracting minerals. The People's Republic doesn't practice "missionary diplomacy" like we do. It'll be bye-bye U.S. Army, hello People's Liberation Army with a sea change in rules of engagement.

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#5) On August 20, 2010 at 11:58 AM, alstry (35.09) wrote:

We are NOT leaving anywhere.......my friend.

That is our only production we have left.....and Afghanistan has a lot of opium and rare earth metals.

Now the question is whether China will fight us for it?

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#6) On August 20, 2010 at 12:12 PM, oshiri (< 20) wrote:

Sempai . . . as things stand now, the People's Republic is getting free police service from Uncle Sam, all the while poking America in the eye over Iran.

Just remember Chairman Mao's maxim, (to paraphrase) "lead with your bayonet -- where you find steel withdraw, where you find muss proceed."

American missionary diplomacy provides a whole lotta muss out there. And keep in mind who is getting squeezed now . . .

When war was raging in Iraq and Afghanistan, Iran was said to be caught in the middle. Now take a peek -- last time I checked we've withdrawn combat troops from Iraq, with Afghanistan smack-dab between Iran and China . . . very interesting Comrade Al, very interesting.

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#7) On August 20, 2010 at 12:15 PM, alstry (35.09) wrote:

Yes indeed as we just learned this week that Iran is sending troops to Venezuela.......crazy times as we try to figure out who is liable for all this debt our politicians borrowed and we can't pay back....

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