alstry (35.77)

Any Guesses How This Ponzi Scheme Unwinds?

February 17, 2010 – Comments (4)

For the past ten years, our economy was driven by borrowing trillions of dollars from our retirement accounts and foreigners and consuming massive amounts of everything from health care to welfare to houses to cars to trips to jobs servicing each other.

We are simply running out of savings and banks simply are pulling back while the appetite to borrow and spend is evaporating.

As a result, we can see the implosion of our consumer economy everywhere.....

New Home Construction only about 20% of what it used to be.....

Auto Sales a fraction of just a few years ago....and key companies went bankrupt

Commerical Real Estate Imploding as vacancies skyrocket......

The problem is our economy is structured as a leveraged consumer economy based in dependent on increasing credit.....and if you slow the credit and spending.....there really is not much an economy.

Our government is now running about a $2 Trillion dollar deficit, in large part because tax receipts are contracting from slowing sales and income....and despite the deficit and much of it being applied to health care (about 20% of GDP), many health care systems are on the verge of bankrupctcy or shutting down.

In essence...the we lived in a consumer economy that was structured not much different than a Ponzi Scheme....as long as the banks lent and we spent....our economy could function.....but once the banks stopped lending and we stopped spending......our economy started to collapse.

We are now at the point where government consumes over half the GDP and government is spending twice its tax receipts.  If we cut government  spending, we essentially destroy the economy as we know it.......if we keep spending, we destroy the currency and destory ourselves since most of the debt is owned by us in our retirement accounts, insurance plans, and investment accounts.

An interesting paradox as we are told there is a recovery.....could you imagine the recovery if every American was given $1,000,000 and told to spend......after all, we gave a lot more than that to the Wall Street Bankers..... didn't we?