The DME.......the ONLY important number
The DME is short for the Deficit Multiplier Effect. In essence, how much does each dollar of deficit convert into a dollar of GDP.
For example, the government borrows a dollar and pays a doctor through medicare....the doctor pays the nurse....the nurse goes to Target.....and the Target employeee gets a paycheck.....and along the way a little bit in taxes is taken out in most of the transactions.
The more geared to a service economy, the higher the DME is for that society as the money simply gets passed between the population servicing each other. The DME can come from private sector borrowing or public sector...it really doesn't matter.
The key to the DME is the deficit, because the deficit is taking dollars that didn't exist before and putting them into service.....such as the concept of turning "equity" from one's home into dollars...the equity was based on a perceived value at the time....the dollars can actually be spent......the more people that do that, the more dollars flowing into the system and the higher values go.....for just about everything.
The same is true for government....by borrowing money that really doesn't exist prior to the loan, it fuels the economy with new money......and as that money is spent....it multiplies along the way by the over 200,000,000 million Americans directly and indirectly receiving a government payment.
Right now, the Institute of Alstrynomics calculates the DME at appromimately 4.4-5.3X.....in other words, about half of the GDP is simply a result of the U.S. Deficit....
This has NEVER happened before in our nation because never before did we run such a large deficit when such a large percentage of our economy was simply SERVICE based. Any nation in the world would have a massive GDP if their economy was similary structured running such a massive deficit. Government would simply be printing money and handing it to its people.....much like we are doing now.....
This is clearly an unsustainable path, especially when the allocation of deficit money is unfairly distributed.......the productive class will start to rebel....as is beginning to happen now....and social breakdown will result.
The Institute of Alstrynomics saw this coming a few years ago....anyone who has read the book Atlas Shrugged knew this was coming...Greenspan said the book changed his life, he was good friends with the author....most successful businessmen have read the book.....and now we are reverse engineering it.
It is pretty amazing if you think about it....we only have a "service" economy in America because government is borrowing money, handing it to us, and we are spending it so we can service each other....
What is even more amazing is the person WORKING behind the cash register is likely getting less money for servicing the unemployed person buying something from them. Crazy times indeed....as long as government keeps borrowing/printing money....we have a "service" economy.....once it stops....watch everyone, especially politicians and bankers, run for cover.