US economic growth peaked during the Reagan administration because America is a debt-based economy and we turned our backs on the formula during it

 The trend for the growth of the total universe of US debt, TCMDO or total credit market debt outstanding, rolled over after 1985, one year after GDP did.

TCMDO is the real money, almost $108 trillion at the end of 2025. In 1985 it was $9 trillion.

M2 was merely $22 trillion at the end of 2025. 

TCMDO is the sum total of debt expansion throughout the sectors of the economy.

Historically, most people have experienced it this way.

You get a full time job, which itself was created by a business selling debt in the form of stocks and bonds in order to expand its operations and future profits, and you go buy a house, putting down $100k on a $500k property. The bank loans you the $400k through fractional reserve lending on a small portion of its reserves but secured by the house. That new money is created out of thin air but is actually represented by the "guaranteed" future income stream of your job for 30 years, because you're a smart, reliable guy who never misses a day of work. TCMDO expands, and expands some more each time this happens.

When the conditions disappear for full time job creation, the process slows down. You can see the decline in the growth of the economy in the decline of the growth of the debt. Yes, everything is still growing, but not as vigorously.

Full time as a percent of population peaked 26 years ago, in 2000, at 53.55%, but retested the 1975 low of 46.74% in 2010 and 2011 at 46.97%, back-to-back years in the Late Great Recession.

Housing strength persisted in the immediate post-Reagan period on the illusory basis of windfalls from massive ordinary income tax cuts combined with the demographic peaking of the 1957 Baby Boom turning 40 in 1997 driving demand, but the hollowing out of the economy had already begun with the move of 20,000 manufacturers abroad after the 1986 tax reform.

Early warning signs began flashing already during the Clinton era.

Clinton immediately raised taxes in 1993 after he promised not to raise them in 1992, began a long series of cuts to federal government employment, and gutted the US Navy.

Americans were already struggling at the time and ominously tapped housing equity to sustain their middle class standard of living. Owners' Equity in Real Estate averaged 70% 1982-1986 inclusive, but plunged ten points within a decade to 60% 1996-1999 inclusive.

Homes had become piggy banks, preparing the way for 1997, the year Clinton and the Republicans went further still and turned homes into mere commodities, which in turn prepared the way for the housing catastrophe of 2008. From 1997 a flood of 70,000 more manufacturers began moving out as globalization kicked into high gear and China gained admission to the WTO in 2001.

Almost no one today wants to say out loud how unpatriotic this whole business was. 

Reagan tried to convince us that we know best what to do with our own money, and we promptly turned around and staked our fortunes on foreign investment, not domestic.

Libertarianism is a lie.  

Today you will be hard-pressed to identify a major manufacturing concern with 100% of its operations in the US. Tesla is a standout (heavily subsidized by the federal government!), but other than that most of the businesses which remain patriotically committed to the American idea are pretty small beer compared with how it used to be. 

The formerly domestic debt expansion was exported abroad, creating middle classes where none existed before, especially in East Asia, and doing so cost businesses A LOT less, the key attraction for them.

As a result, enormous profits accrued to the owners of capital while wage earners here struggled to maintain the American dream. Wealth inequality soared, and now our children are 40 before they buy their first home.   

TCMDO grew at a compound annual rate of 8.355% 1945-1985, but at only 6.398% 1985-2025. The change from optimism to pessimism can be traced in the trend lines.

Continued growth of TCMDO at the former rate but after 1985 would have yielded TCMDO at the end of 2025 of $223 trillion, or 106% more "money" than we actually have.

$115 trillion is "missing", or at least something like that. We will never know for sure, but some of us can still imagine because we watched the great betrayal actually happen.

This is why I say socialism is the future, not because I want it or because I think it will work.

People are going to figure this out eventually, get angry, and do the wrong thing, just like we did during the Reagan administration. 

 

 

So-called libertarian Mackinac Center for Public Policy advocates for limiting local control of zoning laws, blames local governments for high house prices, homelessness, and out-migration as if Michigan were California

 Michigan should embrace zoning reform, reject housing subsidies: Limiting what local governments can zone is not a strange concept

... Michigan needs to learn the lessons of other states. California allows strict local zoning and tries to solve its housing problems through large government subsidies. The result is sky-high housing costs, a large homeless population and people moving elsewhere. ... 

Local governments aren't to blame for federal legislation which turned homes into HELOC piggy banks and mere commodities to be pumped and dumped to escape capital gains taxation.

Fewer than 775,000 people are homeless in the United States, most of them by choice because of mental illness and drug abuse. Meanwhile there are 149,006,000 total housing units in the United States, 15,305,000 of which are unoccupied.

Things are already changing enough to make Michigan more attractive as a place to live. Michigan is a net in-migration state for the first time in 30 years in 2025.

There are no compelling reasons to take away local control of zoning authorities, unless you want the freedom to turn quiet neighborhoods where people want to live into Airbnb hellholes like Austin, Texas where many no longer do.

Adjusted for inflation from 1995, the average mortgage payment in 2025 was 37% higher than it might have been

 

 In June 1995 the average mortgage payment in the United States was roughly $773.

Adjusted for inflation to June 2025 that's $1,635.

The actual average mortgage payment in 2025 was about $2,235.

Bill Clinton teeming up with Republicans in 1997 to turn our homes into mere commodities has really worked out great, hasn't it?

Especially for young people. 

The median age of a first time home buyer in 1995 was 29. 

In 2025 it's 39.

But your GOP-controlled U.S. Senate couldn't care less.

It stayed up late last night to scheme for more money for ICE even though ICE is completely incompetent to deport illegal aliens, but it never stays up to solve the most pressing problems of America's younger generations.

The blindness is mind-boggling.

I keep hearing what a smart guy Jeffrey Epstein was, but his explanation for the housing crisis and the Great Recession doesn't hold up

 In a nutshell, Epstein blamed the whole debacle on Bill Clinton, saying Clinton did what he did for votes. 

Unfortunately for Epstein, Fannie Mae eased credit requirements to encourage banks to lend to people with lower credit scores starting in 1999. Clinton didn't need any votes in 1999.

 

Nor did he in 1997 when Clinton signed the Taxpayer Relief Act w/ its $500k home sale exclusion & 2-yr rule, turning homes into commodities.

 

But of course Epstein wasn't smart enough even to understand the role of the latter, and never mentioned it.

 

Clinton deserves blame for making the mistakes he made, and so does the Congress for voting for it all, but Clinton most certainly didn't make them to get votes.

 

A person who thinks that is just a political hack.

 

 

 

 

The wealth inequality of today's K-shaped economy goes back to the Reagan Revolution

Wealth inequality and the ‘K-shaped’ economy are more striking than ever, data shows

 

They take vacations and buy luxury goods. You struggle to pay for food, shelter, and transportation.

 

K is not OK.

 

... A key measure of wealth concentration called the Gini coefficient sits at 60-year highs, according to a report from U.S. Bank published earlier this month. ... The net worth of America’s top 1% hit a record share of nearly 32% in the third quarter of 2025, the Federal Reserve reported. By comparison, the bottom 50% cumulatively held 2.5% of overall net wealth.

 

The portion of U.S. GDP heading to workers in the form of compensation tumbled to its lowest level in its more than 75-year history, per data tracked by the Bureau of Labor Statistics. That means the average nonfarm business worker is seeing an increasingly small slice of an economy that has largely boomed over the last 15 years. ...

 

Total relative “outlays” — a broad measure of spending and nonmortgage payments — by U.S. consumers in the top 20% hit multidecade highs last year, a data analysis conducted by Moody’s Analytics found. The other 80% tumbled to new lows, the data shows. ...

 

While the “K-shape” term became popularized as an explanation for the uneven economic recovery seen during the pandemic, economists say the origins of this breakaway can be traced back decades earlier.

This type of diverging economy stems from the economic reorganization seen during the Reagan administration, according to Joe Brusuelas, chief economist at tax firm RSM. About two decades later, the structural break that created the K-shaped economy, as it’s now understood, was more clearly observed in the wake of the Global Financial Crisis of the late 2000s, he said.

That was in part due to the loss of wealth tied to the historic housing market crash, Brusuelas said. On top of that, he said the jump in joblessness limited earnings potential for those without steady employment in their prime working years.

The Great Recession “created the conditions for the winner-take-all economy that emerged in its aftermath,” said Brusuelas, who first heard the K-shape term around 2008. “If you live, work and inhabit certain portions of the economy, you might as well live on the dark side of the moon compared to what goes on down-market.” ...

To make meaningful inroads, the U.S. would instead need to focus on tax reform and expanding social safety nets, according to RSM’s Brusuelas. ...

Trump's mortgage bond proposal imitates his own "stupid" Jerome Powell on the financing side to reduce interest rates, which is what helped make homes 50% more unaffordable in the first place

 

The perfect storm of government MBS purchases and sub-3% mortgages through ZIRP in 2021 combined to rocket housing values by 50%.

Housing reached record low affordability a year later, falling to 17.22%.

Yeah, let's do more of that.

Back in the 1990s, before Bill Clinton and the Uniparty got a hold of it and turned it into a commodity, housing was stable and affordable as median income bought 25% of a home. 

Trump hasn't gotta clue what to do.

 

 Mortgage rates drop to lowest level in nearly 3 years as Trump orders buying of $200 billion in mortgage bonds

... In the first two months of the Covid pandemic, as markets reeled, the Federal Reserve purchased $580 billion in agency MBS. It then continued buying more throughout the year. From March 2020 through June 2021, the Federal Reserve increased its agency MBS holdings from $1.4 trillion to $2.3 trillion, according to the Dallas Fed.

The Federal Reserve also lowered its own lending rate to zero. The combination brought the average rate on the 30-year fixed mortgage to record lows, hitting just 2.75% at the start of 2021, according to Mortgage News Daily. ...

... But Zelman also points out that in the broader home market it’s not just the mortgage rate, but overall affordability that is keeping buyers sidelined. Consumers are stretched, and home prices are close to 50% higher than they were pre-pandemic, ironically because of those record-low mortgage rates brought on by MBS purchases. ...

 

 

Third paragraph in, husband's gone from 560 square foot apartment with wife and two kids lol

 Why smaller houses can lead to happier lives

. . . Jaye, who still lives there . . ..