Inflation is the bill you pay later for the prosperity you borrowed now

 Welcome to later.

Debt draws forward prosperity -- Ambrose Evans Pritchard

 

Payback is a bitch, or why everything sucks

Debt stopped buying economic growth, if it ever did in the first place, way back in 1982, but no one has seemed to notice.

Prosperity based on debt is not prosperity.

Debt draws forward prosperity, and then when you get forward, there's no prosperity there because you already made off with it.

It's like the polar explorer who starved and froze to death because he ate the food caches on the way to the pole instead of saving them for on the way back.

 

Money printing getting way ahead of output is the cause of the current inflation

 US GDP last clocked in at $24.883 trillion in 2Q. The total public debt at the end of 2Q is $30.569 trillion.

That's now a mismatch of 123%, up from 105% in 2013, ten years ago, when the total public debt was $16.8 trillion and the GDP $16 trillion.

In other words, the debt has grown by 82% over the period while the GDP has grown by only 56%.

The debt represents spending money we do not have, and the increase in the debt represents the spending of more money we do not have. We simply create it out of thin air to facilitate the process. It doesn't matter what form it takes, whether in the form of Treasury securities or physical money.

Spending go whirr, Fed money machine go whirr, debt go whirr, and eventually inflation go whirr. Inflation is the payback for going into the debt for which we refused to pay at the time.

Debt draws forward prosperity . . .

But it should come as no surprise that the future we robbed has no prosperity in it, now that we have arrived there. 

And people wonder where the inflation came from.

Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.

 

America and its people have added over $12 trillion to their total credit market debt outstanding just since 2019, but that has done little but stall the decline of debt growth

The $90 trillion millstone: We did it to ourselves.

We are now in the future we tapped in the past for the prosperity of "debt draws forward prosperity", and there's little here to be found.

From 1946 to 2008 when we hit the debt growth iceberg, real GDP grew at a compound annual rate of 3.324%. Since then it has fallen 49%, to 1.68%.

We should have stayed with capitalism in the post-war, where one risks actual savings instead of future notional tax, income, and fiat money "revenues". But capitalism went out the window a long time ago, bringing with it the end of the gold standard, the creation of the Fed, and the introduction of the income tax, among other horribles.

Payback is a bitch, and what can't be paid back won't. The rest comes out of your hide.

 

 

 

On GDP Mish sounds just like Ambrose Evans-Pritchard five years ago

Here is Mish in 2015:

"Effectively we have borrowed current growth from the future. Looking ahead, growth surprises will be predominantly on the downside for years to come."

Here is Ambrose in 2010:

"Debt draws forward prosperity, which leads to powerful overhang effects that are not properly incorporated into Fed models. That is the key reason why Ben Bernanke’s Fed was caught flat-footed when the crisis hit, and kept misjudging it until the events started to spin out of control."

Total Credit Market Debt Owed Has Grown Just 16% In 6 Years, The Smallest Increase On Record

Between July 2007 and July 2013, total credit market debt owed (TCMDO) has grown just 16%, by barely $8 trillion. It's the smallest increase on record for any six year period going back to when the data series begins in October 1949.

Going back six years from 2013 is instructive because the summer of 2007 was when the level of TCMDO last doubled (going back to the summer of 1999), and if you go back to the beginning of the data series you find doubling times of as few as 6 years in length to as many as almost 12. In other words, in a period of rapid credit expansion TCMDO might have conceivably doubled in our last six year period, but it hasn't. We sure could have used it. Instead it has for all intents and purposes collapsed, growing just $8 trillion from $50.032 trillion in 2007 to $58.082 trillion now.

From humble beginnings in 1949 when TCMDO stood at $400 billion, the level went on to double in the summers of 1961, 1970, 1977, 1983, 1989, 1999 and 2007. In order to double again (to a level of $102 trillion) by, say, 2019 (12 years from 2007), we're going to have to pick up the pace just a little . . .. Unless, of course, this debt-based economy has reached the limits of what it can do, which may be what the last six years is trying to tell us. 

Here's the data for TCMDO for the six year periods going back to July 1953:

7/1/13 $58.1 trillion (up  16%)

7/1/07 $50.0 trillion (up  74%)

7/1/01 $28.8 trillion (up  58%)

7/1/95 $18.3 trillion (up  45%)

7/1/89 $12.6 trillion (up 102%)

7/1/83 $06.3 trillion (up  97%)

7/1/77 $03.2 trillion (up  87%)

7/1/71 $01.7 trillion (up  57%)

7/1/65 $01.1 trillion (up  49%)

7/1/59 $00.7 trillion (up  42%)

7/1/53 $00.5 trillion.

As Ambrose Evans-Pritchard formulated it in 2011, "debt draws forward prosperity". In other words, we've already enjoyed the prosperity years ago which should be present today by literally pulling it back there from here, and now that we're here, well, there's nothing here, except for a measly 0.97% real average GDP report for the six years 2007-2012.

Time to pay.