Cartoons
Diminishing returns for each dollar of new debt
Or ‘why the economic stumuli won’t go very far’.
http://yelnick.typepad.com/politick/2009/04/
why-the-stimulus-wont-work-the-marginal-productivity-of-debt.html
“According to Antal Fekete [1] if you take this chart further back, we used to get $3 of GDP for every $1 of debt. Sometime in the late ’60s, the line crossed below $1, meaning every new Dollar of debt returned less than that in GDP. Antal thinks we actual went negative in 2006, but regardless of whether his data is the same as this chart, we are approaching that point. This is truly a point of no return. This means every new $1 borrowed reduces GDP.”[2]
[1] http://www.safehaven.com/article-12962.htm
I do not subscribe to all of the view expressed by Antal Fekete. In particular, I am not a fan of ‘the gold standard’ because the application of it would not guarantee the absence of a debt bubble and the hoarding of ‘gold’ does make for a prosperous and healthy economy.
[2] Why The Stimulus Won’t Work: The Marginal Productivity of Debt
Here
Brenda Rosser