Brazil Is the New America: How Brazil Offers Upward Mobility in a Collapsing World Read Online Free PDF

conditions and higher profit potentials because of repaired balance sheets, investors are gambling on the pump. They are expecting to profit from the overt effects of inflation on stock prices and from a continuing depreciation of the dollar.
    Far from signifying improvement in the U.S. economic prospects, much market-moving news merely reflects deeper weaknesses abroad, and transparent statistical confections misrepresenting bottom-bouncing in the U.S. economy.
    Given the fact that we are deflating the biggest credit bubble in the history of the world, genuine, sustained recovery won’t be arriving soon. While the markets wax and wane over ticks up and down in an unemployment rate, the bigger picture is totally missed.
    Consumption and debt growth have been strongly correlated since 1960. Rapid debt growth over the past half-century allowed consumption to grow faster than income. Conversely, if households were to go through a sustained period of deleveraging (retiring debt), then consumption growth would almost necessarily slow. That is what has happened since 2008.
    The current deleveraging (credit contraction) is potentially more devastating than the Great Depression of the 1930s. This has been somewhat disguised by the introduction of food stamps and other welfare programs. These innovations in redistribution hold down the lines of hungry unemployed people that made such a vivid impression during the Great Depression. The National Bureau of Economic Research (NBER) may have determined that a recovery began in June 2009, but it has amounted to little more than Herbert Hoover’s vaunted promise that prosperity was just around the corner.
    It will be an effort of many years to mend balance sheets that have been severely stretched to accommodate outsized burdens of debt. The 55-year mean of Household Debt in the United States is 55.4 percent of GDP. To bring the debt back down to its mean levels implies shedding $6.33 trillion in debt. Hence, the U.S. economy is destined to remain depressed for the next 15 to 20 years. Perhaps longer.
    Remember, the depression could linger for decades, as it has in Japan, where epic real estate and stock market bubbles collapsed in 1990. Japan still hasn’t recovered, in spite of unremitting stimulus packages that involved trillions of deficit spending to build roads to nowhere.
    Short of widespread liquidation and bankruptcy to wipe out excess debt in a hurry, there is really no option or magic potion for recovery. During the credit boom, the combination of higher debt and lower saving enabled personal consumption spending to grow faster than disposable income, providing a significant boost to U.S. economic growth. Reversing that means slower-than-expected growth, as spending lags behind income.
    Shedding debt equal to 46 percent of GDP implies a much deeper and/or longer contraction than the Great Depression, when the nominal debt of U.S. households declined by one-third. The Japanese deleveraging involved shedding debt equivalent to 30 percent of GDP, so the current deleveraging process in the United States looks likely to be one of the most difficult and protracted in history. In other words, status quo expectations for resumption of debt-driven prosperity in the United States are delusional. The economy has reached debt saturation, and a large percentage of the newly created debt is devoted to refunding debts that have gone south.
    The protracted political impasse in the U.S. Congress over raising the debt ceiling underscores the central role that ever-greater doses of debt play in promoting the illusion of economic prosperity. This highlights the vulnerability of the debtist economy.
    As Ludwig von Mises so lucidly observed, artificial booms brought on by credit expansion cannot go on forever. He said,
    True, governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can