Wednesday, July 15, 2015

"The bigger the existing accumulation of debt, the larger must be any new credit use before it provides a boost to the economy."

Interest costs relative to GDP for the Federal government and the whole U.S. economy:

Graph #1: Federal (blue) and Everybody's (red) Interest Cost as a Percent of GDP

I extended the trend of the red line back so you can see what low looks like.

The vertical line of black dots show the year 1992. That's the year Ross Perot wrote:
Today we have a $4-trillion debt. By 2000 we could well have an $8-trillion debt. Today all the income taxes collected from the states west of the Mississippi go to pay the interest on that debt. By 2000 we will have to add to that all the income tax revenues from Ohio, Pennsylvania, Virginia, North Carolina, New York, and six other states just to pay the interest on the $8 trillion.

If you live in one of those states, take a look at the IRS payroll deduction that reduces your next week's take-home pay. Your money is going just to pay interest on this debt, which in 1993 will amount to $214 billion. During the first 152 years of our nation's existence, we spent less than $214 billion to operate the entire government of the United States! ...

And let me repeat: that $214 billion we'll pay next year is interest only. Interest doesn't buy a thing...
From United We Stand by Ross Perot

Perot was talking about the Federal debt, the blue line in this picture. The low line.

The interest on private debt doesn't buy anything, either. The red line.

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