Current Account deficit:
US government debt:
Public AND private debt:
The last three charts have one thing in coming — there is a dramatic change after 1980. That’s when we start going into deep government and private debt (you can’t just blame Washington), and when our current account started to go into a severe deficit. At the same time, our manufacturing production continued to decline (graph one).
What this means is that for thirty years we’ve been borrowing (more debt) and using it to purchase foreign goods (the current account deficit is mostly the trade deficit). Our productive capacity has continued to decline even as we consumed more.
These are trends people noticed — even I was talking about these trends in the mid-nineties. Perot’s Presidential run in 1992 was driven by debt concerns. Yet we kept going because people were making money, the media made it sound like capitalism works magically, and consumerism overtook the country. Both parties share blame equally. Yeah, partisans can make a case one side is worse, but that’s not useful — better to say responsibility is shared and address the deep cultural and structural barriers to building a healthy economy. The trends shown on the charts were unsustainable, and in 2008 the painful rebalancing began. It could continue for quite some time.
No time to write more today, so I thought I’d let the charts do most of the talking.