Effect of Government Debt and Spending Policies Since Reagan
By Kenneth Schan

Proceeding from the basic argument that “you cannot argue against the facts” I decided – once and for all – to research the facts. 

Using 1982 as the base year (that was the year Ronald Reagan pressed the button to go into debt), I looked up the annual statistics for the following: 

1. US Government Debt                               (Source: http://www.publicdebt.treas.gov/opd/opdpenny.htm)
2. M3 Money Supply                            (Source: http://www.econstats.com/m__w1.htm)
3. US GDP (in deflated 1996 dollars)      (Source: http://research.stlouisfed.org/fred/data/gdp/gdpca)

4. CPI Inflation                                    (Source: http://woodrow.mpls.frb.fed.us/research/data/us/calc/hist1913.cfm)


Here are the results:


  1982 2002 %p.a. Compounded
US Debt ($Bill) $1,197.1 $6,282.5 7.9%
MC ($Bill) $,468.8 $8,286.6 6.0%
GDP ($Bill) in 1996$ $4,919.3 $9,439.9 3.5%
CPI 96.5 179.9 3.0%


What conclusions can we draw from the above? 

There has been a marginal improvement in productivity – evidenced by GDP in actual dollars (unadjusted for CPI) compounding at a slightly faster rate than growth in Money Supply. However, to achieve an “apparent” improvement in standard of living, successive US Governments have sanctioned the growth of Money supply as a percentage of GDP (which has fuelled inflation) and have also sanctioned the growth of debt as a percentage of GDP (which is now threatening future standards of living). 

What does this mean?  In words that even an 11 year old can understand:  "The US Government – aided and abetted by the Federal Reserve – has hocked the birthright of coming generations so that a select few might benefit in the here and now."

What a pillaging of the rights of the defenseless by a Nation that has positioned itself as the ultimate defender of human rights! 

As sickening as this may sound, you cannot argue against the facts! If the Founding Fathers were still alive they would probably line up our leaders against a wall and shoot the lot of them. 

From the above analysis, it follows that US debt is increasing at BETTER THAN TWICE the rate of GDP. Ultimately, this scandalous process must produce bankruptcy. The only question is when. 

This situation will eventually destroy the dollar. But the process has been going on for twenty years, what's different now? 

Good question, and what's different is that the US has now adopted the position of being an "imperial power," presiding over and giving orders to the rest of the world -- and doing it by way of it's enormous and unmatched military power. But no nation with the chronically negative current account balance can do this -- at least, not for long. 

This looming national bankruptcy is one of the major reasons for buying and holding gold.

Copyright Family Guardian Fellowship

Last revision: April 03, 2009 07:51 AM
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