Economic Collapse: Germany

Moving away from the developing nations. It is also time to point out that not only a developed nation, but one of the most economically powerful nations in Europe, Germany suffered an economic collapse in the 1990s that lasted nearly 6 years.  Their GDP contracted by 25% during this period and also illustrates that economic collapses aren't always the short and extreme contractions that we see with nations like Japan or Argentina, sometimes they are a gradual decline in GDP.

What is most interesting is that an economic collapse doesn't always entail massive societal decay and unrest like we see in Argentina, though I am willing to go out on a limb and theorize that there was an increase in crime and some unrest, and it has a lot to do with the nature of the collapse. Is it simply a severe economic contraction? Is there hyperinflation? What other factors would contribute to making a bad situation even worse?

Economic Collapse: Brazil

Brazil is the next country that has suffered an economic collapse since the turn of the millenium. Their economy contracted by nearly half from 1997 to 2002.  Brazil has recovered nicely since then and their economy has quadrupled from 2002, and they are now the 6th largest economy in the world just behind France.

Economic Collapse: Korea

Korea suffered an economic collapse back in 1996 where it saw it's GDP decline, due to the Asian financial crisis, by 38% to 1998.  But Korea is suffered a major decline of it's GDP during the financial crisis. From 2007 to 2009 Korea saw it's GDP contract by around 19%.  The latest contraction is large enough, in my opinion to warrant as an economic collapse, but Korea has recovered very quickly, unlike Japan, and it's GDP now surpasses it's high back in 2007.  However, Korea is a very dependent on exports, and hence the global economy. It's TAPG is over 80%, so expect Korea to be hit hard by the next wave of the crisis.

Economic Collapse: Japan

We've talked about the lost decade of Japan, but few realize that they suffered an economic collapse, yet I don't see how you can describe a sudden drop of 27% of your high water GDP, a series of oscillation ups and downs between growth and contraction, and not reaching economic parity to your high until 15years later anything other than a collapse. But that is exactly what happened, their economy collapsed in on itself.

This serves as a very useful reminder that an economic collapse doesn't necessarily entail a complete collapse of society. How the economic collapse plays out depends on a variety of factors, and the fact that Japan's culture is one of conformance, coupled with the fact that they were a close US ally, helped ameliorate the situation.  But this is something that we in the US need to think about, as far too often we think of economic collapses as something like we see with Argentina or Wiemar Germany.  That's not to say that an economic collapse of America would play out more like it did for Japan, far from it in my opinion, but it is something to consider.

Total Government Spending And GDP

A post I wrote a while back covered America's GDP and Federal spending.  If federal spending were taken out of the US economy then it would be a rather large drop in productive GDP. The adjusted GDP, taking out federal government spending, the US economy hovered a little over 10 trillion dollars rather than 14 to 15 trillion reported by the government today. At the time I did not include state and local spending in the mix.  Well, after a trip to the website government spending com, I was able to gather more data to add to my previous GDP chart.

Here is the now updated chart that shows what our GDP would be if we subtracted state and local government spending. And as we can see, private sector GDP shrinks down to 7.9 trillion dollars.

To reiterate my earlier point, while it appears that the US has recovered from the 2008 recession with a 2010 GDP of 14.2 trillion dollars compared to a 2008 GDP of 14.3 trillion.  However, when factoring government spending private sector GDP still has yet to match its 2008 levels. Here is a bar chart showing the dollar amount of of GDP that is private sector versus government sector.

In 2008 private sector GDP reached its zenith of 8.5 trillion dollars, down from a high of 8.6 trillion the year before. In 2010 private sector GDP is 610.30 billion dollars less than it was in 2008 even though our GDP is ostensibly larger by 139 billion dollars. Funny how our news correspondents talk about the recovery, yet fail to mention this fact.  Perhaps because it points out the fact that there is no recovery. You can argue all you want that government is needed to pump the economy, but when the share of private sector GDP shrinks relative to GDP as a whole, then it is hard to argue the efficacy of such a policy.  At best it becomes a holding action.

However the growth of government spending has long been the hidden white elephant that the media, economists, and the masses could choose to ignore if they deigned not to look for it. Below is a chart showing the yearly share that of GDP that he private sector, federal, state, and local spending account for.

The chart shows two items. The first is that it shows the growing share that government spending accounts for GDP. Just eyeballing the chart you can see that in 1948 government spending at all levels accounted for only around 20% of GDP. In 2010 it appears to have almost doubled doubled. 

Below is a chart showing the yearly split between private sector and government spending that accounts for GDP since 1940 and the yearly economic growth rates of the economy.

This chart alone doesn't prove definitively that government spending is the cause for our downward trending economic growth rates. Correspondents and economists would have you believe, not without some merit, that our reduced growth rate is due to demographic and global economic changes.  But, in my opinion, to not even consider that our decreasing economic growth rates may be contributed by growing government spending is like a doctor simply attributing growing weight gain, bone loss, and heart troubles to old age and not acknowledge that the patient went from a 150 to 250 pounds.

The second item that you will also notice is that it isn't just government spending that has ballooned, state and local spending have also grown considerably as shown in the chart below.

Since 1950, outside of local spending, all levels of government spending now increased dramatically. I have a guess as to why local government spending was so high in 1950, and that is that most of that local spending is probably spending by the mega cities of Los Angeles, New York, Chicago and a few of the rust belt cities using the postwar boom to fuel their rapid expansion. Whatever the reason, government spending has undoubtedly increased and it begs the question: How can economists insist that the government is not spending enough money to goose the economy when all levels of government have been on a 60 year binge? At what point will they finally acknowledge that America, throughout our government, has a spending addiction?  

The other aspect that hasn't been covered is that not all of the government spending is backed by actual dollars. Some of it is backed by debt, and as the chart shows, since 1960, outside of the technology infused bubble economy of the 1990's and one year in the next decade, government has run at a deficit. 

This deficit results in government debt which has to be paid for at some point, there is no ignoring this simple fact. When we have to pay this debt and how much of a detrimental effect it will have on the economy remains unclear. But the debt will be paid, and it will have a detrimental effect.  I would hope that anyone reading this post will now acknowledge that government spending could very well have a detrimental affect on our economy; but I doubt I have presented enough evidence to convince those who aren't already convinced. What I do think I have done rather convincingly is show that the GDP figures do not reflect the reality of the ground in any way. Americas economy is on the ropes, not recovering.



Paul Ryan Selected As Romney's VP Candidate. And This Makes No Difference To Me

I know that the circle of blogs that I frequent have differing opinions about Ryan's selection by Romney. To be frank, I am surprised at the level of excitement. I myself cannot muster the same amount of excitement that I have read about.  The fact is, I wasn't planning on voting for Romney and Ryan's selection has not changed this plan one iota. Bear with me as  I explain why.

Ever since my brief stint as a delegate in my congressional district for the republican presidential primaries I have intentionally not paid attention to the presidential race. It was a blissful period that has been temporarily suspended with the news that Mitt Romney has selected Paul Ryan as his vice presidential nominee. Some of my republican coworkers, my family, and even some bloggers I follow are ecstatic, or at the very least optimistic, about the selection of Paul Ryan.  I can see why it galvanizes many republicans.  But the fact is that I am not going to vote for the Romney Ryan ticket.  Here is why.

For most individuals who believe themselves conservatives Paul Ryan is a strict budget hawk.  However, for true fiscal conservatives his plan is severely underwhelming.  Even if his plan was followed to the letter, and assuming our economic growth was in line with his plans projections, then after ten years we would still be running a 287 billion dollar deficit.  This means that for over ten years we would be added to our national debt by about 4 trillion dollars.

And let us not forget the absurdity of doing budgets over the course of ten years.  There is no way to forecast economic growth or even anticipate the fiscal prudence of multiple administrations. How long did the last balanced budget, that only exist on paper, last? Moreover, to add salt to the wound, he projects an increase in the governments share of our GDP from where it stands now.  Yes his plan is better than Obama's, but that is hardly a tough criteria to beat.  I am tired of half and partial measures when real action is necessary. If you really care about fiscally responsible government then Paul Ryan, compared to fiscal heavy weights like Ron Paul, and his son Rand Paul, is a relative light weight.

Many other libertarians or peace minded conservatives will take umbrage with Paul Ryan's stronger stance on defense.  That doesn't bother me. Not because our current defense spending is unsustainable, it is, but because I recognize that there is little change that can be done.  While Ron Paul spoke of closing all, or rather most, of America's overseas bases, ending foreign involvement via funding and secret dealings; I knew that even if he were president he would be able to accomplish very little of that goal.

The other reason why I am less than enthused is, that despite the fact that he is among a small group of republican party members I actually like, he did after all try to put together a plan when so many other so called conservative congressmen didn't even bother, he will most likely have little impact in the Romney administration.  Dick Chaney's vice-presidency is an anomaly in what otherwise is a very weak office whose influence is minimal at best. The vice-presidency is more useful as a springboard to the presidency, 5 presidents since the 1930's were once vice presidents, than an actual office from which policy can dictated and shaped.  Romney's selection of Ryan is simply a move, an admittedly shrewd one, to galvanize enthusiasm for a campaign that needs it if they are to face Obama. And if you vote for Romney based off of your expecations of Ryans roll in the administration, then I think you will end up being disappointed.

The final reason has little to do with Ryan or Romney and more to do with the party in general.  The republican party has shown that they are completely unable to exercise any sort of real fiscal conservatism, or any sort of conservatism in general, outside of mere plattitudes and promises.  The GOPs actions these last few years has shown that the tea partys' affect has been minimal.  If it had, then the the GOP would never had the gall to try and pass their pitiful budget plan and the presidential primary would have been a little bit different.

Ron Paul's candidacy was always a long shot, and I never expected him to win the nomination, but I did expect him to have a strong showing.  And the fact is that he did have a strong showing, and indeed it would have been stronger if it weren't for the party malfeasance during the primaries.  Now I need to make this clear, I am not pulling this out of my rear, I saw this ill-doing and vote scheming in action as I was selected to be a delegate and represent my district for the next round of voting before the state delegate selection.

The party actively did all it could to make sure that anyone they suspected of being a delegate in the camp of Dr. Paul would not be able to attend.  I received numerous messages from our district leaders about how dates and locations had changed, when in fact they had not.  Moreover, at the district convention itself, the chairperson tried to game the system, and if it weren't for a mass revolt by the delegates, Paul supporter, Romney supporters, and others, then the caucus leaders would have completely shut out all the Ron Paul supporters.

I was utterly disgusted by the spectacle that I saws and realized that the GOP had not learned it's lesson and has become utterly corrupted even at the lower levels.  Whether you agree with Dr. Paul or not, the fact is that he espouses the views for a not so insignificant portion of the republican party, and of the nation as a whole. There have been many instances like this, the Goldwater movement, the Reagan election, Ross Perot's third party bid, the electoral revolution of 94, and the tea party movement.  And the one thing I have noticed with these movements is that the libertarian wing of it has gotten stronger with each incarnation. I remember that at our little convention that even some delegate veterans were astounded by not only the youths that showed up for Dr. Paul, but minorities as well.  And the fact that the GOP party treated the man and his supporters the way that they did has shown that they are, not only willing to risk future losses for short term games, but also incapable of seeing which way the wind is blowing.  The libertarian wing is growing, and it utterly confounds me that a party that often argues the need for cooperation between conservatives and libertarians did everything in their power to make libertarians want even less to do with the party. Now more than ever real conservative principals are not only seen as viable, but increasingly popular amongst large swaths of America.

This alone makes me to not want to vote for the GOP candidate simply as a giant 'screw you' to a party that has long since stopped caring about true conservative principals.  I could care less who occupies the office of president, be he democrat or republican, as long as good sound long term policies are implemented.  The GOPs pitiful 100 billion dollar spending cut pledge shows that the party cannot do this.  However, there is a growing minority that remembers what true republican, the idea not the party, virtue is within the GOP. And that is the final reason why I am not voting for Romney.

A lot of bloggers on the manosphere have wrote about the coming economic correction, or what I think of as the final chapter in the depression we are currently in.  This final chapter, if it were to happen, will have long term socioeconomic and political ramifications and I have become convinced that this event cannot be avoided. Even the election of Ron Paul as president probably could not have avoided this even, though the even would certainly be less painful. And I am now thinking about what comes after.  I see two scenarios playing out.  Either we recollect and reorganize ourselves along more republican style principals, or we continue down the path of statism, and true imperialism. The Great Depression was the kind of even that drastically, and fundamentally, altered the nation. It resulted in a government that further strengthened and accelerated the movement towards socialist styled policies that began at the turn of the 19th century.


I do not see how this event, the final chapter in economic collapse, cannot happen by 2016.  We've been in global economic turmoil for over half a decade and the pot continues to boil. It has to boil over, and when it does believe me it matters who is in charge. Because if the democrats are in charge then there is no way they cannot shift the blame away from their socialist policies. Yes they will blame a likely republican controlled congress, but I expect those attempts to fail. However, if Romney is in charge then you will hear no end to how it was a lack of government, no matter how false, that caused this collapse. 

If that is the case, then expect to see an even stronger shift towards populism and authoritative government, like what we have seen in Europe and Latin America.  We have seen how that story ends, and it doesn't end well.

I recognize that there are individuals who will disagree with my decision to not vote for Romney because it will benefit Obama.  Believe me it is not easy considering the disaster that I think a second term will be. But the fact is I am thinking about the longer term consequences and I don't want to inadvertently hurt the long term movement towards a return to true American principals for the sake of some perceived short term gain.  And having participated in two presidential elections already I know this to be true. Voting for someone simply because they are republican and hoping that they will implement real conservative policies is wishful naivete. Just look out how former President Bush's presidency turned out, he usurped the free market in order to save it in his own words.  Never again.