government debt

24 Aug

It’s Capitalism, Stupid

By Walter

The cause of the debt crisis is to be found in the essence of capitalism itself: competition, which – surprise! – produces losers as well as winners.

The primary mechanism through which this contest is engaged is the corporation, which the US Supreme Court recently declared to be the legal equivalent of a person. Here is how it works: corporations hire workers to produce widgets for which they are paid $8.75 each. Later, when the workers become consumers and buy the widgets they produced they are charged $10. The difference: a profit of $1.25 each. That’s a 12.5% skim off the top, a house advantage that would thrill any casino operator.

Here’s how those numbers work out nationally. The monetary value of US gross domestic product (the total of all the various kinds of widgets produced) during the first quarter of this year amounted to an annual rate of $15 trillion. Corporate profits for the same period came in at an annual rate of $1.8 trillion. There it is, the culprit: 12.5% skimmed right off the top. It shouldn’t take a degree in higher math to see that this is a game with a short life expectancy. Before long, the workers will find it more and more difficult, and finally impossible, to keep buying the widgets they make.

Now this is where debt makes its appearance. The only way to keep this game going is for corporations to lend some of their profits back to their underpaid workers and overcharged consumers so they can keep buying those corporate products, but on the promise that those loans will be repaid – with interest. In the long run, of course, this only accelerates the process until finally, as now, it is no longer sustainable.

Meanwhile, the government is also called upon to borrow

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17 Apr

How Debt Saved Capitalism — Temporarily

By Walter

All this bad-mouthing of debt is downright ungrateful. The criticism of individuals and governments who can’t seem to live within their means ignores the fact that if they had not gone into debt the economy would have ground to a halt a long time ago. It’s debt that keeps the capitalist Ponzi scheme going. As long as the Federal Reserve continues to pump money (and debt) into the economy, collapse will be avoided until …

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