The modern era of economic growth begins after WWII and ends early in 2020 [see photo]. For seventy years C20th economic growth was a massive Ponzi Scheme. For example, the price of real estate around the globe kept tracking upwards despite the lack of a valid use-value case for it. But to understand how this happened we must go back to the beginning.
After the Second World War the family became the focal point for economic growth. Each family had to be housed, clothed, fed, etc. The common practice was to build suburbs. These suburbs had relative cheap houses and state-of-the-art infrastructure [streets, lighting, drainage, water supply, etc]. However the most prized family possession was the car. The car was a basic necessity for the family to transport various members from the house to the train, school, church, shops, etc. And so a new eco-system was built around the use of the auto. Soon a family was judged by the model of car that they could afford - so they bought new cars on a regular basis. But, as we all know, any good Ponzi Scheme is a black hole for spending and so new ways had to be found to increase the budget of the family unit. Credit was introduced. Credit was available on every new household item imaginable as well as on any purchase of the family car. Indeed personal credit proved to be the perfect stimulant for a new era of debt-backed growth inside those stand alone households.
However family households in the burbs was not enough to keep this massive economic swindle ticking along. Cities had to be created, and exploited, on the same basis as the burbs and so this new credit system became the secret sauce which made city growth work. Unfortunately, from time to time, these cities ran into significant growth roadblocks through mismanagement, fraud, or short-sighted social policies and thus big government became the backstop to economic growth. In the beginning the government was a small entity with a balanced budget. In the 1960s everything changed as the government became the principle driver of an amazing schema for debt-backed economic growth. Government grew and grew and grew and so did the debt machine that funded its relentless growth.
Flash forward to 2020 and we see government debt become the torpedo that could sink this elaborate Ponzi Scheme. Innovation was required and what came to light was truly stunning. Based on the concepts of "Modern Economic Theory" we discover that debt does not have to be repaid so long as the Ponzi Scheme keeps chugging along. Indeed what we knew as economic growth [based on family units and global consumption] could and perhaps should be replaced by the unlimited growth of government. Monetary expansion and fiscal spending is could and should become the new secret sauce for our C21st Ponzi Scheme. For example, The Green New Deal is a mandate for increased government spending. The "build back better" is a mantra, or a reliable trade mark, for new government spending. The abolition of the "family unit" through mandates for education, child raring, social services, etc is a green light for increased government spending. The use of media to promote government is a channel for expansion of institutional spending. And so on and so on....
The Ponzi Scheme is alive and well however C20th economic growth is dead and buried.
Richard.
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