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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (47789)	12/20/2005 1:41:54 PM
From: UncleBigs	Read Replies (2) \| Respond to of 110194

But does increasing productivity cause people to be unable to pay their debts due to some connection to deflation as Mish asserts? Yes. When a person incurs debt, that represents the sale of their future at a fixed price. As the economy becomes more "productive", the means the same level output can be accomplished with less labor input. Less labor input means fewer people employed at a given output level. How can an individual service their debt when their employment has been eliminated? However, in my view, productivity increases aren't the primary cause of the coming deflationary collapse. An unsustainable rise in consumer spending on everything from houses, vacations, clothing, cars, atv's, motor homes has been financed by debt. Debt induced consumption is not the same as organic growth. This false prosperity will end disastrously and force the American economy to contract to its natural equilabrium. I estimate an "equilabrium" gdp in the $8-$9 trillion range vs. $12 trillion today. That represents a haircut of 25% to 33%.