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A deep recession is forecast in 2020. Despite official claims of low unemployment and increased retail activity in the US in 2019, economic growth in the US and the world is predicted at a rate of 1.7 to 2% in 2020. That is because of hyper-inflation and high debt. Products are artificially over-priced and consumers (corporate, government and individual) are dedicated to spending beyond their means.

House prices and rents are at an all-time high in major cities around the planet while wages decline, mass layoffs multiply and bankruptcies increase. 

The rich economies, reliant on immigration for population growth and therefore a steady labour force, are experiencing deskilling as more educated, experienced and skilled professionals and workers leave the workforce because of retirement, closures and layoffs and immigrants must take up the lowest skilled jobs in food services, transportation, warehouse and factory labour, cleaning services and hospitality, call centres and so on. The latter are often part-time jobs among which part-time workers may try to hold two or three. How much official employment statistics account for irregular work is a question.

Even professionals and skilled trades people must count more on opportunities for self-employment and contract work.

One outcome of all the above is that individuals rely on credit to acquire necessities, sometimes borrowing money to make payments on previous loans.

The more I examine the present economy and its troubles, the more I see that debt is a permanent feature of capitalist economies and capitalist economies are in perpetual crisis. Activity goes in boom and bust cycles, with a recession about every 10 years. It is a downhill spiral. The standard of living has been diminishing in the West since the years of stagflation in the 1970s, when the strategy of seeking cheaper labour and materials abroad while deregulating work, privatizing ownership and liberalizing trade began to compensate from the decline in expected profits. Gambling through investment and borrowing to build or exist is part of the game upon which the economy depends; more and more people lose while fewer and fewer win and come out on top of societies. 

The average, global debt-to-GDP (Gross Domestic Product) ratio was 61% from the 1960s to the last decade, when it climbed to 74% in 2019. That is, debt takes up 3/4 of a country's income. Consider a nation-state's expenses including the interest on debt and you can easily see that countries normally live beyond their means.

Same at the individual level. Just average out the national debt per capita, and see the burden on the individual: in the US, it is $70,000 per known adult resident, given the national debt of over $23 trillion. Add to it personal debt: in the US, cumulative credit card, mortgage and student loan debt amounts to $20 trillion. You can therefore almost double the per capital national debtload to arrive at the total debt load per taxpayer of between $130,000 and $140,000. 

Put incomes into that context. The average per capita US income is $33,000. Now you see the extent of the economic failure. No wonder 40 million people are living under the official poverty line, with many living in tents or cars. Noting the population of the US is some 330000, that's over eight per cent. These persons include legions of former skilled trades persons and professional employees who found life too expensive once retired, injured, sick, divorced or caring for family members. Welfare is inadequate and medicare still does not reach millions of people.

It is interesting to look at cases of the fallen middle class. I have seen numerous testimonies of previously affluent members of US who had to downsize and live on marginal incomes. For many of these types, they simply lived beyond their already high incomes. Apparently, they identified with the upper crust of society and aspired to live like them. Engrossed in a fantasy, they put their kids in schools they could not afford, bought cars and houses they could not afford, took trips they could not afford and bought personal luxury items they could not afford. They kept buying on credit until they drowned in credit card and mortgage debt, much of their property being repossessed.

The more I investigate, the more it seems that the whole economy is based on a fantasy: a picture of wealth that has no basis in material reality. A pipe dream.

1 Comment to Debt:

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