Spiga

When more debt Won't do it

Fleckenstein:

Faber points out a major concern: The debt-burdened U.S. economy may have reached "zero hour" -- that being when a dollar of new debt has no incremental positive impact on U.S. gross domestic product.

For the past 30 or 40 years, it's taken increasingly larger amounts of debt to increase GDP. From 2000 to 2007, total credit market growth was $21 trillion, and nominal GDP growth was only $4 trillion. We have reached the stage where a dollar in debt produces only 20 cents or so in economic growth (versus about 90 cents produced in the 1960s).


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