economics

World Economic Perspectives

Trump has been bragging about the booming US economy. But this economy does not exist in a vacuum; it’s directly related to the world economy. And in both cases, the economic expansion is based on a massive increase in debt. The way to think about debt is this:

Debt is simply present day consumption based on production that’s expected in the future. It’s entirely reasonable and necessary…. up to a point. The problem comes in when the present day consumption constantly increases as a percentage of future production. In other words, if what you owe continually increases as a percentage of what you expect to earn; or in terms of national debt, if it increases as a percentage of Gross Domestic Product. This cannot be sustained indefinitely, but this is exactly what is happening. This is both a long and short term trend, as this table (from the article) shows. It cannot be sustained indefinitely.

(Note, incidentally, the household, or personal, debt: It climbed massively from 1997 to 2007, but hardly rose at all since then. At least in the United States, that probably represents the caution that millions of workers have developed since the 2007/2008 economic crisis.

The article is from the web site http://www.thecommunists.net. It also makes some points about the tendency of the rate of profit to fall as well as declining investment.

Read the entire article here:
The Latest Stock Market Panic (1)

Categories: economics, Marxist theory

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