Under normal economic conditions, the current positive American per capita savings rate after decades of debt-inducing expenditure rates per capita would be considered a return to the reality of living within one’s means.
But in examining the unprecedented 20-year surge of America’s growth inflation, it has become readily apparent that the quintupling of the U.S. gross domestic product during that time was the result of all levels of the nation’s government and its agencies, plus the country’s occupants who were spending way beyond their means.
This dangerous state of affairs became even more potentially explosive after 9/11/2001 when the involvement in wars in Iraq and Afghanistan added hundreds of billions of dollars to the U.S.’s already galloping national debt, in conjunction with significant tax cuts. On top of this financial indiscipline, food stamps and ad hominem entitlements have supplemented this unpaid-for deficit. It is now strictly dependent on a $16 trillion out-of-control debt that’s hanging by the thread of foreign and domestic investors.
The remaining economic sanity that still exists is reflected by America’s wage earners, who have returned to generating a 4% savings rate, and reducing personal debt to the lower level last seen 10 years ago.
This rational behavior by America’s taxpayers has been accomplished by the pay-down on mortgages, student loans, and credit cards. Household debt, unfortunately, has also been forced down by foreclosures, bankruptcy, and short sales.
Although this turn of events has forced the bulk of the U.S.’s 315 million-strong population to live within its means, it is also in the throes of shrinking the world’s foremost consumer demand sector. This is measured by dollar volume as well as the incredible two-thirds percentage of gross domestic product. No other world nation comes even close to this overall consumption level.
It is an unpleasant fact that the current rate of expenditures at both consumer and producer strata will likely impede the ability of U.S. gross domestic product growth to move forward from the current record status of $15.5 trillion.
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