Debt and endogenous growth

Per Gundlach, the U.S. economy would have contracted in nominal GDP terms (excluding inflation effects) three out five last years if the United States had not added trillions in new government debt. Just government debt alone. “One thing everybody seems to miss when they look at these GDP numbers ... they seem to not understand that the growth in the GDP it looks pretty good on the screen is really based exclusively on debt - government debt, also corporate debt and even now some growth in mortgage debt.”

The discussion above notes that debt outpaced nominal growth. They are noit always directly connected because firms fund growth out of cash flow often, and this eventually appears as losses to the Fed, (unexpected productivity gain).  It is productive because the firm finds a shorter path than appears in the monetary system.  The Fed eventually spreads the losses and makes price neutrality, relative to contracted currency function.

So, we should not need all debt matching all NGDP growth, we have managed flows, all hedged in the tree trunk besides official debt. If all the NGDP comes from government debt, then government is simply covering past expenses incurred.   Much of the past expenses are badly counted, as the velocity equations are not working, like the unemployment numbers are fouled by pension stampedes.

The Nixon Moment is upon us, the sooner we avail ourselves of it, the better. We are here because boomers used the right to coin in the past, and are hesitant to pass it on. It is a fixed cost, folks, rich have no reason to complain, it is a known known built in, constitutional cost to finance.