Have we reached the point of Diminishing returns?

...The Diminishing Productivity of Debt Chart
comes from the U.S. Treasury’s latest Z1 data...

...the most important chart of your lifetime.

It relegates almost all modern economists and economic theory
to the dustbin of history.

Any economic theory, formula, or relationship
that does not consider this non-linear relationship of DEBT and phase transition
is destined to fail.

It explains the "jobless" recoveries of the past
and how each recent economic cycle produces higher money figures,
yet lower employment.

It explains why we are seeing debt driven events that circle the globe.

It explains the psychological uneasiness that underpins this point in history,
the elephant in the room that nobody sees or can describe.

This is a very simple chart.

It takes the change in GDP and divides it by the change in Debt.

What it shows is how much productivity is gained by infusing $1 of debt
into our debt backed money system.

Back in the early 1960s, a dollar of new debt
added almost a dollar to the nation’s output of goods and services.

As more debt enters the system the productivity gained by new debt diminishes.

This produced a path that was following a diminishing line targeting ZERO in the year 2015.

This meant that we could expect that each new dollar of debt added in the year 2015
would add NOTHING to our productivity.

Then a funny thing happened along the way.

Macroeconomic DEBT SATURATION occurred
causing a phase transition with our debt relationship.

This is because total income can no longer support total debt.

In the third quarter of 2009 each dollar of debt added
produced NEGATIVE 15 cents of productivity,
and at the end of 2009, each dollar of new debt now SUBTRACTS 45 cents from GDP!

This is mathematical PROOF that debt saturation has occurred.

Continuing to add debt into a saturated system, where all money is debt,
leads only to future defaults and to higher unemployment.

This is the dilemma created by our top down debt backed money structure.

Because all money is backed by a liability, and carries interest,
it guarantees mathematically that there will be losers
and that the system will eventually reach the natural limits,
the ability of incomes to service debt.

Nathan's Economic Edge

Via Nathan's Economic Edge