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bjbj (PIq Hey everybody! Welcome to another episode of Erickson TV. Curtis here with Lauren.
I ve noticed there s been lots of bad news, especially in the media, concerning the fall
that s been going on in Europe and the recent increase in the unemployment rate. It seems
like we aren t making a lot of progress, especially in Europe. I am convinced that absolutely
nobody knows what s going to happen in Europe any more. There s a lot of uncertainty there.
I want to talk today about (1) things that are happening in the United States and (2)
that, in the long run, it makes sense to be optimistic and that it only makes sense to
be optimistic. ve probably been hearing a lot about debt, for instance. A lot of people
talk about how the debt is increasing. That s true if you look at the national government
debt. However, if you look at all debt combined - individuals, corporations, and governments,
the United States has been reducing its debt load steadily ever since the recession ended.
For instance, at the time the recession started, total U.S. debt was 3.73 x total gross domestic
product for 1 year. So for 1 year of total economic output, we had 3.73 times that much
in debt. Now it s been reduced to 3.36 x total economic output. Those number, I realize,
are a bit abstract but that s a dramatic drop from where we were previously. Here s another
way of thinking about it: in the 11 quarters before the recession started, total debt individual,
corporate, government - was increased by $10 trillion. That was a 28% increase. In the
11 quarters since the recession ended, debt has only increased by 1.4% total. That s not
per year, that s total. Inflation ran higher than that, economic growth ran higher than
that, everything ran higher than that. So in a nutshell, that s extremely healthy. The
reason all of this is critical is because if you look at why businesses aren t hiring
new people, it s not because people just aren t spending money right now. Actually, people
are spending money right now. Every since about 2010, total spending has been about
what it was before the recession. The reason businesses don t want to hire is because they
are afraid of what is going to happen in the future. What s going to happen 2 or 3 years
down the road? In order to get employment back on track, the first thing that has to
happen is debt has to go down to a manageable level. When that happens, businesses will
start hiring again. This is economics 001. Long before you get into any of this fancy
stuff, what does it mean to borrow? What it means to borrow is: we are going to have more
prosperity today and I m going to give up prosperity later. The feeling is that prosperity
will increase so they can pay that off with increased prosperity. What happened before
the recession, irrespective of all the specifics, is we borrowed way too much. We borrowed more
than we could handle and then something unexpected happened. When those loans came due, we couldn
t pay them back. There are all these ideas of how you can get out of a recession but
the reality is that you don t get out of the recession until you pay out enough debt. That
s just how the real world works. What you are seeing now is the debt s slowly but surely
getting paid off. This is definitely good news and it s a big part of the reason why
it s always rational to remain optimistic in the long run. In the long run you will
have recession because people took out too much debt. But in the long run they will eventually
pay that debt off and things will get rolling again. In a nutshell, even though people are
unhappy with the government fiscal policies, our individual citizens and our companies
are taking care of business. And that is going to matter when it comes to hiring. Thanks
for watching and we ll see you next time on another episode of Erickson TV. i]i]xU h1;(
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