"Hertz, forget them. How did U S A get $27 Trillion in debt. Poor management to satisfy SNOW FLAKES."
It is what Bush the elder correctly labeled Voodoo Economics.
About $2.5T changing hands on end-user goods and services about 8 times per year = about $20T GDP.
BUT, each year about 3% of GDP ($600B) leaks to foreign trade deficit. About 15% of GDP ends up going to the rich that own 80% of stocks and bonds, of which about half gets spent or invested back into the economy, leaving about 7% drain.
These two structural imbalances drain about 10% of GPD, or $2T from active circulation.
So, how does the economy function if it needs $2.5T circulating, but every year $2T of that leaks out? Simple, put new $2T into the economy. This is done by people going into debt.
Every year that we don't get 10% of GDP worth of new debt generating enough new money, the money supply in the economy shrinks and we go into recession. WHICH, we then get out of by lowering interest rates, loosening lending standards and things like subsidies (cash for clunkers) to get people borrowing and spending.
This is the fundamental flaw of Republican economic policies, which love money and structural imbalances, but hate debt... and refuse to acknowledge that you can't have one without the other. If one entity is earning more than they spend, then someone has to be spending more than they earn.
If you understand why it is impossible for every country to have a trade surplus at the same time... and the bigger China's trade surplus is, the larger other country's trade deficits must be... then you should be able to multiply that by hundreds of millions of households, businesses and government entities to see that it is impossible for everyone to be spending less than they earn, and the more some people save, the more other people have to go into debt.
