by David Galland, LRC (Casey Research)
In describing the current situation in these United States, and in many of the world’s other superpowers, we here at Casey Research have often used the word “intractable”… as in, “impossible to resolve.”
While that may not be technically accurate – because there is no problem related to economics that can’t be solved if one is willing to swallow sufficiently strong medicine – it is a correct assessment, given the overwhelming role that politics now play in the economy.
In a recent edition of The Casey Report, I observed that the largest and most persistent bubble of all over the last half-century has been the bubble in government – making the ones witnessed in dot-com stocks and housing mere blips by comparison.
The following chart is particularly illustrative of that contention.
As you can see, the level of government spending (state being the blue area, and federal being the red) as a percentage of GDP has grown to levels last seen during the unprecedented mobilization undertaken to fight WWII – a period marked by the government takeover of entire industries, rationing of all key commodities, wage and price controls, and much more.
Though it is an overused analogy, the chart paints a perfect picture of a frog in a pot of water slowly being brought to a boil.