The Most Important Chart of the Century

"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks." - Lord Acton

Health care reform is on the verge of passing. Unfortunately, it is coming at a time too late to mean anything; a time when the country's financial system is on the verge of collapsing. The bill itself has been largely watered down, and the thought of any kind of reform at this stage in the game that does not consider the nation's debt is like handing out life jackets when the Titanic was beginning to sink.

The whole debate about health care in the past year has been a huge distraction; a political football game between democrats and republicans who are gambling with Americans' future for their own re-election come November. The larger issue of the day, the federal government's unpayable debt, has been either ignored or downplayed. But that attitude will soon change. And when that day comes, re-election will be the last thing on the minds of America's current representatives in Washington D.C.

Here is Nathan Martin's breakdown of what is really at stake, and what we can do to relieve America and the world from the debts incurred by the practices and machinations of private central banks.

Nathan's Economic Edge: The Most Important Chart of the Century

The latest U.S. Treasury Z1 Flow of Funds report was released on March 11, 2010, bringing the data current through the end of 2009. What follows is 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.

Continued . . .