I haven’t crunched the numbers and done the math, but I’d be willing to bet that most or all of the ‘growth’ in what is reported as the U.S. GDP over the past 40 years or so is due to domestic consumption and the banking and finance industry.
This is a recipe for disaster no matter how you spin or obfuscate its details. Here’s why.
The initials GDP stand for Gross Domestic Product and that name in and of itself harkens back to a time when an economy, and particularly the U.S. economy, was primarily aimed at producing things. Real, tangible things with intrinisc value.
In recent years, the ‘domestic consumption’ component of the U.S. GDP number has been over 70% of the total. This is unsustainable. Over any period of time that you are consuming more than you are producing, you are incurring debt. If your economy is an apple tree that produces 10 apples a month and you are eating 12 apples a month (consumption greater than production), you are going 2 apples per month in debt. If the consumption is chronically higher than the production, the debt increases endlessly. This would be sustainable for as long as you could keep getting loans, except for the inconvenience of interest. In an economy where loans carry interest, there comes a time when the interest payments (aka ‘debt service’) alone become crippling to the economy. From that point on, it’s all downhill. The U.S. of today is right about on that precipice.
So the chronic growth of consumption along with a shrinking of production is unsustainable by itself. But it gets worse. Much worse.
When large segments (in percentage terms) of the economy are skimming money out of the functioning of the economy via transaction fees, arbitrage, price spreads, fraud, and ‘gaming’ (taking advantage of loopholes), it’s akin to running a car with no oil. In energetic terms, such fees are a friction that rob the system of its efficiency. Rather than contributing value to the overall functioning of the economy, the interests of financialization are literally parasitizing the productive members at the expense of the health of the overall system.
Both of these unsustainable trends, consumerization and financialization, are endlessly spun and obfuscated in the media and by status quo economists. But if you strip away all the noise and just look at them in simplistic, big picture terms it is obvious that an economy cannot survive either of them over the long term. Both together are a train-wreck happening right now.
Financialization = Doom.