- Borrowing masked the effects of a slowing real economy. Wages were mostly stagnant. But consumers still spent more money.
- Spending in excess of real output shifted the economy from one focused on production to one focused on finance and consumption. The financial industry, in particular, saw soaring profits... and used its wealth to control government policy.
- Governments, too, increased spending.
- Tax receipts grew along with debt-financed consumption and financial engineering. Tax receipts in 1990 were only about $1 trillion. Now, they are $2.5 trillion. In addition, governments took advantage of low interest rates to borrow more.
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Bill Bonner is founder and owner of Agora Inc., one of America's largest consumer newsletter publishers. Best-selling author and globe-trotting correspondent since 1999 for the Daily Reckoning email, he is chairman of family-wealth advisory Bonner & Partners, and co-author with his son Will of Family Fortunes: How to Build Family Wealth and Hold Onto It for 100 Years (Wiley, 2012).
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