As I become more and more disenchanted with the political rhetoric and lack of substance that defines our country’s politics (on both sides of the aisle), I thought it might be interesting to look at our economic situation from a more business oriented framework in the context of the current election.
After all, we are all shareholders of the USA are we not? We earn our livings and pay for our goods and services in good ol USD.
While simplistic, it generally can be said that the value of the USD is reflective of stability in the economy and future expectations of this country’s economic growth (with some short term influences of expectations of near term interest rate direction).
It’s also a reflection of the health and future health of our national balance sheet.
As a shareholder, here is what I desire of the leadership of an organization: growth. Furthermore, I want that growth to be proportionate to the amount of borrowed investment into the company.
I have no problem borrowing money and leveraging the balance sheet, but the resultant growth should be proportionate to that increase in debt.
Let’s take a look at history:
1950’s: Our debt grew at total % of 12.8% and our GDP grew at a total of 98% in the decade.
1960’s: Our debt grew at total % of 34.1% and our GDP grew at a total of 118.9% in the decade.
1970’s: Our debt grew at a total of 139.1% and our GDP grew at a total of 157.5% in the decade.
1980’s: Our debt grew at a total of 247.6% and our GDP grew at a total of 115.2% in the decade.
1990’s: Our debt grew at a total of 75.5% and our GDP grew at a total of 110.6% in the decade.
2000’s: Through 2007, our debt grew at a total of 58.8% and GDP grew at a total of 51.0%.
During the last 57 years of American economic history, the only periods that our country has failed to grow our economy at a pace faster than the growth rate of our debt have been 1980-1989 and 2000-2007.
I am curious as to anyone’s else’s thoughts on this as we sit here interviewing new candidates for management of our organization.
History has shown that our fiscal performance is best with split control. Personally here is the mix I’d like to see:
McCain + Democratic House + Democratic Senate
Obama + Republican House + Republican Senate
What are your thoughts?