The Myth of U.S. Deleveraging

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (Bullion Bulls Canada) -- Following the Crash of '08, when the mainstream propaganda machine was desperately trying to put a happy face on the collapse of the U.S. economy, a ridiculous two-part economic myth was first spawned, and then regurgitated millions of times by media talking-heads: ordinary Americans were saving money and deleveraging (or voluntarily paying down debt). Neither half of this myth has the slightest foundation in reality.

I've already dealt with the first half of this myth in greater detail previously -- especially in a recent commentary. Simply, the only "saving" that is being done by Americans in any significant amount is by the fat cats at the top, who have been handing themselves the fattest pay raises in the history of humanity over the past decade -- faster than the fat cats can possibly spend it.

This is extremely unfortunate. Given that millions of Americans had/have permanently lost their jobs, while everyone else in the bottom 80% have seen their wages plummeting lower; the massive pay raises the fat cats have been handing themselves represent the only new (potential) consumer dollars being generated in this economy. Thus, news that the fat cats were hoarding their money at an increased rate was 100% negative for the U.S. economy.

The other half of this mainstream myth is equally absurd fiction. From the early 1990's until the onset of the Crash of '08, U.S. consumer credit more than tripled - from a mere $800 billion to a peak of $2.6 trillion. Note that all of this increased debt has been piled on by Americans during a period of time when their wages has been steadily declining in real dollars, meaning that none of this increased debt is sustainable over the long-term.

As the Crash of '08 was revealed to be (in reality) a U.S. Greater Depression, the propaganda machine was desperate to propagate the lie that individual Americans had engaged in "significant deleveraging" while the U.S. economy was spiraling downward. As the chart below reveals, after piling on nearly $2 trillion of consumer debt, the supposed "deleveraging" amounted to a paltry $0.2 trillion -- less than 10% of the entire debt-mountain they had accumulated.