Let us assume that I represent a country. Let us say my personal expenses, investment etc. constitute my GDP.
In the first year, I spend 1000 pounds and let this be my GDP. Assume for a time being that my income is stagnant.
In the next year, if I want to show 2% growth given my stagnant income, I will have to borrow 2% of 1000, which is 20 Pounds.
Third year, I am faced with same problem, so I borrow, 2.5% of 1020 (note that my GDP last year is 1020 and not 100 pounds) which is about 25.5 Pounds. To make it convenient for readers, I put this in table above.
Last row shows sum of my total borrowings. This sum is 1023 Pound equalling to my yearly GDP. This shows that if I borrow equal to my GDP, I can show consistent growth in my GDP for 18 years. There are other things like GDP deflator, interest on borrowings etc...but I am keeping it simple. Now in the last step, I replace my name with “United States of America”.
Looking at these facts, should I sell all my stocks? Answer is NO (why?)
-Shrihas Pandharkar
DYOR
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