Rocking the foundations of our assumptions about wealth creation

Paul Krugman is reflecting what I saw weeks ago when discovering a chart that compared GDP growth with total U.S. debt. The story tells itself:

Obviously, the GDP growth of the past 10 years has been illusory, juiced up by debt. This was par for the course, really; Anytime you drive the housing sector from pure imagination instead of job growth, you’re in Fantasyland economics. Says Krugman:

At one level this should come as no surprise. For most of the last decade America was a nation of borrowers and spenders, not savers. The personal savings rate dropped from 9 percent in the 1980s to 5 percent in the 1990s, to just 0.6 percent from 2005 to 2007, and household debt grew much faster than personal income. Why should we have expected our net worth to go up?

Why did we keep up the charade? I submit that Boomers getting ready to retire wanted so badly to see their assets increasing in value, they were willing to let assumptions go unchecked, up to and including believing in frauds like Bernard Madoff delivering ahead of the market over and over again.

Which brings us to futures studies and statistically-driven management: anytime we rely on numbers for management, we must rigorously check the qualititative basis for our beliefs. That means incredulity, inquiry, skepticism and the conversion of sacred cows into delicious dialectical cheeseburgers.