Dow up 46 yesterday…gold bouncing around.

Not much change, in other words. Nobody can figure out what is happening in Europe. Investors wait…and watch.

In America, the news has been good and bad. The good news was that unemployment was not as bad as it had been. But the bad news was that the good news was largely fraudulent.

John Crudele in The New York Post:

Finally, there seemed to be good news about the economy.

The nation’s unemployment rate dropped to 8.6 percent in November from 9 percent the previous month.

If you added in the 1,096,000 people who wanted a job last month but were too discouraged to look for work, the jobless rate would have been closer to 8.8 percent.

And a drop from 9.0 percent to 8.8 percent would have been statistically insignificant given the size of the survey upon which the US Labor Department bases its figures.

And if you then added in the people who are so disheartened that they haven’t searched for work over this past year, the unemployment rate would have jumped to… actually, there isn’t any figure for that last one.

If a person told the Labor Department surveyors that he was so bummed about the job market that he hadn’t looked for work in a year, he would officially become a non-person.

He wouldn’t be counted anywhere in the monthly labor tally. Poof! — this worker doesn’t exist.

In ordinary times, this slight might be understandable since people like that would be considered lazy, unemployable, worthless bums. But this is a different era.

Yes, dear reader, it’s a different era. But how different is it?

We’re beginning to think it is very different. Not that this is really a New Era. On the contrary, it’s more like an old era. Instead, the era we just left was the odd one.

What do we mean by that? Well, we’re just figuring it out. But something very big has changed. The obvious part is that growth is stalled. Households aren’t making money or spending it the way they used to. And anything that depended on more growth is in trouble.

But wait again. Here’s a report from Bloomberg:

US consumer borrowing rose in October to the highest level in two years, propelled by gains in non-revolving debt like auto and student loans.

Credit increased by $7.65 billion to $2.46 trillion, the most since October 2009, Federal Reserve figures showed today in Washington. The advance was in line with the median forecast of economists surveyed by Bloomberg News that projected a $7 billion gain.

The data indicate consumers are relying more on credit to sustain spending as income gains fail to keep up with inflation and home prices drop. At the same time, increasing employment may be making Americans more willing to take on more debt heading into the holiday shopping season.

“It’s hard to determine whether spending on credit is a sign of optimism or a sign of distress, but just anecdotally we feel there is the beginning of tentative feelings of comfort in taking on slightly more debt,” said Dana Saporta, a US economist at Credit Suisse in New York.

Consumer borrowing, nonetheless, has shrunk relative to its size before the recession. Household debt in the US is currently at about $13 trillion, compared with $14 trillion in 2008, Wells Fargo & Co. (WFC) Chief Executive Officer John Stumpf said yesterday during a conference hosted by Goldman Sachs Group.

“As I spend time with our consumer lending divisions and out in the public with customers, people are paying debt down,” the leader of the fourth-largest US bank by assets said. While the “pool of consumer loans will shrink,” auto loans “will be a growth area” along with student loans, he said.

Whew. For a moment we thought we might be wrong about it. We thought we might still be in the era we thought we’d left…and that consumers were still spending just like it was 2007.

If so, they’ll soon have to relive 2008, too. And we don’t think they’ll want to do that.

That’s the thing about living on credit. Eventually, it runs out. Then you have to live on what you actually earn. And since you earn less than you were spending, your spending goes down…and so does the whole economy that depended on it.

A few days ago, we promised to explain something important. It’s so important that we forgot to explain it…or what it was that we were supposed to explain. But it’s coming back to us.

The gist of it is that it might have been fine for the feds to screw up the economy when the getting was good. Now that it isn’t good, the burden of ‘mistakes,’ zombies, bailouts and regulations is no longer bearable.

If you have an economy that is growing at 5% a year…you can get away with almost anything. You want a program that pays people to do nothing? One that takes able-bodied young men and teaches them about gender issues? One that sends out a swarm of agents to harass the people and eat out their substance? Okay…as long as house prices are rising at 10% per year…Most people will go along.

But what about when the economy stops growing? Then, all those costs that rolled off the citizen’s back previously begin to hit him in the face. The poor guy doesn’t know what is going on. But he doesn’t like it.

He begins to call into radio talk shows with comments such as this (heard this morning, driving to work) from Danny from North Carolina:

“Somethin’s definitely wrong with this great country. I mean, I been working my tail off for 30 years. And what do I have to show for it? Nothing. I’ve got a mortgage on my house that is about as much as the house is worth. I’ve got another year’s worth of payments left on my truck. And it’s hard to find any work that will keep the bills paid.

“And while I’m struggling…those damned rich people are livin’ high on the hog. It’s not right. And that’s what government is supposed to do something about. It’s supposed to make sure we all get a fair shake…and that we all come out okay. All of us. Not just the 1%.”

We’ll have to continue our series of a “New Theory of Government” tomorrow…after we’ve had a chance to think through the next installment.

Right now, we’re thinking about how the economy has changed in a fundamental way. We grew up with growth. We’re used to growth. We expect it. And we have institutions — government and private — that depend on it.

No?

Think about all that debt. The average OECD country has a debt-to-GDP ratio of about 300%. The only reason all that debt exists is because growth rates were high and people assumed debtors would “work their way” out of it. That’s why lenders put up money for government — as well as household — borrowers. Because everybody knows you can’t pay off that much debt on a stagnant income.

Almost every major government is now not only deeply in debt, it’s going even further in debt. Japan has about $10 trillion of debt, for example, and adds about $500 billion every year. The US has $15 trillion in debt and adds about $1.5 trillion a year.

If you’re adding debt, you’re running a deficit. But in order to pay down debt, you’ve got to run a surplus. So, to get from a $1.5 trillion deficit to a $1.5 trillion surplus, the US would have cut out 85% of its spending. No chance of that. Even if it just wanted to break even, it would have to cut out far more than the politicians would ever permit.

No, dear reader…growth is the only answer. Or bankruptcy.

Only once in history has a country been able to work its way out of a debt over 250% of GDP. That was Britain in the 19th century.

Of course, Britain had some very unique advantages. It was the world’s leading empire — and gaining ground. After the Napoleonic Wars it was able to vastly cut its military budget…without giving up control of its colonies. And it benefited from the single biggest innovation in human history — the introduction of coal- and later oil-fired machinery.

Britain did it in the context of the biggest growth spurt in history.

But how will it do this time? It has a debt to GDP ratio approaching 500%. And, for now…no growth.

And Japan hasn’t had any growth in 20 years. Its GDP is nominally lower today than it was in 1991. How will it pay its debt?

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.