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Thread: Why economic collapse is inevitable

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    Why economic collapse is inevitable

    It is nearly impossible to convince people that an economic collapse is likely, perhaps inevitable. It is beyond anything they have seen or can imagine. I attribute that to a normalcy bias, an inherent weakness of experiential learners. For many, accepting something that has not occurred during their time on the planet is not possible. The laws of economics and mathematics may shape history but they are not controlled by history.The form of cataclysm and its timing is indeterminable. Political decisions continue to shape both. The madmen who are responsible for the coming disaster continue to behave as if they can manage to avoid it. Violating Einstein’s definition of insanity, they continue to apply the same poison that caused the problem. These fools believe they can manage complexities they do not understand. We are bigger fools for providing them the authority to indulge their hubris and wreak such damage.






    More and more debt, less and less growth. The prescription for certain collapse.

    “Any man who thinks he can be happy and prosperous by letting the government take care of him had better take a closer look at the American Indian.”. Henry Ford

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    Further to the above:

    Two things are known:
    • So long as borrowing increases faster than GDP, the ability to repay diminishes. That has been occurring for more than forty years and the differential growth rates have widened dramatically in recent years.
    • Not borrowing at this pace would likely have decreased reported GDP dramatically. While that may have been a proper economic response, it is now politically impossible (or highly unlikely).
    Continuing to increase debt at a rate greater than GDP ensures financial collapse. Stopping or slowing down at this point likely leads to the same point. This country has maneuvered itself into a no-escape situation.
    What would happen to GDP and the standard of living if borrowing were dramatically reduced? How much of the last $10 trillion in debt borrowed between 2000 and 2009 went directly into reported GDP? Is it possible that reported GDP for this period could have been $10 trillion lower? If there is indeed a monetary/fiscal multiplier as Keynesians insist, then results would have been worse.
    Answers to these questions are speculative. Those in favor of more debt argue that a calamity would have occurred had the massive rise in debt and its accompany stimulative effects not happened. For the Paul Krugmans of the world, more debt and stimulus is always the answer. All problems look like nails when you own only a hammer.
    Rapidly increasing amounts of debt since 1965 have been accompanied by falling rates of growth. One may speculate what this growth would have been with different rates of debt expansion. Whether the rate of debt expansion increased or decreased the rate of real GDP is moot. Economists can use their competing paradigms to duel over this issue, but cannot come to a conclusion that is acceptable to most.
    Mathematics, on the other hand, is definitive. There are mathematical limits that control the ability to service debt. Once these limits have been breached, some amount of the debt will be defaulted on. The breach point is referred to as a debt death spiral. The US has passed this mathematical point and is in a death spiral.
    The political class in America, either via misguided economic policies or a deliberate attempt to hide the true condition of the country, has put us here. They will continue to employ whatever policies they believe will keep things going for a while longer. The tragic ending has been cast. Economics cannot trump mathematics.



    “Any man who thinks he can be happy and prosperous by letting the government take care of him had better take a closer look at the American Indian.”. Henry Ford

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    The problem is how are you defining the debt since a good portion of the total debt is from one department of government borrowing from another department of government.

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    We have many financial problems, but nowhere as screwed up as Europe's. If they are still afloat, we will be too.

    One fact often overlooked between all the political partisans pointing fingers at each other is the fact the rich, the 1%, have a lot more to lose in a collapse than the rest of us 99 per centers. It's for that reason that I believe the 1% won't let a collapse happen. They'll do what is necessary to save their own fat cat asses and not one thing more. That means the economy won't collapse, but we won't see much improvement for the Middle Class.

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    Respectfully, I think you are missing the point. The rich won't have the assets to prevent the inevitable crash when these two obvious trends reach the breaking point. The debt is simply too large.
    “Any man who thinks he can be happy and prosperous by letting the government take care of him had better take a closer look at the American Indian.”. Henry Ford

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    The only thing that is going to collapse is the far rights whining and ranting

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    Quote Originally Posted by Mainecoons View Post
    Respectfully, I think you are missing the point. The rich won't have the assets to prevent the inevitable crash when these two obvious trends reach the breaking point. The debt is simply too large.
    Money is power and power controls Washington. No doubt we are overspending and this trend cannot continue, but the collapse isn't a certainty. It can be fixed and my point is that the 1% will make sure it's fixed before they suffer from a collapse.

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    Quote Originally Posted by Road Warrior View Post
    Money is power and power controls Washington. No doubt we are overspending and this trend cannot continue, but the collapse isn't a certainty. It can be fixed and my point is that the 1% will make sure it's fixed before they suffer from a collapse.
    If debt matters, the assets of the 1% can't solve the problem. It couldn't fund our current budget for any more than 8 months.

    The only way that there will not be a crash, is if we can keep interest rates at their current artificially low rate. That just can't happen forever.

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    Quote Originally Posted by MainecooThe article quoted
    It is nearly impossible to convince people that an economic collapse is likely, perhaps inevitable. It is beyond anything they have seen or can imagine. I attribute that to a normalcy bias, an inherent weakness of experiential learners. For many, accepting something that has not occurred during their time on the planet is not possible.


    This illustrates the fundamental difference between the two major sources of information: the rational and the empirical.

    Rational considerations (as noted in the OP) seem to point in the direction of inevitable economic collapse.

    But empirical considerations--i.e. what we have actually experienced--do not.

    When rational and empirical criteria come into conflict, I tend to give more weight to the latter. (For instance, according to rational criteria, a bumblebee simply cannot fly--its wingspan, in conjunction with its body mass, must surely render any such thing impossible--but our experience is that bumblebees do fly...)

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    Quote Originally Posted by Common View Post
    The only thing that is going to collapse is the far rights whining and ranting
    Off topic inflammatory post typical of a few here. It's only purpose is to irritate you into an emotional response and then that will justify his launching into personal attack and you're being blamed for it.



    On topic: I agree, we're in the midst of a debt bubble of sorts. But why can't the US just renege on its debt? Just simply announce, we're not going to pay if back.
    “If a man drinks wine and not water I cannot say he is acting irrationally. At most I can say that in his place I would not do so. But his pursuit of happiness is his own business, not mine.” ~ Ludwig von Mises

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