The Inescapable Math That Dooms Our System

[Aaron1776]

My article on how and why our system is doomed.
The Inescapable Math That Dooms Our System ? XY Rising
If there are any economists out there who can correct me if I'm wrong, I would love to hear from them.

-Aaron

 

[BehindBlueI's]

I generally don't reward hyperbolic doomsday articles with a click. If you care to sum up what our system is and why it's doomed, I'll be happy to chime in.

 

[JettaKnight]

I generally don't reward hyperbolic doomsday articles with a click. If you care to sum up what our system is and why it's doomed, I'll be happy to chime in.

I did, but I stopped reading when I saw that the author was just "Aaron". If you can't bother with your full name, I can't bother reading your "journalism".




EDIT: Just now realized it's the OP pushing his own website.

 

[JettaKnight]

Dang it, I thought this looked familiar. OP only comes to INGO now to push his own website.

Deja vu.

I see you've now got your own domain name.

 

[indiucky]

I did, but I stopped reading when I saw that the author was just "Aaron".

It's Moses' younger brother...They didn't have last names back then....

 

[JettaKnight]

 

[BehindBlueI's]

I did, but I stopped reading when I saw that the author was just "Aaron". If you can't bother with your full name, I can't bother reading your "journalism".




EDIT: Just now realized it's the OP pushing his own website.

Original post now reads "my article".

 

[BehindBlueI's]

Dang it, I thought this looked familiar. OP only comes to INGO now to push his own website.

Deja vu.

I see you've now got your own domain name.

Original post now reads "my article".

 

[JettaKnight]

Original post now reads "my article".

I can't be bothered to read and comprehend posts on INGO.

 

[Ericpwp]

The posts weren't edited.

I can't be bothered to read and comprehend posts on INGO.

 

[dusty88]

I generally don't reward hyperbolic doomsday articles with a click. If you care to sum up what our system is and why it's doomed, I'll be happy to chime in.

Here's why the system is doomed, and it's not just government spending. We've used debt (via fiat currency) for the last few decades (very handily since 1971 for obvious reasons). Fiat currencies always end this way: devalued until people lose confidence. But ours is the biggest in history because the whole global economy is tied to it.

Though some will tell you that macroeconomics is "different" and you can't apply math to it, I disagree. I think that it's no different than your family borrowing money to survive; it's just that a sovereign can expand the Ponzi game much longer before it bursts. And when a sovereign gets all the other sovereigns to help them expand it, the expansion is epic.

I think it was Ross Perot that used the phrase "big sucking sound" but back then the main concern was only the government debt. The private debt is even worse.

Here's one good chart that sums it up. When you first start using debt, it can be productive. Just like in a business, your start-up debt might bring you more returns than the debt cost you. But if you keep expanding your debt, the return plateaus and finally goes negative. So then your debt starts growing faster than your revenue increases. That's what's been happening and it really hit its tipping point in 08. But with a little creative new way to inject more money and 10 years of NZIRP, they have managed to squeeze out some more debt and kept growth flat at the same time.

This top line is debt, bottom is growth. The little blip in debt in 08 was due to the bankruptcies that occurred around the financial crisis. BAnkruptcies are, unfortunately the sort of correction that needs to happen, but it's bigger now because we decided to...what was it Bernanke did... save the world or something?



I think Aaron is right to an extent, but it's a lot of stuff to explain and I'm not particularly good at it either. I've looked at it a lot the past 10 years and think you have to start the explanation with understanding how money is created and that our money really isn't a store of value. I was talking to an intelligent guy who is a global director of a moderate sized company. When I spoke that money is created when he borrows money or swipes his credit card, he didn't believe me; called it tinfoil hat. That helped convince me that much of the population is living the blissful life of an ostrich with its head in the sand.
But I babble.... carry on.

ETA: the tipping point (to oversimplify) is when you can't make payments. This might show up as major bank defaults, inability for a government to keep selling its bonds, or just a rapid debt acceleration trying to prevent a recession (08). If you think about the fact that we've needed these crazy-low, effectively zero, rates for 10 years just to keep the economy afloat, that should tell you how precarious things are. How many businesses would fail, and how much trouble would the government have with payments if rates returned to the historical average of around 6%?

Or if we can keep them at zero but growth slows some more? And when one guy can't pay his bills, the guy he owes money to also goes bankrupt. And so on.

Deflation has been in the cards for a long time. But the government and the FED don't like that. QE just put inflation in the asset bubbles (stocks, bonds, real estate). And I'm beginning to think they will never cry uncle. I'm thinking we are going to see some form of helicopter money. Sadly, another reality of what governments do in severe economic crisis is start a major war to create patriotism and a tolerance for tough times.

 

[Jludo]

I did, but I stopped reading when I saw that the author was just "Aaron". If you can't bother with your full name, I can't bother reading your "journalism".




EDIT: Just now realized it's the OP pushing his own website.

Dunno if just having a first name should necessarily be the deterrent, didn't the founding fathers pen most of their writings under fake names?

 

[Aaron1776]

I generally don't reward hyperbolic doomsday articles with a click. If you care to sum up what our system is and why it's doomed, I'll be happy to chime in.

Can't really summarize an entire system in a few paragraphs. That's why I posted a link. The biggest problem is the demographic cliff. But you'll have to read the article to see why.

 

[Aaron1776]

"I've looked at it a lot the past 10 years and think you have to start the explanation with understanding how money is created "
I don't bother trying to explain fiat money creation to a lot of people. The reason it's a great scam is because it's so intangible it's hard for people to get their heads around. Demographics and debt they can handle.

 

[Aaron1776]

Dang it, I thought this looked familiar. OP only comes to INGO now to push his own website.

Deja vu.

I see you've now got your own domain name.

Yes, hundreds of posts and I "only push my website". You sooo totally caught me.
I love it when people who don't have the drive or capacity to come up with stuff of their own crap on other people who do. Hope you feel better about yourself as you pound away on your keyboard. Lol

 

[dusty88]

"I've looked at it a lot the past 10 years and think you have to start the explanation with understanding how money is created "
I don't bother trying to explain fiat money creation to a lot of people. The reason it's a great scam is because it's so intangible it's hard for people to get their heads around. Demographics and debt they can handle.

I think it's more "hard to believe" than anything else. But there are some good books and videos out there.

Understanding how it contracts and what the effects may be still befuddles me, ie how and when velocity of money will affect the price inflation vs the monetary inflation. But that's really not because we are all too stupid to understand. It's because nobody really knows what fires they will start when they try to pretend fiat currency is value.

College course in macroeconomics don't include monetary history, as far as I remember. I asked one major in finance and she said she did not have monetary history in her courses.

We are all supposed to believe the emporer is well-dressed when your common sense should tell you that he is naked. You can't make wealth by diluting currency.

 

[indiucky]

I love it when people who don't have the drive or capacity to come up with stuff of their own crap on other people who do. Hope you feel better about yourself as you pound away on your keyboard. Lol

Jetta has drive and capacity....Seriously he is full of drive....I've seen him drive hundreds of miles just to hang a few lights and eat some ribs....Judging by the amount of BBQ ribs he ate he has lots of capacity as well...

 

[Aaron1776]

It's Moses' younger brother...They didn't have last names back then....

Now this is funny. Lol

 

[Aaron1776]

I think it's more "hard to believe" than anything else. But there are some good books and videos out there.

Understanding how it contracts and what the effects may be still befuddles me, ie how and when velocity of money will affect the price inflation vs the monetary inflation. But that's really not because we are all too stupid to understand. It's because nobody really knows what fires they will start when they try to pretend fiat currency is value.

College course in macroeconomics don't include monetary history, as far as I remember. I asked one major in finance and she said she did not have monetary history in her courses.

We are all supposed to believe the emporer is well-dressed when your common sense should tell you that he is naked. You can't make wealth by diluting currency.

I'm not saying their too dumb, I've seen PHDs tell me that fiat money creation via debt doesn't create money.
I don't know how to explain how smart people can't 7understand it outside of it just being too intagible for them to believe in. Sorta an out of sight out of mind deal.
I can however provide hard facts about the numbers of working 's non working and point out that cost curves and the debt we incur due to them is more than we can bear.

 

[Alpo]

Get Piketty's book, "Capital". Your ideas comport with the Freshwater economists to some degree. And Hayek a bit.