The Debt/Growth/Energy Conundrum

Here’s the fundamental problem facing our country, and the global economy, today:

“If the interest you’re paying on debt is higher than the rate of growth, you end up in a death trap, where you’re adding to the debt all the time,” says Gabriel Stein, an economist with Lombard Street Research, a London-based economic advisory firm.

So, gotta have high rates of growth yearly – something above 4% – or we are in the economic death trap.  Using the Rule of 70 regarding exponential growth, this means that our US economy would double every 17.5 years.  This hasn’t happened over the last few decades, nor will it ever happen in the future.

Growth requires cheap energy, and as you know, energy is getting scarcer every year. Further, there aren’t resources enough on this planet to support that kind of growth here, let alone everywhere else. 

The logical conclusion is that growth ends and that we enter the death trap.  The only possible way out of the death trap is to inflate the money supply so that paying back the debt becomes somewhat easier, or that we default.

Both of these are disastrous for us individually and as a country. 

Hyper inflation makes our saved money worthless and drives the price of oil through the roof because it is priced in dollars and as they become worth less, then the price has to increase correspondingly.  Wages on the other hand are constrained by globalization and the cost cutting desires of business. So what money we have on hand is worhtless, prices will go thru the roof, but our ability to keep pace with inflation with our salaries is severly hampered.  

On the other hand, if we default on our debt obligations, we will never again be able to borrow as much as a nation.  And this means the end of government as we know it today, as it has soley existed for the last 30 years (since Reagan begain “borrow and spend”).  The social saftey net will vanish, the amenities we enjoy will vanish, hundreds of thousands of workers will be let go, further eroding the ability of wages to keep pace…..and on and on.  Not a pretty picture.

Here in Lexington, we are reacting to this as simple-minded colonists.  Over the next couple of years, the need for “growth” will be heard ever more  here.  The motivation will be greed, but it will  be couched in patriotic terms, in order to minimize the opposition. You know, we in Lexington must do our part to help our country. 

The only antidote to that is to increase our efforts to become independent, in food, water, energy, and material necessities.  If we are independent, our economy will become stable and we won’t need growth.  This will be the best and only protection against the death sprial the world is about to enter.

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