Friday, April 20, 2012
Credit- topia THE END GAME
Credit-topia the End Game
What do you do with an economy built on 53 trillion dollars of debt that needs to be serviced. (And another 78 trillion of unfunded liabilities (debt) that has been contracted to be funded but could easily by defaulted upon)
What to do?
Raise Taxes. Obviously this will provide little revenue towards servicing the debt problem
Lower Taxes. Obviously this will provide even less revenue - (notwithstanding Reagan apologists who have no understanding of the difference between causation and correlation)
Monetize the Debt - we are. Massively. But this is a dangerous game as the dollars used to pay down existing debt become less and less valuable which leads to the famous Liquidity Trap and eventually hyper-inflation
GROW THE ECONOMY - This is the War Cry of the Truly Brain Dead who don't understand that in a credit-topia this means taking on ENORMOUS NEW DEBT. This is because in Credit-topia Investment comes from CREDIT and not SAVINGS. Our saving rate is not zero - it's negative.
Sorry, but taking on huge debt does not Lower the Debt. I know this is difficult to understand: but More debt actually means more debt.
So gee - where does that leave us?
Sounds like a tough one, right?
But wait, there is a solution - and nobody will like it - because everybody is still thinking about capitalism and socialism in stead of Credit-topia.
The solution is for the Government to create jobs and new investment by massively subsidizing new technologies.
But that's socialism! Only to the tiny brained. The banks are massively subsidized. The insurance companies are massively subsidized. The oil industry is massively subsidized. The auto industry is massively subsidized. The entire agriculture industry is massively subsidized. Welcome to Credit-topia.
The Government must keep renewing the subsidy game with new and better technologies. But it won't because nobody in government - or the rest of the country - is ready to admit that Capitalism and Socialism are dead.
But wait - won't that create more new debt? Yes - of course - this is credit -topia. Debt fuels everything. But at least this debt would be marginally productive and could produce a reasonable return. Enough to postpone the implosion a good long while.
Welcome to Credit-topia. A place where everybody borrows and spends and nobody stops to think of what that might mean.