Sunday, April 2, 2017

Greenspan admits that we can't grow our way out of the debt problem.

It is the liberal Keynesian battle cry that debt is good because you can use the debt to buy more capability that will allow you to grow your way out of the existing debt.  This is the foolish logic that convinced so many people to agree with the global debt Ponzi con.  The problem is that when everyone is using debt in order to increase productivity you have too much production which drives deflationary pressures.   So then you have to spend a ton of debt based money to create a productive capacity which does not bring in enough income to cover the debt service and other risks associated with manufacturing.  The world is going to robots financed at nearly 0 percent interest.  The robots eliminate jobs which is to say they eliminate customers.  So once everyone is up to debt in productive capacity you can expect growth to peak and then reverse itself.  Like an airplane in which someone has been pulling back on the yoke too hard for too long, the economy stalls and then goes into freefall.  This boom and bust is exactly what we have to expect going forward because it is the nature of the Ponzi scheme.

Greenspan was out late last year talking about the economy and his view was clear: we are not going to be able to grow our way out this time.  There is this small problem of 9% annual increase in entitlement demand in a 2% world.  But what is he talking about when he says "entitlement".  He makes it sound like the welfare roles are increasing by 9% each year.  This is just not the case.  What IS the case is that boomers are retiring and they want to be paid what they are "entitled" to.  Much of that entitlement is called social security.  After working for 30+ years and paying a large sum of money into the social security system, yes, many boomers are in fact entitled to getting repaid.  After all, it was billed as if it were some kind of savings account (cough cough), NOT just another tax.

Well Greeny is telling us it is mathematically impossible!  So what he is really telling us is that someone is eventually going to have to take a haircut.  The money simply is not there to pay all the people what they are entitled to (AKA OWED).

And that is with interest rates in the dirt.  Wait until the rates move to 5,6,7,8% again (and they will).  I'm watching to see when parts and pieces come flying off of this flaming chariot we call an economy because that will tell us the wheels are about to come off.

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