To subdue the enemy without fighting is the supreme excellence. - Sun Tzu

Thursday, March 15, 2007
(10 minute or so read)
Right now we're at about slide 6, bullet point 3.

The trick is nailing down numbers. Exactly how much is this country in debt? The US Treasury Department says $8.8 Trillion for the Federal Government (almost certainly a gross underestimate). Outstanding consumer debt is probably somewhere in the $3 Trillion range, plus another $12 or so in consumer credit... You can go on and on adding up various debts. I don't know what the total is, but at every level (consumer, government, foreign trade, etc), debt is increasing with no concievable end.

The specific reason why this is bad is that, eventually, there must be a recorrection in the form of a dilution of the value of the dollar. As soon as it appears this might happen, institutions that have dollars will attempt to dump them while they're still worth the ink they're printed with. This sets off a 1929-style cascade, and the next day everyone wakes up and their savings are worthless, their job is gone, and the bank is calling in its debts. You can imagine what happens next (actually, you don't have to- it was called the Great Depression last time... except this time it'll be worse because we're falling farther; we have more amenities today that will be gone after the collapse).

Picture the economy like a person being chased by a pack of wolves. As long as the person can outrun the wolves, they are not experiencing any physical harm (so the TV can tell us that the economy is doing great, everything's great, keep working and spending).

One possibility is that our person could trip over a rock... or, rather, Iran (see what I did there? that's wit. That's how the pros do it). The occupation of Iraq is like a backpack full of bricks. If there is any sort of military action against Iran, Iran will probably retaliate by closing the Persian Gulf, through which 60% of the world's oil supply passes. The collapse would happen within a week or two (I know, I've been saying, "ANY DAY NOW!" for a while, but it's not an exact science).

Our person is starting to run out of breath and the wolves are catching up. The other possibility is that eventually, at this rate, the wolves will devour the person. This is the 'slow decay' collapse model, occuring over ~20 years, primarily due to the gradual using up of cheap oil. The real kicker is that if our economy keeps going strong for 20 more years, at projected or even a, say, 20% reduction in carbon emissions, the global temperature increase by the end of the century will be at "worst case scenario" levels.


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