The status quo models of "growth" and credit expansion inevitably lead to collapse.
Frequent contributor Harun I. has captured the essence of why the status quo is intrinsically unsustainable. Readers often do a better job than I can in explaining a profound feature of our world, and Harun's commentary is devastating in its logic and clarity. (CHS: Emphasis is mine.)
Our problems began in 1913 when the Fed and therefore de facto centralized planning was established. And every generation that ignored the fact that counterfeiting money and lending it at interest is a scheme that has catastrophically failed in all previous attempts deserves what eventually befalls them -- results equal intentions.
The problem with maintaining inflation at 3% is that it compounds until the curve approaches vertical. This exponential growth will eventually outpace real productivity and therefore, at some point, fake prosperity has to be created through expansion of fiduciary media (credit). What this implies is that what is happening today could have been and probably was predicted well before 1913. But once again politics trumped reason.
The effects being experienced today had to materialize. Mathematically there is and can be no other outcome. Ceteris paribus, as real productive activity decreased, credit (fiduciary media) had to be expanded at exponentially increasing rates until exhaustion. Exhaustion occurs at the point where the curve approaches vertical where infinite credit or money has to be injected infinitely. This is impossible and is why all efforts thus far have failed.
Mish is absolutely correct when he observes that credit is being destroyed faster than it can be created.
Those demanding that you tender solutions do not understand that: 1) The 106 trillion dollar gorilla in the room cannot be satisfied. What is so egregious is that the Boomer generation saw or should have seen it coming. Instead of tackling a very difficult problem they chose distraction by bread and circuses.
That the most technologically advanced country in history could conceive that sending worthless pieces of paper to China so that they could buy worthless Treasuries so that we could continue to purchase "things" that required real human effort and natural resources is either collective insanity, rank stupidity, desperation, or just plain old greed.
And now that we have engaged in this type of activity for decades and the comeuppance is upon us we demand solutions to avoid the inevitable consequences of ineptitude and apathy.
Means testing will cost billions we do not have, will be implemented ineffectively, and, on scale, will prove ineffective at deflecting the 53 trillion dollar asteroid the size of Rhode Island hurtling at us at a few hundred-thousand miles per second.
The situation is untenable. That an insolvent government (starting from a 106 trillion dollar deficit) and facing global peak resource utilization, will somehow effectively manage to administer to a huge retired population whom have no savings, assets that they will only be able to sell at a loss and pensions denominated in a worthless currency, as a line of thought, is at best, imprudent. I take no pleasure in stating, and do so without any hyperbole, that you are about to forget about Katrina.
2) This Grand Cycle top is unlike any other faced by mankind. We are at peak everything; peak oil; peak food; peak water; peak industrialism; peak credit; but not peak population. There is and will be no excess capacity for growth. The very mechanisms that have allowed homo sapiens to reach such high levels of population density are at or near exhaustion.
And there is no Plan B. Those depending on technology to the rescue do not understand that by the time the Trident Submarine was put into production its design was 20 years old -- and obsolete. This type of government performance is not encouraging. Very long term there will be no return to what has become to be known by the Boomer and current generation as status quo.
What will have to happen is a return to using precious resources not for consumerism with all of its built in waste (planned obsolescence, disposable everything) but for producing absolute necessities.
This may all sound grim but if you remove the adjective, it simply is.
I have not read Mr. Kunstler's book but the title cuts to the heart of the matter -- we have entered a long emergency.
Thank you, Harun, for summarizing our shared situation.
Here are a few books which address the intrinsic limits of the status quo:
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