Not the 1970s or the 1920s: We're in Uncharted Territory

All of these similarities and differences are setting up a sea-change revaluation of capital, resources and labor that will be on the same scale as the extraordinary transitions of the 1920s and 1970s.

The awakening of inflation after decades of slumber has triggered a flurry of comparisons to the 1970s accompanied by a chorus of projections for 1970s-type stagflation, defined as inflation plus economic stagnation-- limited or negative growth and high unemployment.

A less popular comparison is with the 1920s: a massive expansion of debt, an equally massive speculative bubble in assets and extreme wealth-income inequality, all against a backdrop of slowing growth and debt saturation.

Each of these eras shares certain characteristics with the present, but beneath the surface there are consequential systemic differences. Let's start with the 1970s.

The oil shock that fueled inflation had two sources: 1) the oil-exporting nations took control of their hydrocarbon resources and repriced them in the context of 2) declining reserves and production in the West, particularly the U.S., which had been the Saudi Arabia of the world through the 1930s, 40s and 50s.

A second, much less understood dynamic was the immense investment required to clean up the U.S. industrial base. Pollution in the U.S. was out of control by the early 1970s, with toxic rivers catching fire and high levels of air pollution. The oil shock prompted federal regulations on pollution and improvements in the basic efficiency of appliances, vehicles, etc.

This was a major sea change for the entire industrial sector, and it required immense investments of capital and a painful learning curve. This diversion of capital depressed profits and acted as an economy-wide tax on the system. In today's money, the overall cost of this transition was in the trillions of dollars.

The debt levels in the 1970s were by today's standards absurdly modest. The cultural values of frugality and avoidance of debt still held, and there was resistance to heavy public-private borrowing that has completely vanished.

The demographics of the 1970s was also completely different from today. The 65-million strong Baby Boom generation was entering the workforce and starting families and enterprises. The demographic double-whammy was the mass entry of women into the workforce as opportunities and ambitions expanded.

Meanwhile, the energy picture was brightening under the radar as the development of newly discovered super-giant oil fields in Alaska, the North Sea and Africa began. It took many years to bring these new hydrocarbon sources online, but by the mid 1980s, the price of oil had fallen to lows that slashed the income of oil exporting nations, including the Soviet Union.

None of these conditions are present today. Much of America's domestic production was offshored in the past 20 years, the demographics are no longer as favorable (soaring population of elderly and flatlined workforce) and the production from the super-giant fields brought online in the 1970s is declining. There are no new super-giant fields in the global pipeline to replace those in the depletion phase of declining production.

As for the 1920s: the parallels are debt saturation and speculative excess against a backdrop of an economy that feasted on debt-fueled spending and speculation while absorbing new technologies.

The differences are the U.S. still had immense natural resources and relatively limited infrastructure in the 1920a. While private debt was through the roof--$100 in a stock market account leveraged $900 in stock purchases due to the 10% cash margin requirement--federal debt was still modest compared to modern levels.

This set the stage for massive expansions of federal debt in World War II that funded sustained investments in infrastructure through the 1940s, 50s and 60s.

In the present, we have all the fragilities of the 1920s and few of the strengths. We have all the debt saturation and speculative bubble excesses but our resources have been heavily tapped and every sector of the economy is heavily indebted.

All of these similarities and differences are setting up a sea-change revaluation of capital, resources and labor that will be on the same scale as the tumultuous transformations of the 1920s and 1970s.

We're in uncharted territory. More on these revaluations next week.




My new book is now available at a 10% discount this month: Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $8.95, print $20)

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.


Recent Videos/Podcasts:

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My recent books:

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $25, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 Kindle, $10 print, ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 Kindle, $8.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


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Doom Porn and Empty Optimism

If we can't discern the difference between doom-porn and investing in self-reliance, then solutions will continue to be out of reach.

I'm often accused of calling 783 of the last two bubble pops (or was it 789? Forgive the imprecision). Like many others who have publicly explored the notion that the status quo isn't actually sustainable despite its remarkable tenaciousness, I am pilloried as a doom-and-gloomer (among other things, ahem).

Fair enough, and I'm fine with the doom-and-gloom label (we have more fun!) as a generality. But many take any skepticism of the sustainability of the status quo as extending into some perverse delight in the prospect of collapse leading to a Zombie Apocalypse featuring black gunships and firefights over the planet's last case of refried beans.

That is a mis-characterization of my premise that whatever is unsustainable eventually unravels. We are not god-like (other than the Federal Reserve, of course), and so our heartfelt desire to render the unsustainable sustainable via the power of empty optimism will fail, as magical thinking can change our internal emotional state (happy happy, it will all work out without any inconvenient sacrifice or change), but it can't change the real world (alas).

This leaves us a choice: either 1) manage the unraveling with an eye on minimizing general adversity by investing our capital, resources and labor in transitioning to a sustainable economic model, or 2) squander our capital, resources and labor on propping up the final terminal phase of a waste-is-growth, hyper-financialized, hyper-globalized, perversely corrupt and unequal status quo in which the few exploit the many via their control of power and capital.

One analogy of this choice is pruning a fruit tree. If we let nature take its course, the most extended branch weighed down with the most fruit will break off under its own weight, an ugly splintering that puts the tree at risk. The alternative approach is to prune the most extended branches and thin the fruit to what the tree can productively bear.

That is my preferred approach to unsustainable systems.

The managed unraveling won't be "bad," it will simply be different. Those of us who look at our way of life as a system don't see much point in value judgments that characterize the unraveling of unsustainable systems as doom-and-gloom, any more than the overloaded branch breaking is anything other than gravity acting on an over-extended branch.

Those who reckon that the unraveling of the waste is growth Landfill Economy is a catastrophe are clinging to a brittle branch. A living branch is flexible and bends in the breeze; a dead branch is brittle and breaks.

The unraveling will be different but it doesn't have to be "bad." Black gunships won't have to blast the zombie hoards. The more likely path will be things simply fray and stop working reliably. Things that were always abundant may become sporadically scarce, or perhaps permanently scarce. Overly complex and wasteful systems will decomplexify, either via a controlled process or an uncontrolled collapse. Frugality will be incentivized, waste will be disincentivized. Phantom "wealth" will dissipate. Real wealth will be reassessed.

Capital, resources and labor will all be revalued. When stuff breaks down, there may not be enough capital, resources and silled labor to restore it to the good old days of endless abundance. What's valued now may well be revealed as worthless. What's mocked and ridiculed may turn out to be more valuable than what's currently praised and admired.

We've been trained to view optimism as the most important trait, and therefore one that must be displayed in public. If life gives you lemon, make lemonade, etc. Anything less than more of everything for everyone, forever is frowned upon as lacking the desired optimistic confidence in human ingenuity and the magical power of self-interest to solve all problems.

America has lost the ability to discern the difference between the empty optimism of magical thinking and grounded-in-reality optimism which focuses on assessing the resources at hand and making tough choices about how best to maximize the value of those resources. As a general rule, this means to invest more, we must consume less.

This confusion between empty optimism and grounded optimism based on realistic assessments, tradeoffs, experimentation and adaptability manifests in one absurd fantasy after another: the U.S. has built a grand total of two nuclear reactors since 1995, but we're going to magically build hundreds in the next few years to replace hydrocarbons.

We're going to seamlessly transition without any sacrifice of comfort, convenience or cost from jet-fuel powered aircraft flying at 590 miles per hour to all-electric aircraft recharged by solar panels and wind turbines. (Never mind the panels and turbines have to be replaced every 20 years; the future is unlimited.)

And we'll all be sitting around with our virtual-reality headsets getting rich buying and selling digital "value" in the Metaverse, while robots will do all the work and money will be printed and distributed to everyone. If we need to invest in whatever systems produce the robots, fine, we'll just print another couple trillion so we can have it all: invest and consume at whatever scale we desire.

Missing in all the pipe dreams is any grasp that the real world has constraints that are becoming consequential. Systems that have reached extremes of unsustainability--hyper-globalization, hyper-financialization and hyper-self- exploitation--will unravel first and unravel fastest. This isn't doom porn, it's simply the way systems work. All systems have constraints, and the constraints of unsustainable systems become consequential in non-linear dynamics.

I like my comforts and conveniences as much as anyone: we're all entitled to pursue our own interests. But to believe that the pursuit of self-interest will overcome all real-world constraints is magical thinking because there is no causal link between overcoming real-world constraints and self-interest.

We tend to solve systemic problems as a group, so cooperation is one of humanity's core selective advantages. On occasion the lone genius invents a new technology that solves scarcities and adds new comforts and conveniences, but relying on this one model of change is folly. Social innovations are just as important as technological innovations.

Just as common sense suggests pruning the deadwood and thinning the fruit is a better use of our time than waiting for the overloaded branch to break, we would be better served by eliminating the waste and friction in the current systems that don't add to our lives while consuming immense amounts of capital, resources and labor that would be much more productively invested elsewhere.

We would be better served by reducing our dependence on unsustainable systems such as hyper-globalization and hyper-financialization and invest in shortening long dependency chains, i.e. invest in self-reliance.

If we can't discern the difference between doom-porn and investing in self-reliance, then solutions will continue to be out of reach.




My new book is now available at a 10% discount this month: Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $8.95, print $20)

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.


Recent Videos/Podcasts:

The Dam Has Cracked (37 minutes, with Gordon Long)


My recent books:

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $25, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 Kindle, $10 print, ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 Kindle, $8.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


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Crash Is King

This may be one of many revaluations of capital vis a vis labor and resources and core vis a vis periphery.

You've heard the expression "cash is king." Very true. But it's equally true that "crash is king:" when speculative excesses collapse under their own extremes, the crash crushes all other narratives and becomes the dominant dynamic.

Everything that the mainstream uses to predict "value," market action and "the future" is tossed out the window. Price-earnings, "growth," "innovation," cash flow, yields, the bat-guano-quatloo carry trade, etc., etc., etc.-- none of it stops the crash or makes sense of the crash, which happens for systemic reasons beyond conventional explanations.

In the context of conventional concepts of "value" and central bank power, crashes are impossible. According to conventional explanations, the central banks control the markets and so crashes are brief and shallow because the banks will quickly change course and flood the financial markets with free money.

In the conventional view, markets are rational and liquid: there will always be a a buyer for every seller (i.e. liquidity) because there will always be a rational reason and cash/credit available to buy an asset at the current price.

Crashes reveal this as false: there is no buyer for every seller in crashes because it's not rational to buy assets which have been grossly overvalued and are resetting at new valuations in a chaotic freefall. Indeed, the entire concept of "value" is in doubt, and as we all know, markets hate uncertainty.

Secondly, there may not be cash or credit available to purchase assets, as credit dries up as fast as liquidity: the last thing lenders want is for reckless gamblers to borrow their money and then lose it all trying to catch the falling knife.

This is why crash is king: when liquidity dries up, the entire structure of "there's always a buyer" collapses. When there are only sellers and few buyers, markets crash. When the underlying value of the asset can no longer be known with any certainty, it's not rational to gamble that the first or second leg down is "the bottom."

When future supply and demand are up in the air, tumbling chaotically, there is no way to pin down the value of anything. Money and credit are no different than any other commodity: the cost and value of money is dictated by demand for that particular flavor of "money" and credit. When "money" loses purchasing power and credit is no longer available, the demand for assets collapses right as assets are dumped to limit losses and raise cash.

It may be time to revisit core and periphery. Like many others, I find the model insightful and useful: The Core-Periphery Model (June 11, 2013).

The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012).

Crashes reveal what's core and what's periphery because the core controls the destiny of the periphery. In systems terminology, the initial conditions set the parameters of potential options and the limits of the efficacy of various choices. The core's initial conditions are considerably more constructive than the initial conditions of the periphery.

In network terms, every connection between nodes runs through the core. This is not the case for the nodes. The dependency chains are asymmetric: each node looks stable and independent until push comes to shove. Everyone is dependent but some are less dependent than others.

The vast majority of the grandiose claims of what's truly core will be revealed as false in a crash. The crash in core assets is less severe and the bounce back is quicker, as the underlying value of the core resets more readily.

Crashes in the periphery are one-way slides. These assets never recover their speculative-excess valuations because the eventual reset of underlying value strips out all the artificial / phantom value.

It's instructive to look at these charts of the Japanese yen (USDJPY). Something is happening, and the punditry is rushing to stake claims of understanding it all. I am circumspect about this tsunami of explanations. There are a lot of major revaluations underway and these act as feedback for each other in complex ways.

This suggests to me that any one explanation will very likely be wrong / misleading.

It may be nothing more than a zephyr, but I find it interesting that the long-term chart of the USD-Yen appears to be a multi-decade inverse head and shoulders which if it plays out would suggest a massive revaluation of the yen is underway in the direction of devaluing the purchasing power of the yen.

This may be one of many revaluations of capital vis a vis labor and resources and core vis a vis periphery. Cash may be king but when crash is king you have to choose the right kind of cash to avoid the general decimation of "wealth."

Every node claims to be core, but that's not how it works. There may only be one core. While the crash will garner everyone's attention, it's the aftermath of the crash that will inform us what's core and what's periphery.






My new book is now available at a 10% discount this month: Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $8.95, print $20)

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.


Recent Videos/Podcasts:

The Dam Has Cracked (37 minutes, with Gordon Long)


My recent books:

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $25, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 Kindle, $10 print, ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 Kindle, $8.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $1/month patron of my work via patreon.com.

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Staring Into the Abyss

So sorry, but "you'll own nothing and be miserable--oops, we mean happy, yes, deliriously happy" doesn't count as a solution.

The global economy is perched on the edge of an abyss, and averting our gaze doesn't actually lessen the risk, it increases it because problems which aren't faced directly and addressed directly fester and rot the system from within.

This is why we're collectively staring into the abyss: all the big problems have been dismissed, ignored or papered over with PR-happy-talk "solutions" that only make the problem worse. There are three basic techniques that our "leadership" (public and private) have used to avoid dealing directly with our pressing problems:

1. Appear to address the problems by doing more of what's failed spectacularly.

2. Propose magical-thinking happy-happy technological "solutions" that are appealing but impractical.

3. Keep the status quo glued together to maximize quick-buck gains for the elite while guaranteeing long-term catastrophe for the entire society / economy.

Doing more of what's failed spectacularly is one of the phrases you've seen here over the years. This generates an illusion of control because the tried-and-true Band-Aid makes it look like the problem is being addressed. Since doing more of what's failed spectacularly doesn't break the system immediately, everyone incorrectly assumes it's benign or actually helping.

The Federal Reserve's blowing of serial speculative credit-asset bubbles is a good example. With the bogus goal of generating a "wealth effect" that only rewards the already-rich, the Fed has exacerbated socially fatal neofeudal inequality and created guaranteed-to-pop bubbles that each collapsed with devastating consequences for the credulous who believed the Fed's poisonous assurances that a) this isn't a bubble and b) bubbles never pop.

The Fed's "solution"--blowing an even bigger bubble to paper over the catastrophic losses when the previous bubble popped--has finally reached the endgame: three bubbles and you're out (2000, 2008-09 and 2021-22). Sorry to disappoint the beneficiaries of the three Fed bubbles, but there won't be a fourth bubble. Bubbles don't inflate at the bottom of the abyss.

Magical thinking abounds in finance, energy and and economic policy. Examples include substituting nuclear power for hydrocarbons, conveniently sidestepping the reality that we'd need to build a new reactor a week for years to make a difference, and the really inconvenient reality that the U.S. has built a grand total of two new reactors in the past 25 years and the world has a few dozen under construction--a scale roughly 1/100th of what's needed.

In finance, magical thinking appears across the entire spectrum from the fanciful delusions of Modern Monetary Theory (we can't go broke because we can always print more money--uh, sure, that will work just fine, guaranteed) to the Fed's "if we just make the already-rich even richer while bankrupting the bottom 90%, everything will work out just peachy." Peachy for whom? That question is never answered because the billionaires are so charmingly bashful.

The New Nobility elites reckon that if they can keep the crumbling cliff edge from collapsing for a few more years, they can maximize their private gains and then escape to their New Zealand bunkers when the consequences of their plunder send the global economy into the abyss.

The elites are in effect selling seats in the Titanic's lifeboats to the highest bidders. The ship is doomed and they see this tragedy as a terrifically profitable opportunity.

Another analogy is polluting your nation and people so a handful of industrialists and party hacks can get super-rich. The land, water and air are all poisoned and the people sick and dying, but who cares once you're secure in your fortified villa?

None of humanity's most pressing problems have been addressed by any elite, any where. So sorry, but "you'll own nothing and be miserable--oops, we mean happy, yes, deliriously happy" doesn't count as a solution.

Every elite is pursuing the same self-serving agenda of maximizing their private plunder and hoping--perhaps vainly--to escape the consequences of their obsession with short-term gains at the expense of the planet and its people.

Watch your step while peering into the abyss. The cliff edge is crumbling faster than we realize.




My new book is now available at a 10% discount this month: Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $8.95, print $20)

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.


Recent Videos/Podcasts:

The Dam Has Cracked (37 minutes, with Gordon Long)


My recent books:

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $25, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 Kindle, $10 print, ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 Kindle, $8.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $1/month patron of my work via patreon.com.

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What's Your Plan A, B and C?

Nothing unravels quite as dramatically as systems which are presumed to be rock-solid and forever.

Here's the default Bullish case for stocks and the economy: let's call it Plan Zero.

1. The economy and equities can grow forever (a.k.a. infinite growth on a finite planet in a waste-is-growth Landfill Economy)

2. Higher energy costs have near-zero effect on the economy and stocks.

3. The Federal Reserve will deliver a soft landing which reduces inflation back to near-zero while the economy and stocks continue lofting higher.

4. Higher food costs and global food scarcities have near-zero effect on the economy and stocks.

5. Supply chains unraveling has near-zero effect on the economy and stocks.

6. Deglobalization has near-zero effect on the economy and stocks.

7. Higher interest rates have near-zero effect on housing, the economy and stocks.

8. The continual evolution of more contagious variants of Covid-19 has near-zero effect on the economy and stocks.

9. There are no speculative bubbles in housing, stocks or other assets.

10. Even if a speculative bubble in stocks did arise (gasp!), it will never pop because a) the Fed b) sentiment is bearish so stocks can only go higher c) stock buybacks will continue expanding forever d) the yen-quatloo pair's correlation with bat guano futures is signaling more bullish upside e) Golden Sax issued a buy recommendation, etc. etc. etc.

We hope you enjoyed your ride through FantasyLand. As you exit the ride, please watch your step returning to reality, where extremes unravel extremely energetically and magical thinking fails to actually change the real world.

Back in the real world, it behooves us to have a Plan A, Plan B and Plan C. I have often suggested a simple formula for methodically planning a range of responses ahead of time so we’re ready when and if our circumstances change: Plans A, B and C.

Plan A is our response should our circumstances change while the socio-economic system remains pretty much the same. An example might be unexpectedly losing your job due to a sudden downturn and being unable to find a replacement job in the same field at the same wage.

Plan B is our response should our circumstances change while the socio-economic system is unraveling. An example might be we no longer feel safe in our neighborhood due to rising crime and a dysfunctional, bankrupt local government.

Plan C is our response should the socio-economic system completely break down. An example might be supply chains fail and gas stations no longer have fuel and grocery store shelves are empty.

No matter how unlikely a breakdown might be, the consequences are so dire that it's prudent to prepare a response. Making a plan ahead of time requires no money and only a modest amount of effort. Trying to figure out what to do in a chaotic crisis rarely leads to good results.

Common sense suggests preparing a plan that avoids adversity as much as possible rather than going to ground until adversity has reached maximum disruptive force and then waiting passively for others' decisions to impact you.

Another benefit of preparing Plans A, B and C is that we may conclude that there is much to be gained by taking action before a crisis rather than waiting until the crisis washes ashore. By then, our options will have significantly narrowed.

For example, trying to leave a city when everyone else is trying to leave will only trap us in gridlock. Our planning should be designed to get us out of the city a week, month or even a year before the crisis arrives.

Extremes unravel unpredictably and unevenly. Some locales will remain relatively stable while others decay and others break down. Some forms of wealth may gain value while others lose value. Things we assume will always be available may become unavailable.

Living and working in a productive community that values our contributions offers advantages that cannot be matched by isolated islands of wealth which make attractive targets.

Just as money is no substitute for personal integrity, money is no substitute for people who value us for our contributions, however modest, and our willingness to share and add value however we can.

If we look at communities where people are active and productive into old age, we find life revolves around the fundamentals of human existence: growing food, raising animals, caring for children, sharing home-cooked meals and working together on common interests. This is a good life.

Much of what we're told is essential for a good life is just relentlessly marketed consumerist excess. The limited value of these excesses will be revealed as scarcities and instability show us what's truly valuable.

As the economy transforms from a waste is growth Landfill Economy dependent on cheap resources and credit to a degrowth economy of improved efficiency and reduced consumption, there will be many opportunities for those whose work provides truly sustainable sources of energy and other essentials by improving productivity, efficiency, recycling and durability.

Let's recap: Plan Zero depends on speculative bubbles never popping and extremes only becoming ever more extreme, basically forever. The true believers in this fantasy also believe that their phantom wealth will protect them from anything bad happening. The Plan C view is that depending on phantom wealth to protect them from anything bad happening more or less guarantees something bad happening.

You may only get one chance to activate a plan, so choose wisely. Nothing unravels quite as dramatically as systems which are presumed to be rock-solid and forever.

There's much to be said for being a valued contributor in a productive, low-consumption, tightly-knit community: The Art of Survival, Taoism and the Warring States (June 27, 2008).




My new book is now available at a 10% discount this month: Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $8.95, print $20)

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.


Recent Videos/Podcasts:

The Dam Has Cracked (37 minutes, with Gordon Long)


My recent books:

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $25, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 Kindle, $10 print, ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 Kindle, $8.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print) Read the first section for free


Become a $1/month patron of my work via patreon.com.

Read more...

A Couple of Thoughts on Big Numbers

Let's ask "cui bono" of the $33 trillion in added debt and the $9 trillion added to GDP: to whose benefit?

I've been thinking about how hard it is to get our heads around big numbers. Technical analyst Sven Henrich (@NorthmanTrader) recently provided one method to grasp the immense wealth of Elon Musk: How to become as wealthy as Elon Musk? Easy. Get paid $1 Million every single day. For 750 years in a row and you're there.

How can we get a handle on the $33 trillion we've added in total debt since 2010? We can start by noting that's a 60% increase in debt in about a decade, while the population of the U.S. rose by 7%.

Are we 60% better off than we were 12 years ago? How do we measure "better off"? GDP went up by 60% as well, but are we 60% more efficient or 60% more productive? Has the purchasing power of our wages gone up 60%? Can we buy 60% more with a day's earnings?

I think it's fair to say "no" to all these questions. We've added $33 trillion in debt to more or less tread water.

Does it illuminate the $33 trillion to say that's $100,000 of debt for every one of the 330 million Americans? Are we each $100,000 better off for borrowing $33 trillion? Well, a few folks have benefitted. The top 400 wealthiest folks have seen their wealth skyrocket by trillions of dollars, from roughly 8% of GDP in 2010--way up from a paltry 2.5% in 1985--to about 18% of GDP, which is now $24 trillion. That works out to $4.3 trillion.

I think it's fair to say that hyper-globalization and hyper-financialization has generated hyper-wealth and hyper-inequality.

Speaking of big numbers, let's look at the bottom 50%, roughly 65 million households. As the chart below shows, these 65 million households own about 0.6% of the $40+ trillion U.S. stock market. That's less than 1%, or around $240 billion. Divvied up amongst 65 million households, that works out to a couple thousand bucks per household.

The ownership of stocks in the bottom 50% probably follows the same power law distribution curve as all stock ownership: the top 1% of those 65 million households own most of the stock and all but a thin slice is owned by the balance of the top 5%.

So the reality is the vast majority of American households have no stake at all in the glorious U.S. stock market's tens of trillions, or the bond market's tens of trillions, or the trillions held in privately held enterprises and commercial / rental real estate.

So let's ask cui bono of the $33 trillion in added debt and the $9 trillion added to GDP: to whose benefit? I think it;s fair to say the benefits were distributed along a power law distribution in which the top 0.01% skimmed the majority of the gains, the top 0.1% received the next largest chunk, the top 1% collected most of what was left, and the rest of the top 5% (from 1% to 5%) scooped all but a few scraps that fell mostly to the top 6% to 10%. A few crumbs were left for the top 10% to 20%, and below that, only dust motes were left.

I'm not at all sure there is any way to truly grasp hyper-wealth and hyper-inequality or its consequences. Our sense of fairness is difficult to quantify, but that doesn't mean it doesn't exist. At some point the pressure cooker of rationalizations and distractions blows a gasket and the kitchen becomes a real mess.












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Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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Debt Saturation: Off the Cliff We Go

When the system can't borrow more and distribute the insolvency, it implodes

I started writing about debt saturation back in 2011. The basic idea is we can continue to borrow and spend as long as one of two conditions hold: 1) real (inflation-adjusted) income is rising, so there's more income to service additional debt, or 2) the cost of borrowing declines so the same income can support more debt.

After 13 long years of declining interest rates and stagnant incomes for the bottom 90%, we've finally reached debt saturation: after dropping to near-zero, interest rates are now rising, pushing the cost of debt service higher, while wages are losing purchasing power (a.k.a. inflation), so there's less disposable income left to service debt.

The game plan for the past 13 years was to fund "growth" today by borrowing vast sums from future incomes: the $1.6 trillion in student loan debt, for example, was supposed to be paid by the soaring wages of all those student-loan-serfs, and all the sovereign debt was supposed to be paid by the soaring tax revenues from rapidly expanding economies.

These fantasies have now run aground on the unforgiving shoals of reality. There's no way to expand debt if income is losing ground and the cost of borrowing is soaring.

As I observed in 2012, Spreading Insolvency Around Does Not Create Solvency (August 23, 2012). In 2011, I used a different analogy: The World Is Drowning in Debt, and Europe Laces On Concrete Boots (November 14, 2011).

Saturation is an interesting phenomenon. You keep adding more and more to a system that seems to absorb "more" with no ill effects, and then suddenly the whole mountainside gives way and rumbles off the cliff.

There's a runaway feedback loop aspect to debt saturation. Think of a planetary atmosphere where you keep adding greenhouse gases. The atmosphere keeps absorbing more greenhouse gases with little effect until a saturation point is reached and then the atmosphere loses its negative feedback mechanisms that kept the system stable.

At that point, the feedback is all positive, i.e. every additional unit of greenhouse gases doesn't just trap an additional unit of heat, it multiplies the effect. (The atmosphere of Venus is hot enough to melt lead--900 F or 475 C.)

We see this same dynamic in debt saturation: the breakdown is accelerating rapidly. Since households burned through their stimulus bonanza, the savings rate has fallen and credit card balances are soaring. But this is not low-cost debt, it's high-cost debt, so those additional credit card balances will soon stripmine disposable income, leaving less for additional spending or debt service.

The "temporary debt forgiveness" ploy is staving off the day of reckoning in student loan serfdom. Rather than admit the student loan scam is unsustainable, the status quo plays an absurd game of pushing the date that student loan interest will have to be paid forward. This works until it doesn't.

Meanwhile, with mortgage rates over 5% for the first time in a decade, the housing bubble is popping. The runaway feedback of higher mortgages and slowing sales will accelerate price declines and mortgage delinquencies far faster than the mainstream anticipates.

Rising bond yields will push the cost of government borrowing higher, too. Borrowing money to pay the interest on borrowing money is another feedback loop of doom: it's downright inconvenient when most of the income tax revenues are devoted to servicing government debt, leaving little for the rest of the government's vast spending.

There's a lot of shuck and jive in income and wealth statistics to mask the doom-loop of debt saturation. Oh, the household is still doing just fine, we're told: look at all the luscious wealth and income available to service more debt.

What punctures the pretty fantasy is the reality that only the top 5% have plenty of income and wealth. The top 1% collect around 20% of all income and own 50% of all financial wealth, and the top 10% collect over 50% of all income and own roughly 90% of financial assets.

The bottom 50% of households own less than 1% of financial wealth and the bottom 90% will discover how much of their "wealth" is phantom when the stock and housing bubbles pop.

The point is wealth and income are highly concentrated in the U.S., so claiming households have plenty of wealth and income is a gross distortion. Yes, the top 5% (7 million households) could borrow more, but they have enough wealth and income that they don't need to borrow more.

Those who need to borrow more to survive can't borrow more: households, zombie corporations, and local znd national governments.

Top 1% of U.S. Earners Now Hold More Wealth Than All of the Middle Class

The U.S. Income Distribution: Trends and Issues

There's no tricks left to keep expanding debt: rates are rising, not falling, and wages are losing ground to the soaring costs of rent, adjustable mortgages, healthcare, childcare, food, energy, junk fees, property taxes, etc. As for the phantom wealth of bubbles: as rates rise and the Federal Reserve trims its stimulus, all the bubbles will pop.

When the system can't borrow more and distribute the insolvency, it implodes. And so off the cliff we go.

Tip of the hat to Adam Taggart of wealthion.com for suggesting it was an appropriate moment to revisit this topic--thank you, Adam.
















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Yes, It Is Different This Time

Most people would be horrified by a 40% decline in their "investments." When bubbles pop, speculative assets don't drop 40%, they drop 90% or even 98%.

The irony of the sudden panic about real-world inflation generated by rising wages is two-fold:

1. The status quo never mentions the rampant inflation in assets, because the already-wealthy got wealthier, so asset inflation is wonderful and deserves to be permanent

Look at the chart below (courtesy of Mac10) of the S&P 500 / wages adjusted for the CPI (consumer price index): corporate profits have soared against wages since 2009.

2. Wages have been hammered since 1975, as RAND Corporation research found $50 trillion has been transferred from the workforce to capital in the past 45 years. (see chart below)

The wealthy had no complaint about wages losing purchasing power for 45 years, but the first little blip up in wages' purchasing power causes a panic.

Now that the trends of soaring asset inflation and deflation of labor have reversed, assets will deflate and wages will rise, sending the wealthy and their apologists, toadies and media tools into panic.

"Markets rise on a escalator and fall in an elevator" is a Wall Street saying, but there is more than reversion to the mean or other technical dynamics at work: the obscene wealth that's been transferred to the top 0.1% is now a political target.

Being self-supporting at 19 years of age sharpens one's memory of earnings, costs and the purchasing power of a day's labor.

I kept a logbook of all expenses, no matter how modest, in my early 20s when my wages were low due to limited hours (being a full-time university student) and low pay.

By the absurdly understated official inflation calculator (https://www.bls.gov/data/inflation_calculator.htm), the $1.65/hour we earned as minimum wage in 1970 is now worth $12.17.

But when I recall what I could buy with my modest wages, I think the more realistic equivalent is $16 to $18/hour.

The $3.50/hour I made in 1974 is officially worth $20, but in terms of what I could buy with that $3.50, it's more like $30/hour.

For example: in 1974, the rent for my low-end studio in Honolulu was $125/month. (Recall that Honolulu has long been one of the most expensive cost-of-living cities in the U.S.) It took 35 hours of labor to pay the rent (ignoring taxes for simplicity).

Today, it takes about 60 hours of labor at $20/hour to pay the rent on a studio in Honolulu ($1200/month).

Much is made about the higher quality of goods today and the lower cost of electronics, etc. But we forget that TVs, appliances, etc. lasted a long time back then, so such purchases were rare. Used goods were available for a fraction of new.

The worker making $3.50/hour in 1974 could buy more and save more than the worker making $20/hour today.

As an experienced (but not yet full journeyman) non-union carpenter in 1977 (age 23), I was earning $7.50/hour. According to official inflation, that's worth almost $36/hour today.

How many experienced 23-year old carpenters make $36/hour today? My guess is relatively few, though short-term piecework and boomtown jobs may offer high wages for brief periods. By my calculations of what I could buy then for $7.50/hour, the equivalent today is more like $45/hour. Back then, I paid rent, ownership of a vehicle, taxes, dining out, etc. and still saved 50% pf my net pay.

Is that possible for someone earning $36/hour paying open-market prices for rent, healthcare, vehicle ownership, dining out, etc. to save half their net earnings? Not without a "special deal" on rent or extraordinary sacrifices. I didn't sacrifice much of anything in 1977, I simply didn't squander my earnings. There's a big difference between sacrifices and merely being frugal / careful to get full value.

When I was a builder in the mid-1980s, we paid 100% of our employees' full-coverage healthcare insurance. It was about $50/month for each individual and around $150/month for a family.

According to official inflation, $50 in 1985 is now worth $132. Can you buy full-coverage healthcare insurance for an individual for $132 a month now? No. "According to research published by the Kaiser Family Foundation in 2019, the average cost of employer-sponsored health insurance for annual premiums was $7,188 for single coverage and $20,576 for family coverage." That's $600/month for a single individual.

As a result of cartels, monopolies and asset inflation, real-world costs have eaten wage-earners alive for decades.

Asset inflation will reverse into asset deflation for many reasons, and wage deflation will reverse into inflation (i.e. gaining purchasing power) for many reasons.

When cycles turn, we seek specific explanations, but the reality is often more systemic: extremes reached limits, diminishing returns turned into negative returns, the pendulum consumed all the available momentum and is now swinging back to the opposite extreme.

Look at the chart of wages share of GDP (gross domestic product) below. If wages gained 8% and returned to levels of the mid-1970s, that would be 8% of $21.5 trillion GDP (2021) or $1.7 trillion.

That equals $13,000 a year for each of the 130 million workers in the U.S.

Corporate profits have risen from $400 billion to $2.4 trillion. What would it take for those profits to decline back to $700 billion?

Most people gambling in assets don't think they're gambling; they think "investing" isn't gambling. But asset bubbles are not the result of investing, they're the result of speculation running to extremes.

Most people would be horrified by a 40% decline in their "investments." When bubbles pop, speculative assets don't drop 40%, they drop 90% or even 98%. Many tech companies that were $100+ in early 2000 were $4 or even $2 by 2003.

This is not at all unusual. We've simply forgotten what happens when bubbles pop.

The U.S. stock market was worth $53 trillion at the beginning of 2022. If corporate profits fall to $1 trillion annually, and the price/earnings ratio drops to a historically reasonable 11, U.S. stocks will be worth $11 trillion, a decline of roughly $40 trillion or 80%.

Recall that U.S. stocks fell to $11 trillion in value in 2002 and again in 2008.

"Impossible!" Yes, of course. That's what everyone thought in 2000 and 2008 just before the bubbles popped. This is the third bubble, and it is the most gargantuan, the most stretched, and so the reversal will be the most extreme.

Think elevator, not escalator. Generational inequality, class inequality, wage deflation and the worship of the false gods of "wealth without work" the have all reached extremes. This time is different, but not in the way the status quo expects.












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Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
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Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 Kindle, $10 print, ( audiobook): Read the first section for free (PDF).

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Which Leads to Doom, Which Leads to Revival: Free Money or Frugality?

Clinging to delusional fantasies of "free wealth" won't lead to positive outcomes, any more than swallowing handfuls of meds leads to "free health."

Under various guises, labels and rationalizations, "free money" has now been established as the default policy fix for any problem. Stock market falters? The solution: free money! Economy falters? The solution: free money! Bankers face collapse from ruinously risky bets? The solution: free money! Infrastructure crumbling? The solution: free money!

Inflation raging? The solution: free money! Ruh-roh. We have a problem free money won't fix. Instead, free money accelerates the conflagration. Dang, this is inconvenient; the solution to every problem makes this problem worse. Now what do we do?

Despite the apparent surprise of the policy-makers, pundits and apologists, this was common sense. Create trillions of dollars out of thin air and spread the money around indiscriminately (fraudsters and scammers getting more than the honest, of course) after global supply chains were disrupted and shelves were bare, then open the floodgates of speculative gambling in stocks, cryptos, housing, used cars, bat guano, quatloos, etc., and what do you think will happen?

Supply can't catch up with free-money-boosted demand, prices rise, people instinctively over-order and over-buy, and "don't fight the Fed" speculative betting begets more betting: the inflation rocket booster ignites, wages soar as workers try to keep pace with rising expenses, speculative bubbles inflate to unprecedented extremes, and all this "wealth without work or productivity" gooses spending and gross domestic product (GDP).

In the chart below, I've noted GDP and total debt (TCMDO). The raio of debt to GDP is informative. Forty years ago, the ratio was 1.6: debt was $4.8 trillion and GDP was $3 trillion.

Then the policy solutions of fiscal "borrow and spend" and Federal Reserve "balance sheet expansion." a.k.a. free money, became the policy default. The ratio rose to 2.76 in 2000 and has wobbled around 3.7 for the past decade--a decade that just so happened to see the stock market quadruple and the housing bubble reinflate to new heights as the Federal Reserve kept interest rates near zero as part of the "free money" policy: if we're going to borrow tens of trillions of dollars to squander, we need near-zero interest rates to keep costs of borrowing down.

Though no one in a position of power or influence dares admit it, the ratio of debt to GDP hasn't blown out for one reason: speculative bubbles have pushed GDP higher in a massive, sustained distortion of "wealth effect" and winner take most gains for those who knew how to extract the majority of gains from the bubbles.

Once the bubbles pop, GDP crashes and the ratio blows out. The belief that adding trillions in debt magically adds GDP will be revealed as delusional fantasy.

Completely forgotten in the era of Free money as the solution to all problems is the discipline of frugality, which can best be defined as discipline over spending as a means of building long-term financial stability and general well-being.

Financial discipline (frugality) has been set aside as a needless discomfort: why make difficult tradeoffs and sacrifices when the solution is just to borrow/create more free money? Indeed. Along the same lines, why bother with all the hassles of healthy food and fitness? Just pig out and swallow a couple handfuls of "free" (heh) meds.

Discipline isn't just about limiting waste. It's about investing capital and labor wisely to secure future gains in productivity which is the only real source of income and wealth. Creating "money" out of thin air and spreading it around to satisfy every constituency doesn't increase productivity. It destroys productivity by incentivizing waste--the waste is growth Landfill Economy--and speculative bets on bubbles never popping.

Alas, all bubbles pop, and now that creating free money only makes costs rise faster, there is no solution other than--oh, dear, dear, dear--the unforgiving discipline of frugality and investing for productivity gains rather than for speculative bubble "wealth."

Which path leads to doom? Free money. Which path leads to revival? frugality and discipline. That's not what everyone wants to hear, but clinging to delusional fantasies of "free wealth" won't lead to positive outcomes, any more than swallowing handfuls of meds leads to "free health."






My new book is now available at a 10% discount this month: Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $8.95, print $20)

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A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 Kindle, $10 print, ( audiobook): Read the first section for free (PDF).

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The Demographics of Financial Doom

Whether we admit it or not, collapse is the default "solution." That destiny has already been written by demographics.

The saying "demographics is destiny" encapsulates the reality that demographics--rising or falling trends of births and deaths--energize or constrain economies and societies regardless of other conditions.

Demographics are long-term trends, but the trends can change relatively rapidly while policies remain fixed in the distant past. This disconnect between demographic reality and policies has momentous future consequences. An appropriate analogy is the meteor wiping out the dinosaurs; in the case of demographics, this equates to the complete financial collapse of the retirement and healthcare systems.

As this article below mentions, extrapolating the high birth rates and falling death rates of the 1960s led to predictions of global famine.

As death rates declined and women's educational and economics prospects brightened, birth rates fell, a trend that now encompasses most of the world.

As a result of the Green Revolution (hybrid seeds and hydrocarbon-based fertilizers), the Earth supports more than twice as many humans as were alive in the 1960s (3.5 billion then, 7.9 billion now).

Now the problem is a shrinking working-age population that will be unable to support the financial and healthcare promises made to the retired generations.

Birth rates in developed nations have fallen below replacement rates, which means populations are shrinking and populations are aging rapidly, i.e. the average age of the populace is rising..

One side effect discussed in this article is the decline of the cohort of young males and the rise in the average age reduces the likelihood of conflict: Children of Men' is really happening--Why Russia can’t afford to spare its young soldiers anymore.

I remember reading similar research in the mid-1970s that identified a strong correlation between the relative size of the cohort of young males and the likelihood of war.

If the cohort was above a specific percentage of the total population, war was likely. One example was Germany in the 1930, which had a large cohort of young males under the age of 25.

This may partially explain the increasing reliance on economic war (sanctions) and cyberwarfare--nations no longer have large enough cohorts of young males to field armies where high casualties are a reality.

What the article mentions in passing--the demographic impact of social values and political power--is worth exploring.

In broad brush, several trends are visible in many nations and cultures.

One is that having children has gone from being an economic necessity or benefit to a tremendous financial liability in the developed world.

A Danish friend once commented that only wealthy families could afford to have three children now in Northern European countries. The same can be said of the U.S. and many other countries, once we consider the higher demands now placed on parents.

Where in the good old days of previous generations, parents were deemed adequate if they provided a roof over the kids' heads, basic meals and clothing. Education was left up to the public schools, and public college was low-cost, should the child want to continue their education.

(The University of Hawaii tuition was $89 and student fees were $27, for a grand total of $117 per semester from 1971 to 1975, $780 in today's dollars. I was able to support myself, pay all my university expenses and carry a full class load on a part-time job--in one of the two most expensive cities in the nation, Honolulu.)

In a fully globalized "winner take most" economy, parents with aspirations for a top 20% career and lifestyle for their children have a much more demanding burden.

Parents seeking to give their children a leg up must provide costly enrichment lessons and juggle complicated schedules of after-school classes. Prestigious universities now expect more than mere academic excellence; applicants must show evidence of leadership, civic engagement, etc., and even public universities are outrageously expensive.

Another trend is the cultural bias of favoring the elderly in terms of government support.

As workers increasingly lived long enough to actually retire, social and political values supported government funded pensions and healthcare for retirees.

In the high birth rates 1940, 50s and 60s, governments greatly increased benefits for the elderly / retired, as everyone assumed there would always be 4 or 5 workers for every retiree. Relatively few people lived to age 80 or older.

The steady decline in birth rates and the steady increase in longevity have dropped that ratio to less than 2 workers for every retiree. In the US, there are 127 million fulltime workers and 69 million Social Security beneficiaries (including disabled). That is less than 2 fulltime workers for every beneficiary.

In a recession, Boomers will continue retiring en masse while the workforce will shrink. A ratio of 1.5 workers to every beneficiary isn't that far away.

Is there any doubt this ratio is unsustainable financially? No.

These two trends are a double-whammy on those young adults having children: the costs of raising kids is much higher, the expectations are much higher while the government support is heavily weighted to the elderly populace, which is exploding as people now live into their 80s and 90s. (My Mom is 93, my Mom-in-law who we care for here at home is 91, our neighbor's Mom is 99, and so on.)

We have elderly friends who retired from federal government jobs at age 55 after 30 years of service and have collected 40 years of retirement. Is this financially sustainable? No.

The actuarial foundations of Social Security and Medicare were based on 4 or 5 workers per beneficiary and average lifespans around 70. Retirees were expected to collect benefits for 5 to 7 years, not 25 to 30 years.

These systems are fundamentally unsustainable at current retirement ages (55 for many government workers, 62 for "early retirement" Social Security and 67 for full benefits and Medicare at 65), current longevity trends and less than 2 workers per retiree.

The only way to reverse these demographic trends would be for government support for retirees taking a back seat to government support of children and young parents, greatly reducing the financial burden of having children.

The only way an economy can support a massive population of elderly is if there are enough young workers entering the workforce to keep the society and economy functioning.

Forward-looking populations would realize supporting parents and children is the only way to support future retirees.

But humans aren't very forward-looking; we want all the good stuff now. So the elderly support politicians who promise their benefits are sacrosanct and untouchable--except to increase them.

Almost all elderly people vote while a much lower percentage of young people vote. So the government continues supporting the elderly even as the population of elderly explodes and the means to provide this support are in free-fall.

Retirement ages have barely budged, increasing a mere two years in 40 years from 65 to 67, while lifespans have greatly advanced and the worker-retiree ratio has collapsed.

Open-ended healthcare expenses are an invitation for profiteering, fraud and unnecessary or even harmful medications and procedures. By some estimates, 40% of the $1.5 trillion dollars spent on Medicare and Medicaid annually is paper-shuffling, fraud and needless medications and procedures.

A third trend is female workers wanting a fulfilling career and children, too.

With childcare costing $25,000 or more annually, one parent may essentially be working just to pay the childcare costs for two children.

A fourth trend is relying on high birth rate immigrants to substitute for native-born workers is no longer viable, as birth rates have plummeted in nations that provide immigrants.

As the saying has it, something's gotta give. Doing nothing will lead to the collapse of the programs benefiting the elderly while the birth rate continues declining.

All these values and programs assumed high birth rates, high worker-retiree ratios and modest costs for raising children were forever. They weren't.

Now we need a new set of values that reduce or eliminate the financial burdens on parents raising children. It would be nice if we could afford to pay for everything we want but printing money to do so just collapses the entire system.

Personally, I would raise all retirement ages to match the rise in lifespans, limit Social Security benefits to those with no other pension or retirement income, limit publicly funded extraordinary healthcare measures for people over the average lifespan, tax revenues rather than labor, and pay all childcare and after-school programs expenses currently paid by parents, plus a modest sum per child that can only be spent on after-school enrichment classes and programs.

That seems common-sense to me, but I'm open to other permutations of hard choices.

Hard choices lead to better outcomes than collapse, but few have any stomach for hard choices. Politicians who make hard choices that require sacrifices of powerful lobbies and voting blocks lose elections.

The fantasy that we can "print our way out of any problem" is strong because it's so convenient and apparently so successful--at first.

Whether we admit it or not, collapse is the default "solution." That destiny has already been written by demographics.




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