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We’re all doomed, part 94

October 12, 2009

If you really want to spook yourself, try this. The sweep of history, courtesy of Dylan Grice of SocGen (he starts with 3rd Century Rome) shows that all fiat money eventually collapses under the weight of its internal contradictions, as politicians struggle to meet promises made under more benign circumstances.

There are some really spooky charts here, showing the real level of government liabilities (rather than merely the actual borrowing) and none of the Western countries looks remotely solvent. Oddly enough Spain comes out best – or least worst –  with liabilities totalling a mere 250 percent of GDP. The US is joint worst with 550 percent.

Grice comes up with even scarier figures when he calculates the income/liability ratios, which effectively show that Europe and the US have no hope of returning to long-term fiscal stability.

Alas, he gives us no idea of how to protect ourselves from the consequence of fiscal incontinence. Perhaps that’s in his next piece of research. I’ll let you know.

Comments

Interesting article. Inflation is complex to measure and estimate, and there’s certainly room for “dishonest” assessments. Governments have a long history of dodging painful fiscal responsibilities. It’s unfortunate that the US is among the worst of the offenders. But we can’t let that secret out because then the world would question the validity (sanity?) of democracy.

But I digress. Inflation is impacted by productivity and unless we can dramatically improve productivity (similar to the machine age), I fear that the economy will implode (really, collapse under the weight of government ineptness via hyperinflation). And in the not-too-distant future. Oh my.

 

None of this had to happen and it was not the inevitable conclusion of social security and medicare. Had the gov properly invested (or even just saved) the social security taxes each year, the system would be functioning fine. Congress just couldn’t resist spending the money. Imagine if you put away money for retirement by writing a postdated check and then spending the money! That is exactly what congress did.

Posted by mrchris | Report as abusive
 

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