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james_nicoll

Richard Duncan, formerly of the World Bank and chief economist at Blackhorse Asset Mgmt., says America's $16 trillion federal debt has escalated into a "death spiral, "as he told CNBC.

And it could result in a depression so severe that he doesn't "think our civilization could survive it."


Why does that sound so familiar? Oh, right: from John D. MacDonald's The Green Ripper (1979)

How did the conference go?" I asked.

He shook a weary head. "These are bad days for an economist, my friend. We have gone past the frontiers of theory. There is nothing left but one ugly fact."

"Which is?"

"There is a debt of perhaps two trillion dollars out there, owed by governments to governments, by governments to banks, and there is not one chance in hell it can ever be paid back. There is not enough productive capacity in the world, plus enough raw material, to provide maintainance of plant plus enough overage to keep up with the mounting interest."

"What happens? It gets written off?"

He looked at me with a pitying expression. "All the major world currencies will collapse. Trade will cease. Without trade, without the mechanical-scientific apparatus running, the planet won't support its [a number] billion people, or even half of that. Agribusiness feeds the world. Hydrocarbon utilization heats and house and clothes the people. There will be fear, hate, anger, death. The new barbarism. There will be plague and poison. And then the new Dark Ages.

[...]

"How much time have we got?"

"If nobody pushes the wrong button or puts a bomb under the wrong castle, I would give us five more years at worst, or twelve at most."

Also posted at Dreamwidth, where there are comment count unavailable comment(s); comment here or there.

Thirty years and change, and there are still people pushing this? Hoping to make it happen, are they?

But now the numbers are even bigger!

How else can it be insured all those people they don't like are punished for their sins? In this case it's probably not worshipping the Holy of Holies, the Unregulated Free Market, Its Name Be Praised.

It's like putting Dr. Evil in charge of global finance. "Two... TRILLION... Dollars!"

Here is my prediction: when Western civilisation finally collapses, it will be for a more compelling reason than because numbers on a ledger didn't add up in the right way. Numbers on a ledger can be rewritten, if it's really necessary - but economists don't like to admit that, since it means admitting that their field is the study of arbitrary, human-made rules rather than being any sort of hard science.

Now, people warning of environmental disaster, those might be right in the end. But even they have a history of proclaiming that the end is right around the corner only to find that the world wasn't as fragile as they thought.

You're confusing finances with economics. Economics is the study of human interactions on both large and small scales through a certain lens; the rules governing those interactions are of interest to economists as is how they change. Economists don't look at Wiemar and Nazi Germany and throw up their hands in despair -- they say, "Ooo, what a fascinating case study!" What you're claiming is like saying, "Since laws can change, political science is bunk."

If that is true in practice as well as in theory, how come all economists I hear about sound like this guy - absolutely certain that continuing to play by the current rules is the only option, and that if the current rules doom us, then we are doomed and there is nothing more to say about it?

Now, I'm perfectly willing to believe that it doesn't have to be that way - that it's the current state of the field rather than anything inherent in it. It's just that every economist I ever hear about seems to not so much study the market and come up with possibilities for changing it, as worship it and come up with elaborate explanations for why it is perfect exactly the way it is and any alteration to it will lead to the Apocalypse.

Paul Krugman is quite clear that the best course at the moment is increase the debt using short term 10 year bonds, get the economy restarted, then get people back to work and THEN go austerity crazy and raise taxes to pay it down.

The problem we're in at the moment was clearly predicted and the solution has been known since the 1930s.

Yes it has been known. "Increase debt during recession, pay it off during good times" is pretty much what Keyenes want too.

Problem is, it never worked out that way. I do not know of any modern country which cut spendings during boom times. Increase taxes during boom times, yes it happened. But always to pay for new and expanded social program, never to pay off the debt. Any politician calling to cut spending during a boom would not only lose election, he would be laughed at.

I think Germany and Sweden have pretty much done this. The main issue is that this doesn't work too well with binary governments.

Didn't Bill Clinton pass spending cuts during his second term? And the deficit was reduced during that term, too.

Bruce

Problem is, it never worked out that way.

Thinking more about this it comes back to a general observation I have about US politics. Just because the US can't seem to run a whelk stand, it doesn't mean that it's impossible to do.

I class this perception about politicians in the same bucket as "the government can't run healthcare cheaply" where actually, governments around the world have demonstrated multiple and effective ways to manage healthcare and control costs.

We're suffering from 30 years of rank stupidity in which debt was run up with no plan to pay it down, and when there were surpluses they were spent on Bread and Circuses. The only good thing, is that, I don't actually think the US national debt, is, in the scheme of things, a major issue.

I am terrified that the potential loses through arcane global financial transactions are many multiples of global GDP - I've heard $200-$600TR bandied around.

That's more of a problem than a large productive, peaceful nationstate running a debt of about it's GDP.

Thank you all -- I stand corrected

Canada cut spending during boom times. (1993 onward)

Known social democrat Tommy Douglas used post-war affluence to pay down Saskatchewan's debt before instituting state-financed health care.

It's just that every economist I ever hear about seems to not so much study the market and come up with possibilities for changing it, as worship it and come up with elaborate explanations for why it is perfect exactly the way it is and any alteration to it will lead to the Apocalypse.

By any chance, was the writing pool for Marvel's What If heavily tilted towards economists?

"What If... Reed Richards was appointed Chairman of the Federal Reserve?"

Are you listening to real economists who conduct credible research, or bloviating partisan hacks who appear on Fox and MSNBC to read off talking points?

NPR put together a panel of economists from across the political spectrum and asked them to come to a consensus on what changes America should make. Their conclusion: eliminate all income taxes, personal and corporate, and switch instead to carbon emissions. That doesn't sound to me like leaving the market as is.

http://www.npr.org/blogs/money/2012/07/19/157047211/six-policies-economists-love-and-politicians-hate

According to the written summary, they called for replacing income and payroll taxes with a progressive consumption tax. The carbon taxes were a separate point. (But the update text at the bottom implies that might not've been clear at some earlier point.)

The people I hear who do sound like this guy are all being linked to either by my goldbug friends who read everything produced by the Ludwig von Mises Institute, or by those insistent Google ads that show up on all the political websites.

There's a rant written on papyrus in hieroglyphics

lsanderson

2012-08-22 02:04 pm (UTC)

That my ancient history teacher read (in English) in class in college.

About the Egyptian government being a broken reed and the younger generation all going to hell in a hand basket. (I no longer remember if it wuz Old or Middle Kingom, but it wuz not New.)

Turns out they wuz kinda sorta right, just off by a couple o' thousand years or so.

And still, or so I hear, the Nile flows north to the sea.

Re: There's a rant written on papyrus in hieroglyphics

bwross

2012-08-22 06:59 pm (UTC)

I'm Gen X, so I see the older generation all going to hell in a hand basket. I fear what they might do to civilization more than the younger one.

The younger generation are mostly alright, although they seem to think that a singularity ate all media before their birth... they're always saying "that was before I was born", which I've never heard from my generation. After all, I grew up in a time when there wasn't such a deluge of new media and so old media was still largely played to fill time. And so I grew up in a culture that was half before my birth.

I have no memory of that passage, but I remember The Green Ripper as a significant shift in tone for the Travis McGee books (I may be wrong, but it's how I recall). At that point I hadn't read a series which traumatized the lead like that. I had assumed the grimmer narrative of the last few books might be related to MacDonald's age, but now I suspect he read a few theories which brought him down as well.

In the long run, we are all dead.

this is true

(Anonymous)

2012-08-22 02:19 pm (UTC)

but it remains that having the distribution of the deadness relatively even is a feature.

-- Graydon

No, I believe having a significant dip in deadness at the present is a good thing.

Hmmm. I wonder if there was ever a time when the population of living humans was low enough that it was an insignificant fraction (less than 0.1%, say) of the total of dead humans?

According to this article (http://www.prb.org/Articles/2002/HowManyPeopleHaveEverLivedonEarth.aspx) we are currently at about 6.5%. Not big, but not trivial. (That was simply the first article I came upon in Google; I have no idea how reputable the Population Reference Bureau is.)

I'm told that quite a while ago (during one ice age or another), the portion of humanity that had left Africa had a significant population contraction and "bottleneck" effect, which might be the place to look.

I'm feeling particularly cranky today, so I'm also inclined to suggest that American civilisation can't collapse, because that would imply there was a civilisation there to begin with... /gratuitous snark and anti-Americanism

Based on the degree of genetic similarity found in Homo Sapiens, I think they've established that humanity probably got down to around 2000ish within the last 70,000 years.

IIRC there was a Stamford study published in the summer which concluded this.

I believe Gandhi expanded that to Western civilization. He was more on about the British Empire, of course.

Since chaos begets order, I'm sure that there's civilized America somewhere.

Yes, it does; I believe the locals call it "Canada."

I come from the districts of Ontario, where things are completely Unorganized to a first order approximation (it's something like 98-99% in the Kenora District). This is probably why I see Canada as only having small pockets of civilization.

Curiously, there is a large overlap between the people who claim to see the deficit as a Sign of the End of Days and those who call for further tax cuts for the wealthy. It's as if they had some sort of hidden agenda or something. :)

Bruce

Part of the mythology is the idea that the deficit is so large that there's not enough money in the world to get rid of it by taxing anyone. (But cutting spending on welfare will help.)

"There's not enough money in the world" is the major theme, but, curiously, the same people are fans of a strictly limited money supply and terrified that quantitative easing will cause hyperinflation. (The example is always, always Zimbabwe, though sometimes they do stick the Weimar Republic in there so they can claim it created Hitler.)


Edited at 2012-08-23 10:59 am (UTC)

Also, Greece proves that government spending inevitably leads to collapse.

(I like to bug them by claiming that Greece shows that if people pretend they don't have to pay taxes, the society collapses.)

Greece is in Europe; Sweden is in Europe; therefore the Swedish welfare state leads inevitably to the fate of Greece.

Also, I just discovered that Matt Taibbi is incensed about the Fed magically creating money and, on this subject, seems to be about one millimeter away from being a goldbug, and thinks this is a progressive position.