Tuesday, December 10, 2013

Failure to launch


In order for our financial system to work, it must continually grow.  This is to pay interest (which is kind of obsolete now) and to create "wealth", because one man's debt is another's financial asset. I think of it like a giant hot air balloon. The system in its natural state (free of government intervention) would probably be shrinking or maintaining.  The role of government is supposed to be to blow into the balloon to keep it from shrinking and to help it grow.  But as soon as you decrease the government support (the red line), the rate of growth slows.  I think the rate of growth (the blue line) has peaked and it will decrease slightly until 2015 or 2016 when it will crash again in a recession. At which point government spending will increase again in order to try to counteract the decline.



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