Why Must The Economy / Debt Constantly Grow At An Exponential Rate?
Hey all… I’ve seen the Crash Course videos and listened to tons of Peak Prosperity over the years. Chris has absolutely outstanding content and I recommend his channel to all my friends and family.
What I don’t understand is… why is it the case that we need exponential debt in order to keep our economy from crashing?
As a very simplified example (which might be wrong), let’s say all the outstanding debt in the USA is $ 500 trillion. This would represent all unsecured and secured debt, including real estate, vehicle loans, credit cards, corporate debt, and the like.
Say that for five years, everybody agreed to not take on any unnecessary debt. For example, your neighbor that has to have the brand new Mercedes every year foregoes it and drives their daily driver for five years. People stop going out to restaurants and buying material items and putting them on their credit cards, but instead decide to pay off the principle payments on their debt. Would that not reduce the total amount of debt in the system, thereby forcing it to not align with a true exponential function?
I am sure I am misunderstanding something. In my example, let’s say if people didn’t go out to restaurants as much, then the restaurants would make less money and have to lay off workers, and so on. So that could be seen as a partial collapse of the system.
Given what we have seen in the last five years, I think a lot of us are re-examining old knowledge about central banks, money printing, and the fractional reserve system (which is no longer even fractional). It seems like there will never be any way for us to reduce the $34T national debt, and as Chris often says, somebody will need to eat the losses. As of today it’s around $300k per American citizen, although maybe that figure will go down slightly if we include all the new illegal people streaming into the country. Maybe they would like to help take on our debt burden! ?
Is what I am saying making any sense or am I an idiot? Thanks
If everyone stopped expanding the debt the system would collapse in a deflationary spiral.
The system requires enough new currency each year to pay for the interest on last year’s debt.
Individually we each take on new debt and spend a number of years paying off that debt. But, collectively the whole pie of debt must keep growing.
Is it possible, that Doomberg has become TOO well respected, that he (they?) needs to be careful what he says? There are absolutely crazy things afloat, and there’s always that sobering instinct to keep the masses calm and distracted as things fall apart.
I do not know how much of the Marcellus Shale is tapped, There is new plays coming online in Guyana, Not to mention Venezuela having a huge amount of (albeit dirty) crude that is hardly tapped. Not sure how much this pushes out our time horizon, but I think this could be important.
Hi Chris,
Thank you so much for your review. I trust your information and appreciate all the time you put into your research.
After watching Oil Output part 1, and Doombergs’ conversation with Adam’s Thoughtful Money, I can understand your perspective, and also Doombergs’s.
I am a mechanical engineer and have been involved in the oil and gas industry for the last 15 years (after working 8 years in the alternative energy industry). Oil and gas are part of my professional and personal life. I have seen peak oil theories being destroyed by human creativity: https://www.forbes.com/sites/arielcohen/2022/11/30/peak-oil-the-perennial-prophecy-that-went-wrong/?sh=71fc2be12bbe
Two important examples I can mention are the oil sands (Canada) and rock fracturing (fracking). When I look at the proven oil reserves, it is hard for me to believe that the oil peak will occur as soon as 2025/2026. https://www.worldometers.info/oil/oil-reserves-by-country/
The US is a very big producer and changed from a net importer to an exporter by increasing oil production in a way that would have seemed impossible 30 years ago using fracking. The reserves of both Canada and Venezuela alone are a mind-blowing 565 billion (16 years of oil consumption at current volumes). From my analysis, I would expect peak oil to occur anytime between 2040 to 2050. I’d be happy to share my model assumptions if you are interested.
Respectfully yours,
Luis Figueroa
In fact Doomberg’s latest newsletter refers to Chris’ counter argument. A debate is in order here. I’d buy beer and snacks just to watch it. Quite a treat it would be.
Yep. This was the part of Chris’ rebuttal that nailed it most for me. 72% of NGLs that Doomberg wants to also define as oil, CANNOT be used for transportation.
So many things this US Admin just reclassifies when the prior definition makes them look bad. Changing CPI breakdown and definitions within labour market reporting for example. I expected more from Doomy to be honest and it’s 3 strikes and I’m out.
Well done again Chris.