Steve Keen: The Deliberate Blindness Of Our Central Planners

Thanks for pre-digesting his argument. I could not grasp the nub of the issue.
This is as far a I have got: If an entity accumulates more money than it can spend, then it has to lend out the surplus at interest,  and next year they own even more wealth than they can spend.

A compounding problem that I do not seem to have.

I am fully aware of Keen's thesis on how debt money does not need to grow exponentially in order to keep debt serviced.  The point of my post was not to induce you into a lecture, it was simply to point out that Keen does not address the fact that debt-money has in fact been growing exponentially.  So, this ends up an academic argument.  It's a model he is referencing.  I am asking about the real world.  
Why then does debt run away from money in most systems?  Keen, in the Forbes article linked above, simply says, again kind of ducking the question, but indeed recognizing the tendency;  "…the causes for this phenomenon are far more complicated than a simple mathematical certainty because banks lend money, but not money plus interest."  

And yet, we know that debt runs away from money… I have often times linked this chart put together by a guy who was trying to figure out how money works;

There it is.. over and over.. debt running away from money.

So here's my take;  We have a money system where observation and data suggest that it tends to grow exponentially, in a world where resources are becoming ever more limited.

Saying that the money system does not in fact have to grow helps us how?  I still believe the model to be flawed.  Your explanation Dave is simplistic - of course is only takes a relatively small amount of salary flow to pay off a large mortgage debt… but, the fact remains that the money I am using… the money I get from my employer, was first borrowed into existence somewhere else.  As I pay off the debt (principle), that money is destroyed.

Most debt is back loaded regarding the ratio of principle-to-interest… as we all know… the principle level of that mortgage will stay stubbornly high for a long time if you don't make, "extra" payments against the principle.  But during the end of the term… you are paying more principle than interest finally… meaning that money is being destroyed at a faster rate.  My observation would therefore be that, during the waning phase of a big debt boom… like a housing boom, debt (money) principle is being destroyed at a quicker rate vs. the early stages… how about this dynamic?  Is this in the model?  Does it matter?  Again, exponential growth is what we see.  It appears to be a feature of the system even if Keen wants to argue that it does not have to be.  

late edit:  Just saw Chris' post after I posted mine.  What he said  : )

Looking at the big picture time wise, that is going back to the pre industrial revolution era of only 'renewable' energy sources, the money systems were almost all commodity based. They did not have our modern belief meme that a bigger future tomorrow is guaranteed.  Once that belief is challenged successfully by some historical data showing shrinking energy/resource supplies, the fiat money cookie will crumble quite quickly.  Since it is a debt based system based on more and bigger energy tomorrow,  it must fail in a shrinking energy world. 
Economist's theories of the economy, to this simple mind, remind me of blind men examining the elephant and coming up with varying descriptions.  If the elephant starves to death  and becomes so weak it dies. then every one of those theories are non sequitur.  A few economists might even be crushed when the beast falls over.  It appears to those of us with vision who step back a little for a wider view that the elephant is currently not as healthy as a few years ago; maybe even stumbling when it walks. Apparently the econophant is very dependent on the environment it calls home.

You don't need perfect flows when the vast majority of participants have a 10:1 ratio between the flow across an income statement and the money stock required to enable that flow.  Payments are made easily.  Almost all businesses look like this.  Almost all people look like this.  They require very little in the way of money stock/bank credit to enable a much more massive flow.  That's how interest payments are made.  Flow.  Plenty of individual cases of "stagnation" can happen without any problem.  That 10:1 (or 20:1) ratio allows for an incredible amount of slop in the system.

I could write code to model this out no problem.  I can see in my mind how it works.  It all hangs together.

The economy isn't just one wealthy industrialist.  Its millions of people and businesses who need very small amounts of bank credit stock to enable vastly larger flows through their accounts.    For every wealthy industrialist whose stock of bank credit outnumbers his flow, there are 50,000 people for whom exactly the opposite situation holds true.  The one enables the other.

Secondly, just because money grows exponentially (and it clearly does - and Steve Keen has always agreed with you on this score), that does not prove that your structural flaw thesis is the correct explanation as to why this occurs.  The two statements are logically unconnected.  Consider the following:

  1. Money grows exponentially
  2. My theory says it grows exponentially because the sky is blue.
  3. Therefore, money grows exponentially because the sky is blue.
Steve Keen's thesis for why money grows exponentially?  Its an unintended consequence of a politically-minded Fed trying to "fix the business cycle."

The Fed itself causes the exponential growth by short-circuiting the natural tendency in the economy to deflate after every ponzi debt bubble, because they want to serve their political masters, who intensely dislike economic "busts."

Instead of allowing a natural period of deflation after a ponzi pops, the Fed rapidly drops interest rates in order to restart the borrowing cycle.  There is no time for actual deflation and a reset back to the proper natural level of debt, and this constant series of boom-then-short-circuited-bust events results in a growth in credit over time.  You can see the effects of the short-circuit in the chart below: every time the business cycle peaks, loan growth drops (resulting in a recession and economic pain - which results in political pain), and so to "fix" this, the Fed rapidly lowers rates to restart the lending cycle.  Since that average LOANINV percent change over time consistently remains above the 0% line - that's exponential growth by definition.   A new boom is created immediately to "fix" the previous bust.  Housing boom "fixes" dotcom bust, bond bubble "fixes" housing bust, etc.

We all know this.  But the "why" of it - we only need to know that the politically-minded Fed dares not allow economic pain to last long enough to clear out the ponzi credit growth from the previous cycle, so LOANINV growth very rarely drops below 0.  Exponential growth is an unintended consequence of focusing entirely on "fixing the current bust", getting the current politician re-elected, without considering the long term effects.

The "political Fed" explanation is quite sufficient to explain exponential money growth.  In my opinion.  There is no requirement to add in a monetary-structural issue.  Occam's Razor and all that.



Although a model shows that, under certain circumstances, a debt based money system could be stable without exponential growth, what we actually have is this;  a system prone to business (debt bubble) cycles, whose monetary policy is run by folks who don't like (the downside) of business cycles, especially since they (those who set monetary policy) are bankers, and the downside of a business cycle is deflationary, and deflation hurts banks.
Dave pulled up a chart that I have shown in the past as well… except mine (from Douglas Short) goes back farther to show that, prior to the 1950's, and prior to the final stage of central bank mission creep that has fully engulfed us today, deflation was in fact allowed to happen - this version tells a much more dramatic story I think;

So, I am still confused as to why I should be dissuaded from telling people who want to learn about the money system, and the dynamics thereof, the following;

1)  Money is created as debt.

2)  When money is created as debt, only the principle is created… the interest must come from the existing stock of debt money. (This is absolutely true as stated… I have simply not tied it to exponential growth as direct cause vs. effect).

3)  The amount of debt in the system can, and often will (see chart I posted earlier in this string) start to run away from the amount of money in the system - this has various names;  the upside of the business cycle being one of them… debt bubble cycle being another.  

4)  The downside of this cycle, were it allowed to happen, would be deflationary (not enough money in the system to service the debt) and data shows (chart above) that deflation is anathema to those who set monetary policy.  Therefore the system ends up in a state of nearly perfect (mathematically speaking) exponential growth.  

Cutting out the middle parts 2), and 3), we can shorten the above to;

1)  Money is created as debt.

2)  Therefore the system ends up in a state of exponential growth.  


I wonder if anyone can ever show an interest or debt-based money system, ever, in all of history that did not turn out to be exponential?
The very concept of a jubilee was predicated on seven periods of seven (49 years) which was judged to be the maximum amount of time an interest and debt based money system could operate before needing a reset.  That's a pretty old concept.

I cannot come up with any examples…

But let's take the stocks and flows in a simple example and prove that this cannot work out.

Person A borrows $1,000 at 10% annual interest from Bank A.

That's it.  That's the whole system.

Fortunately the bank requires $100 per year of 'work' from Person A, so immediately after person A pays the bank $100 in interest out of their stock of borrowed money the bank pays it right back to Person A.

Look, no exponential increase in anything, right?  There's always a stock of $1,000 of money in the system and the flows make it all work out.  This can go on indefinitely for as many years as we like.  

The only problem comes in right at the end when the loan has to be paid which requires both the $1,000 and $100.  Then the system is short $100.  That is a a simple stock issue.  There's no way I can see for the flows to magically create an additional $100.  

It's not how the system works.

So, the question is, in this simple two-party system, where does the $100 come from?  The only possible solution is to have Person A perform additional work right before the loan is due, be credited (not paid) the right amount to have the $1,000 in his possession cover both the remaining balance and the interest on that balance.

As I said, immaculate stocks and flows are what's required.  They never happen.


Steve Keen: ...Chris, there's a wonderful article called "Exponential Economist Meets Finite Physicist." Have you ever seen that?

Chris Martenson: Oh yeah by Tim – Mr. Brown.

Steve Keen: Right.


"Exponential Economist Meets Finite Physicist" (see  ) was written my Dr. Tom Murphy, previous podcast guest:

Thanks to Chris and Steve for this outstanding conversation!  I have only listened to it once, and need to listen a few more times, as it's quite rich.
I have been asked to teach mostly economics next year at the high school where I work.  Professionally, this is likely to be very good for me, as the economics courses are part of a specific program of study that is internationally recognized and which will make it easier for me to get jobs at other international schools. 

However, it means it also means that a more general social studies course that some colleagues and I designed and tailored specifically for our student body is being canceled, not because it is unpopular (it's popular) but because it isn't part of this branded program of study.  In that course, I have been able to dedicate about 2 months to exploring with the students limits to growth and major destabilizing shifts in our civilization, which is another way of saying that we have been able to study the three E's.  

So, my school and I are being rewarded, at least in the short run, for turning towards hyper-specialization and away from a broad general look at our civilization. The problem is that we need more generalists who look at the whole forest and fewer specialists who fixate on individual trees, yet even as we careen between the rock wall and the precipice, it seems that most of the passengers in our civilizational bus are busy peeling gum off the seats or tuning the radio.

I'm currently at a very old UK university at a training course for my new program.  Mervyn King is going to give a lecture here in May titled A Disequilibrium in the World Economy.  I wonder how radical his speech will be.

Here is one of the orthodoxies I found on a test and grading key that we looked at today.

Question:  When calculating inflation for the purpose of policy-making, economists might calculate a core/underlying rate of inflation. Explain why they do this. 

Answer (from grading key):  [Full credit will be given] for explaining that large and sudden changes in the price of one or two products (or product groups) may distort the measured rate of inflation.  In order to focus on the general price trend, the government may calculate a core/underlying rate of inflation, which excludes products or product groups with highly volatile prices, such as energy and food, on which to base economic policy. Reference to specific products/product groups such as food and energy is not required. 

Source: IB Economics HL Paper 3 May 2013

My alternative answer:  Calculating core inflation as opposed to simply using the basic techniques that were  used to measure inflation since WWII and before only became popular in the 1980's, and was part of a wave of changes to the measurement of inflation that - apparently - were designed to understate inflation. According to John Williams, if inflation were measured as it was before 1980, our current rate of inflation would be around 3.5%.  

It is no accident creating a measure of inflation without food and energy happened soon after the inflationary oil shocks of the late 70's and early 80's. Contrary to its purported dual mandate of price stability and moderation of long term interest rates, there is another school of thought that claims that the Federal Reserve was designed mainly to provide a backstop for the America's largest banks.  Since these banks abhor deflation and prefer some amount of inflation, the measurement of inflation has been changed to make it seem less apparent, to make it easier for the Fed to subtly inject inflation into the monetary system.  In other words, we juked the numbers and lowered the bar, mostly for the benefit of the big banks and the political class.  After all, what household can go without food and energy? These categories clearly belong in any meaningful measure of inflation.

Probably, this alternative answer would get few or no points in the current grading scheme.

I don't think any of the teachers in this training course had heard of Steve Keen, but now they have.  The thing is, even those teachers interested in exploring heterodox approaches to economics will often have to choose between preparing their students for the test and showing their students that the emperor is not wearing any clothes.  

Specialization and hierarchy still hold the day, while the perspicacious are mostly ignored, or waived away with pretentious yet fatuous dismissals such as, "well, debt-to-GDP ratios don't matter because you can't compare a stock to a flow." So classic…

Next year, I will try to prepare my students for the test which means teaching them to know when to say, "the emperor is wearing a lovely purple robe today…" but I will also invite them to notice the real state of his attire.  

Keen's Debunking Economics is already on my classroom bookshelf.  Hopefully, somebody besides me will pick it up.


Pat-on-the-back for bringing real knowledge into a high school classroom! :)  I bet it was fun to watch your students digest information that actually got them thinking about "how things work", and that helped them make more sense of their world.  Much more interesting than rote learning/memorization!

Who knew that the revolution would start with those radical Icelanders? It does, though. One Frosti Sigurjonsson, a lawmaker from the ruling Progress Party, issued a report today that suggests taking the power to create money away from commercial banks, and hand it to the central bank and, ultimately, Parliament.

Can’t see commercial banks in the western world be too happy with this. They must be contemplating wiping the island nation off the map. If accepted in the Iceland parliament , the plan would change the game in a very radical way. It would be successful too, because there is no bigger scourge on our economies than commercial banks creating money and then securitizing and selling off the loans they just created the money (credit) with.

So let's use the example of your simple system, modified in two important ways to conform with reality.
Guy borrows $1000 from bank.  He has $100/year in interest payments to make, and so let's call it $20/month.  For him to qualify for this loan, he must have payment coverage of say 25%.  He needs a salary - from somewhere - of $80/month.  Otherwise - he can't get the loan, right?  That's reality, at least in the good old days, and this is our first change to conform with reality.  Initial condition: you need enough salary to cover the P&I payments with a decent amount left over.  Otherwise, no loan.

So, how does our borrower make his payments?  Cash flow from his salary.  That was in the initial conditions.  It takes him 10 years to pay it all off.  And he does, assuming he can keep his job that provides him his flow.  (Bear with me, I'll explain how).

Now then, when the loan gets fully paid back, the bank has no more assets or income.  Probably, it closes.  [We ignore for the moment what happens to the interest payments - which are likely recycled back into the economy, as salaries, dividends to shareholders, etc].  But now I hear you cry, "but wait!  All the money is gone from the system!  And then some!"

No.  Turns out, we have one more modification to make to adapt the simple system to conform with reality.

There is this thing called base money.  Before the system starts, the Fed provides an additional chunk of base operating currency for the economy that provides a level of underlying liquidity so that money can still flow even when every single loan in the system is paid off.  And remember, flow is critical to making those payments.

So in a sense, it is base money that enables continuous flow - regardless of what happens to individual banks and individual borrowers.  Even if all banks close, there remains enough money to enable enough flow through the system so that the economy can still function even with zero bank credit outstanding.

So once you add in base money, everything works fine.  The simple system - turns out, its too simple.  It is missing some absolutely critical bits.  Add in flow and base money, and everything works.

Are these things fake or artificial?  No.  They both exist.  To get a loan, you must show you have the flow to cover payments.  And base money also exists.  It has, since 1914.

What can we conclude from all this?  Flow is critical to the model working, and its also critical for the real economy.  Without flow, people cannot make payments.  When the flow slows in the economy, that is when people start having real trouble. 

Just in talking this through, I am realizing that deflation effects are as much about slower flow as it is about reduced quantity of money.  Some people (Martin Armstrong) suggest that flow is actually much more important than money quantity.  And indeed, in our hyperinflation podcast, we saw that once people started money flowing much faster, that led directly to price increases.

Without modeling flow - by trying to model a system just using "quantity of money" - you are missing a critical piece in understanding how things really work.  In fact, without flow, nothing works.  Consider: what happens when you attempt to model human physiology by looking only at the quantity of blood.  Does that work?  Of course not.  Without blood flow - when the heart stops - the body dies.  Same idea.  So modeling a bank/debt/money system without including modifications that take into account flow just won't work.  It can't.  Flow is the magic that enables everything to happen, in the body, and in the monetary system too.

If you hand someone 10 trillion dollars and they keep it in the cellar, its not inflationary.  No flow = no inflation.  If you hand that same person 1 million dollars, and it gets passed from person to person such that everyone in the economy holds it for 60 seconds, that's hyperinflation, because math says it will change hands 525,000 times in one year - resulting in "GDP" (activity) of 525 trillion over that year.  From only a million bucks!

I really love these discussions.  I learn some new nuance every time we talk about them.  Apologies if others find this sort of thing tedious and repetitive.  One of my "things" is that I want to really understand how stuff works.

Just as a matter of interest, ABMSL (Seasonally Adjusted base money) is one of the oldest timeseries that FRED has.  First entry was in May, 1914, at 3.93 billion dollars.  And change.

In thinking about this more, stagnation really is a problem.  When a depression happens, everyone hangs on tightly to their money, flow drastically slows down, and - the problem is not just a decrease in the quantity due to defaults -  it is that the flow of money has virtually stopped.
And we now know that flow is absolutely required to make payments on debt.

One way to kick-start flow is for someone to spend money.  Taking out a loan is helpful - not so much because the quantity of money increases (there is already lots of money out there - hiding under the mattresses), but because that newly borrowed money then flows into the economy and is spent, at least once.

Same thing for government spending.   Government snatches money from citizens via taxes, and then spends it right back into the economy.  That has an inflationary effects based mostly on flows.  Certainly with deficits, the quantity of money has also expanded (if you consider T-bills to be money - Armstrong argues that they act as money, even if they aren't actually bank credit) but the more important immediate effect is on flow.  Especially during times of high stagnation, like a depression.

Faster flow = higher (CPI) inflation.  Slower flow = lower (CPI) inflation.  Slower flow = a lot more loan defaults.

Quantity of money (at some level) doesn't matter, as long as confidence remains intact - and flow is probably a great measure of confidence.  Too slow = low confidence = defaults & CPI deflation.  Too fast = also low confidence = inflation/hyperinflation.

Attempts to predict gold price based on overall size of M2 are doomed to failure.  I know - I've tried.  However attempts to predict price based on flow (the change in loan outstanding) tend to be more successful.  My guess is, changes in loans (and government spending) reflect alterations in flow, while absolute size just reveals the amount of total stagnation: the sum total of all the wealthy industrialist cash piles.

And that is why I care about all this.  If I can figure out how things actually work, I can perhaps develop a model that can predict where things will end up.  That's why these details matter to me.  My ego here doesn't matter.  Coming to the correct answer - that's all I care about.

First of all, I like your chart - except that my chart is of changes in loans outstanding, and DShort's chart is the CPI.  They are most definitely NOT the same thing.  I hope you can understand why.  Mine talks about actual money growth (the subject under discussion) and DShort's chart talks about prices - which is not the subject under discussion.  If I could find a chart on loans dating back that far, I would simply love it.  I have been unable to get data on bank credit past 1947 - which is that LOANINV chart I put up.

Anyhow, from the get-go, your chart: "objection, irrelevant."  Nice chart, but not on point.

Now then.

  1. Money is created as debt.

Yes.  Except for base money, which is not created as debt, and is not destroyed.  And currency too: not created as debt, and not destroyed.

  1. Interest must be paid from the stock of debt money.

No.  Interest is paid from the flow of debt and base money through the economy.  Clearly some stock of money must exist (and base money + currency guarantees that it always will), but the flow is the critical bit, just like the flow of blood is critical to keeping a human alive.

  1. Money creation gets out of control because of bankers.

Yes.  100% agree.  Banks are motivated to create debt money, because they benefit from it.  The more they create, the better they do.  That's why things get out of control.  By design, they are motivated to do so.

  1. Politics ends up short-cutting the deflation cycle.  At least these days.


Here's the essence of my issue:

If we focus on "the interest not being created", we are focused on the wrong thing.  First of all, its not correct: flow is the prime issue, not stock, regarding ability to make interest payments.  Slow flow = cannot pay.  Fast flow = payment is easy.  Total money supply can remain unchanged and either situation can develop.

Secondly, and more importantly, I believe we should focus on the motivation of bankers and their ability to create money (and the system's current unwillingness to let it unwind) - that's where the problem lies.

Unless we identify the actual root cause of our problem, any solution we propose based on a false premise will lead to a solution that simply won't work.  Or if it does work, it will be strictly by accident.


Sorry to disagree with you Jim.  Money is also created when banks pay bonuses, wages, dividends, make asset purchases etc.  The money thus created, circulates and comes back as "interest" money.
 In effect:  interest money pays the  bonuses, wages, dividends, asset purchases and other costs that the banks incur.  If you disagree with me, Jim, please explain where the money to pay bonuses, wages, dividends and asset purchases comes from if not from interest.   

I was waiting for this myth to reappear so I could dispel it, yet again. 

You will need to look elsewhere to explain our "growth imperative"

In fact, base money is created as debt.  

The mechanism involves the Fed taking something onto its balance sheet (and issuing credit, and more rarely currency) and that "something" is always a form of debt.

In the past that 'something' was Treasury paper.

And the Fed collects the interest on that paper.  Whether the interest goes towards paying the expenses of the Fed and the 6% dividend of its stock holders, or it gets remitted back to the US Treasury, the base money is still generating interest payments.   

Base money comes from POMO activities.  It can be both created and destroyed by the same process.

To disagree with me Climber.  I am very crusty with Dave because we have long running divisions over the issue of Gold market manipulation and we just always seem to butt heads - that does not mean I am always crusty   : )
You said,

  Money is also created when banks pay bonuses, wages, dividends
I would agree with you that these things are paid out of retained interest.. and also from fee-based income that the bank earns.  I question though why you call this money creation?  The interest money was pre-existing in the system... consisting of pre-existing money that is "flowing" in the system.  

I continue to believe that the growth imperative comes from the very nature of debt-based money.  I would state this simply:  When old loans are being paid off faster than new loans (money) are being created, then we have deflation through debt destruction.  Central banks hate deflation and fight it with monetary policy such that we are usually (see the chart from Dave) in a mode of money (load) growth.  This is the root of the growth imperative.       


I continue to believe that the growth imperative comes from the very nature of debt-based money.  I would state this simply:  When old loans are being paid off faster than new loans (money) are being created, then we have deflation through debt destruction.  Central banks hate deflation and fight it with monetary policy such that we are usually (see the chart from Dave) in a mode of money (load) growth.  This is the root of the growth imperative.
I agree with everything you say here.

To my mind, "the nature of debt-based money" critically involves its method of creation, and that is where the trouble lies.  The creators themselves are incentivized to create as much of it as possible.  And the creature "guarding the hen-house" is Fed the Fox, under the influence-if-not-control of the banking system it allegedy regulates.  It is this that lies behind the ever-growing debt load.  Complete self-interest, the only motivation required.

The more they lend, the more they make, and the larger their control over society.

By focusing on "creating the interest" issue, we distract ourselves from the real culprit: Its just the bankers.  That's it.  That's the root cause of the problem.

I don't have a simple fix - but I certainly know where the problem is coming from.  Glass Stegall, eliminating banks that hold more than 5% of US deposits  - that's a good start.

And Iceland's solution might be a good idea too.

Lastly, a state bank that provides basic banking services and no "gotcha" fees, I'd toss that into the mix too.  I'm sick to death of $60 billion a year charged to the poorest Americans for overdrafts, etc.

There.  Problem solved.  Mostly anyway.

I accept your point of clarification.  Was that the only issue you found with my post, then?  :slight_smile:

So assuming that was your only issue, I will agree that base money does have debt associated with it, but it is not bank credit per se, since it was not borrowed into existence.  There is nobody who is going to "repay the base money" and thereby destroy it - unless the Fed decides to do that on its own.  Furthermore, I contend that the Fed can always find something to buy in order to issue base money.  They've shown themselves to be pretty adept at doing so.

So in our simple model, and indeed in the real world, we should stipulate that base money and currency will continue to exist even after every bit of "standard bank credit" is repaid.  Therefore, income and flow can continue to exist without standard bank credit, and therefore interest payments can continue to be paid via that flow.  Most importantly, no new money needs to be issued to "make the interest payments" - as long as the flow is fast enough to do so.

So, our simple model should include:

a) the ability of the borrower to repay the loan via sufficient cash flow prior to being able to borrow the money.

b) base money and currency already extant in the system, that is not normal bank credit, and will exist after all bank credit is repaid.

c) the loan that is made, and then repaid by the monthly income flow across the borrowers account over time.  The money used to repay the debt could be bank credit, cash, or base money.

I will freely concede that if complete stagnation occurs, and one entity or group acquires essentially all bank credit, all cash, and all base money, and refuses to spend any of that money for any purpose, then no flow will occur and all loans will not be able to be repaid.

Perhaps that really does happen too.  Maybe that's why the Fed encourages borrowing, and government spending - to "fix" stagnation issues during depressions.

But again, we are identifying the actual problem here.  It isn't about "not having enough money to pay the interest" - it is not a lack of money quantity, but rather, it is instead about problems with money flow.

That's my contention, anyway.

Just had a moment of clarity.  Steve Keen said that the US and UK could have up to 5 years of private debt  fueled GDP growth before it starts to collapse under its own weight. Right? He said that and I agree with him that this a high probability event.  Therefore what will the government's response be to keep the show on the road? This is what I was asking myself before my rare moment of clarity. Are you ready for this?
We need another layer of debt accumulation to form the base of the pyramid to support all the previous debt above it.  This debt will come from an expansion of the population.  As the periphery countries struggle, the US and UK will attract/accept more and more net immigration and encourage larger families   It may be possible for this new influx to take on sufficient debt to keep the Ponzi scheme going. 

I present my evidence.  The UK's population is growing by 400,000 per year (not all from net immigration but also a higher fertility rate) and is the highest rate in the EU.  I understand the US population is also expanding at a high rate due to the same reasons.

What do people think?

ps By the way, don't attack me. I believe in introducing measures to decrease population not increase it.  I've just started reading Catton's seminal book Overshoot.  We're on the road over the cliff.  



For there to be a growth in the economy, the growth in population will require more goods and services which is a growth in resource use.  Does this not mean, since both the UK and USA have pretty high resource utilization rates at the present, that the additional resources will be pulled from other countries?  Is that why we have to extract these resources by force?  At what point will the rest of the world say–'Enough!'  ?