Challenges

In Today’s Economic Environment

CHALLENGE 1: Rising Debt

  • Debt is rising uncontrollably since Nixon’s 1971 gold default
  • Debt is not a bug in the system; it’s a feature of it
    • The dollar is not an extinguisher; it’s an IOU
    • When you pay with an IOU, the debt is merely shifted
    • There is no way to pay off the debt

CHALLENGE 2: Zero Interest Rates

  • Rates skyrocketed through 1981
  • Rates down for past 35 years
  • Choice between speculative risk or zero yield
  • Great for bond traders; destructive for savers

CHALLENGE 3: Diminishing Returns on Borrowing

  • Total debt is not the problem
  • Debt-to-GDP ratio is not the problem either
  • The problem is each freshly borrowed dollar adds less to GDP (generates less growth)
  • The concern is the capacity to service the debt

CHALLENGE 4: Falling Dollar

  • More debt
  • Less capacity to pay
  • Falling interest rates
  • Reduced confidence
  • Quantitative Easing
  • The long-term trend is downwards
    • The trend is unstoppable