PENDING ECONOMIC TRAIN WRECK MADE BY CONGRESS
May 26, 2011
“No fewer than 44 states are bleeding serious red ink, while unprecedented costs of social programs, unemployment claims and natural disasters are draining their remaining coffers along with the reserves of the insurance companies. This is the same story; exponential growth and exponential decline.” Mike Folkerth
In this ongoing series with my friend and economist Mike Folkerth, www.kingofsimple.com, and author of The Biggest Lie Ever Believed, he writes, “No other mathematical possibility remaining than for the US to pitch into a full blown depression.”
Today, the U.S. languishes with a $14.2 trillion debt. Our Congress has dug our hole so deep, that when we look up, we cannot see the bottom. Give us an idea of what we face and why Mr. Folkerth:
“I was recently asked by a friend why I have predicted the time frame of 18 to 22 months for a failure of America’s current economic system,” said Folkerth. “I thought I would share my response. Those who disagree should respond accordingly with their reasoning and rebuttal. If you agree; today is a good day to begin adjusting.
“Before I continue, I should interpret my meaning of failure. In this instance, failure should be considered that point and time when the vast majority of American’s realize that our mathematically flawed underpinnings of debt-based-growth-capitalism has failed. And, the point in which radical change is evident and being openly aired, even by our dimwitted leadership. It will suffice to say that the trip back down our mountain of debt won’t be pretty.
“So why 18 to 22 months as a time frame for a meltdown or our current economic structure? It’s a complex multifaceted calculation, but in short, the exponential mathematical function will play out in several key areas simultaneously. Once the U.S. got behind the power curve in several critical areas that had formerly grown exponentially, the time before reaching mathematical impasse is not only short, but much easier to calculate.
“The backside of any exponential curve that represents total consumption of any finite physical supply, or the exponential growth of debt, looks exactly like the front side of that growth curve, except in reverse.
“The trip up and down an exponential curve can be likened to a speeding car going uphill with no brakes and limited fuel. Everything goes just ducky so long as the engine is propelling us ever upward. Once the fuel runs out, the trip back down is similar to the trip up with the exciting addition of the ever increasing speed of decline.
“That brings up oil consumption as a perfect real life example of that speedy decline. Over the period of a short 120 years, world oil consumption has gone from zip to 84 MBD (million barrels per day). Once the maximum supply reaches balance with consumption, the shortages and rising costs will become monumental within months, rather than years.
“As an aside, those who continue to believe that we are awash in oil in the United States should seriously consider the hard cold facts that provide indisputable evidence to the contrary.
“The U.S. National Debt has reached the vertical stage of the exponential curve to the tune of currently growing at $2 TRILLION per annum. In 1980, the 204 year accumulated National Debt was $907.7 BILLION. The fight occurring in this year of 2011 over raising the debt ceiling by another $2 Trillion, may well represent the last time that any compromise is possible, as this proposed one year deficit has now reached approximately 2000 times the total National Debt of our first 204 years of existence!
“The last remaining argument for raising the debt level is one in which the United States will increase GDP (Gross Domestic Product) to a level where income and debt are once again in balance. The former supposition is both physically and mathematically impossible. The flawed assumption is two-fold in supposing that GDP can be forever exponentially increased and that such increases of GDP are unconstrained by physical inputs (hard limits).
“Some two years past, I predicted that U.S. GDP had hit zenith if corrected for per capita share, inflation, and debt accumulation. In fact, GDP has fallen when the proper accounting is applied. GDP is constrained by the available matter and energy while debt is merely a paper agreement between delusional humans that has no constraints whatsoever with the possible exception of running out of trees and cotton from which to produce paper. Let there be no gray area; the United States is broke.
“Real unemployment is not improving and won’t improve, due to an imbalance of labor required verses labor available. The U.S. now has an endless oversupply of labor that is growing by millions…yes, millions.
“This very week in May, 2011, some 5.3 MILLION students will graduate or will have dropped out of high school and college. During the entire year, approximately 1 Million legal immigrants will join our ranks and there is currently a bill being discussed to allow some 12 Million illegal immigrants to receive amnesty and citizenship. They all have one thing in common; they’re looking for work.
“When I state “labor,” it should be considered to include brawn or brains. It should also be considered that real wages for the Middle Class has been stagnant for years and is now in steady decline.
“Student debt has grown exponentially and has now eclipsed the total credit card debt in America. The only possible way out of this conundrum would be immediate, tremendous job growth and unprecedented wage increases, which are both physically impossible for the U.S. under a globalized economy, and it is now far, far too late to correct our past errors even if our leadership were so inclined…and they aren’t.
“Education costs in general and the highly successful propaganda of “I need to pay for my kid’s college regardless of cost,” have transferred the last bastion of wealth from Middle America’s families to the institutions of higher learning. This total breadth of this wealth transfer could easily represent the greatest Ponzi scheme of all time.
“A recent report has concluded that 2011 will represent the fewest summer jobs for students in our nation’s history and fewer job prospects for graduates. All that, while at the same time setting a record level for graduating student debt at an average of $22,900.
“The false and fleeting wealth of personal housing has been lost. Housing will not recover in any meaningful way and foreclosures will remain quite high for the remaining period of time prior to the failure of our debt culture. Housing may be seen as a micro-view of the nature of our future decline. Personal housing values grew and fell in an exponential manner.
“The first class of baby boomers did in fact arrive as scheduled this past January 2011, and that first wave of 3.4 million has 16 years of relentlessly marching reinforcements arriving behind them, with each class growing in number. Millions upon millions of Americans will now claim Medicare and Social Security while they simultaneously draw down their investments. Once again, this is a real life example of exponential growth and exponential decline.
“The only possibility of these states pulling out of this exponential decline would be for tax revenues to surpass all time previous highs…by a bunch. The states will soon reach the point of having no further areas from which to cut. The maintenance of our massive aging infrastructure has become impossible to fund. Without the offsetting phenomena of exponential growth, the game ends quite suddenly.
“The positive feedback loop that is being created by above subjects and many other examples that I won’t take the time to delve into, will culminate in an event that will be similar to that of the Great Depression. I see little evidence that points to the possibility of putting off that event beyond an 18 to 22 month time frame.
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“In the mean time, most Americans will busy themselves with accusing one political party or the other for the failures. Nothing could be further from the truth. The culprits are mathematics and natural physics; subjects that our elected officials on both sides of the aisle are totally ignorant of.
“The fuel that fed our exponential rise was provided by two rarely reported, but essential elements; new frontiers to settle and vast undiscovered resources. The license plate motto of our 49th state of Alaska says it all; The Last Frontier. And by the way, Captain Kirk was fiction; there is no final frontier that will save our collective bacon.”
“The greatest shortcoming of the human race is our inability to understand the exponential function." – Dr. Albert Bartlett, Professor of Physics, University of Colorado.
Listen to Frosty Wooldridge on Wednesdays as he interviews top national leaders on his radio show "Connecting the Dots" at www.themicroeffect.com at 6:00 PM Mountain Time. Adjust tuning in to your time zone.
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