If you are not watching the TSX in turmoil, it probably means you do not have RRSPs that are market based. But you should be paying attention anyway. We are in historic times. Today the TSX fell farther in one day than it has in 8 years. The world economies are thrown into turmoil over the refusal to bail out Wall St. It is fascinating to watch! My post today is a short quote from a long and insightful editorial by Bill Bonner regarding the peril that the USA finds itself in. It looks like we are about to see what it looks like when a country, the most powerful country in the world, goes bankrupt.
Here’s a sobering detail: For the last 15 years, the U.S. money supply has grown about twice as fast as GDP. Federal government liabilities, meanwhile, have grown three times as fast. It now has more financial obligations than assets. It is, effectively, broke.
And here is another cup of strong coffee: U.S. debts are now compounding negatively like a Neg Am mortgage, that delightfully fatal confection invented at the height of the housing bubble. Some house buyers didn’t even pay enough to cover the interest on their mortgage; the missed interest payments were added to the mortgage itself, causing it to grow automatically. Exponentially.
We don’t know what Professor Chris Martenson is a professor of. But he has done the world a favor with his description of what happens when things grow exponentially, rather than arithmetically.
Imagine you could make a football stadium watertight, he writes. Then, imagine that you put a magic drop of water in the center...a drop of water that doubles every minute...so that after six minutes or so, you’d have about enough water to fill a thimble. Now how long would it take before the stadium filled, he asks?
We’re not going to leave you in suspense. For the first 45 minutes, you can walk around the stadium and barely get your feet wet. But in the next 4 minutes the stadium fills and you drown.
And here is another cup of strong coffee: U.S. debts are now compounding negatively like a Neg Am mortgage, that delightfully fatal confection invented at the height of the housing bubble. Some house buyers didn’t even pay enough to cover the interest on their mortgage; the missed interest payments were added to the mortgage itself, causing it to grow automatically. Exponentially.
We don’t know what Professor Chris Martenson is a professor of. But he has done the world a favor with his description of what happens when things grow exponentially, rather than arithmetically.
Imagine you could make a football stadium watertight, he writes. Then, imagine that you put a magic drop of water in the center...a drop of water that doubles every minute...so that after six minutes or so, you’d have about enough water to fill a thimble. Now how long would it take before the stadium filled, he asks?
We’re not going to leave you in suspense. For the first 45 minutes, you can walk around the stadium and barely get your feet wet. But in the next 4 minutes the stadium fills and you drown.
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