Posts Tagged ‘economics’

A visualization of the exponential function

Take a good, hard, long look.
US Debt over time, graphed semi-logarithmically
This is a graph of the debt of the US Government, original Excel spreadsheet is here. Time is on the horizontal axis, in number of decades since 1800. The vertical is the total debt load graphed on a log scale. Notice a few things.

  • The dip around decade five (the 1840s) is Andrew Jackson’s time, when the debt actually went away completely. I couldn’t include the actual zero point, since that would have broken the log scale, but imagine it’s there.
  • The black line is a best fit trendline. Notice it goes past $100 trillion around decade 26 (roughly 2050). Note also that it accounts for the data points before 1840, which means that if it only included data from when the debt started up again, it would be even steeper.
  • The great deficit and debt reduction of the 1990s? That’s the slight decrease in slope between points 20 and 21. The Great Depression? Between points 14, 15, and 16. The Civil War? Points 7 and 8.

See what I’m getting at? The numbers are inexorable, unavoidable, and undeniable. There is nothing that can stop that slope from continuing, except one thing. Not a civil war, not a world war, not a depression, not anything – except rejection of the debt.

It will happen. Either our creditors will refuse to accept our debt notes, or we will devalue them by printing more. That will have the effect of spiking the trendline to higher levels earlier. The early signs are already here – Social Security started paying out more than it took in annually, starting this year. That’s a full decade earlier than it was anticipated to do so.

Once the debt is repudiated, the currency will die. Not just collapse – die. Dead. John Cleese parrot dead. Of interest only to currency hobbyists, and maybe not even them.

Karl Denninger explained it another way with Fed minutes and memorandum, but the point it the same.

We’re in for a wild ride, and not wild like Space Mountain fun wild. As Jefferson might say if he was around, “… they have devalued our currency, by replacing the just and honest measure of precious metal with a currency valued by fiat, then destroying it without regard to the property rights of the citizens or their expressed will …”

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