Casaubon's Book

If Trends Continue…

Posted by Sharon Astyk on March 20, 2012
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Richard Heinberg has a nice piece about drawing conclusions from present trends. Among his observations:

If current economic trends continue . . .
China’s economy will be 8 times as big as it is today by 2040.
China’s economy will surpass the size of the present global economy before 2050.
The US federal debt will double–from $14 trillion to $28 trillion–by 2022.
In 2072, the federal debt will amount to $896 trillion, or $1,629,091 for each American (assuming a US population then of 550 million).
By the end of the century, each American will “owe” over a billion dollars.
Thanks to the doubling of US households living on less than $2 per person per day between 1996 and 2011, in 150 years there will be about 1.5 billion Americans living on practically no income.
The number of billionaires in the world (having grown from 793 to 1210 in just two years, from 2009 to 2011) will equal the world population in only 70 years. (Given the previous trend, this is especially gratifying news: since the rate of growth in the number of billionaires in the world exceeds the rate of growth in extreme poverty in the US, this means each American will become a billionaire before his or her grandchildren plunge into desperate poverty).

As Heinberg rightly points out, following out trends is sometimes useful but also dangerous – and particularly dangerous because so many economic assumptions are built on underlying material assumptions that don’t hold up. The whole thing is well worth a read as an illustration of the thought traps we are popularly prone to.

Want to hear Richard speak in the Albany area? Want to hear me introduce him? Want to spot my husband and I in the same place due to the rare miracle of a babysitter ;-) ? Richard will be speaking at SUNY Albany on March 27 at 7pm. Hope you can join us there!

Sharon

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Comments

  1. #1 Art
    March 20, 2012

    “Debt” is the wrong metaphor. Yes, I know, everyone talks about the national debt but in reality it isn’t a debt in any normal sense.

    At one point, when US dollars were redeemable for gold, a dollar was a ‘debt’. Now it is a just a dollar and all you can do with a dollar is get more dollars or, outside the system, buy US products; or, inside the system, pay taxes. All other transaction cancel out.

    In the largest case China ships us manufactured good and we give them money. It is a trade, fair and square. At that point neither side owes anyone anything. The trade deficit is neither a debt not a problem. China holding money is not a debt. What can China do with that money? If they sell it to another nation then the other nation holds it. We, the US are unaffected because he the amount of money outside our nation hasn’t changed. If they sell it to a US business they get a US made product, which corrects our trade imbalance and the money reenters our domestic system.

    The other thing they can do is buy treasuries. Sounds ominous but it is pretty much the same thing as you opening a savings account. It is a savings account that pays off in US dollars. They haven’t gotten rid of their dollars. Now they have more dollars and a vested interest in maintaining the value of the US dollar. Current interest rates on Treasuries are close to zero percent. A savings account that offers essentially no interest.

    This, along with high unemployment, are good indicators that the US economy is not overheated and inflation is not going to be an issue for a good time.

    The only way for anyone to get rid of US dollars outside our system is to buy US products. Inside our system the equivalent is that you pay taxes. In the first case the dollars shift from outside our domestic account to inside. In the second case it returns to the treasury which created it by punching numbers into a computer.

  2. #2 Ruben
    March 20, 2012

    Here is a comment I posted on Richards page.

    This is a great way to tell this story. I think it might be powerful, maybe even more powerful, to look at trends between. say, 1950 and 1980, and talk about where that trend is now. Sales of slide rules sure have fallen off the cliff….

    That would make it more concrete in our lives today, rather than being a work of imagination. Missing the trend on the upside or downside would still make powerful narrative.

    I would also note that–with the exception of how many Americans live on $2 per day–these numbers are very, very abstract. Nobody can really feel how big a billion is. We know it is big, but it is meaninglessly larger than a million, which is meaninglessly larger than ten fingers and toes. A million might make sense, but only if we translate it into how many houses or sports cars or years of retirement we could buy with it.