Survival__ Structuring Prosperity for Yourself and the Nation - Charles George Smith [86]
5. The debt-based consumer economy was not a permanent new level of consumption but a one-time anomaly based on an imprudently engineered reduction in the cost and availability of credit combined with a (false) perception of near-zero risk. The entire FIRE economy (finance, real estate and insurance) will be permanently reduced by digital automation and the shrinking of these sectors as the global debt and real estate bubbles burst.
If history is any guide, then interest rates will rise for a generation, effectively depressing real estate and other debt-dependent assets for a generation.
Though the Federal government is furiously borrowing and printing money, the ability to do so at no cost to the dollar (in terms of depreciating purchasing power) and at low interest rates is ending. Since Federal borrowing of trillions of dollars has effectively backstopped the U.S. GDP, the end of the government's "borrow and spend trillions" campaign will remove that backstop and cause spending and employment to further shrink.
Even worse, the rise in interest rates will divert billions from programs to servicing the Federal debt, further reducing government expenditures on goods and services. Since so much of the debt is held by non-U.S. entities, a significant share of this interest paid will end up overseas. This feedback loop will further reduce Federal spending and employment.
If reckless Federal borrowing and money-creation ends up destroying the purchasing power of the U.S. dollar, then that will add yet another feedback loop as consumers pay more for imported oil and other goods and have less to spend domestically, further suppressing employment.
As collateral (bubble-era real estate valuations) and credit fall, so will consumer debt and the spending it enabled.
6. The demographics of a large cohort (the global Baby Boom) entering retirement coupled with longer lives and costlier "healthcare" options guarantee all government entitlement programs will face insolvency and collapse or greatly reduced benefits within a decade.
One of the consequences of this will be the reduction of currently "healthy" healthcare employment; another will be the diversion of vast sums of income away from consumption and into retirement savings.
7. ESSA (eliminate, simplify, standardize and automate) has barely touched much of the U.S. economy. Union rules, old habits and lush revenues have protected millions of processes, procedures and jobs from the scrutiny of plummeting revenues and taxes. As credit dries up and collateral falls in value, spending falls which reduces employment and taxes, which further erodes jobs in a self-reinforcing feedback loop of ever lower spending and ever falling employment.
For instance, buying a car or property no longer requires the expertise implied by a 6% transaction fee. In effect, the research and transaction could be done digitally.
8. Mechanization and automation form a "scalability trap;" once production can be scaled up then the necessity for human labor permanently declines. If I understand the concept correctly, it refers to the inevitability of new scalable technologies replacing human labor.
The Scalability Trap
To the best of my knowledge, the term "scalability trap" was coined by oftwominds.com correspondent Kevin Dodson who insightfully captured this powerful concept thusly:
"I think this 'scalability trap' that we find ourselves in (i.e. the more advanced we become, the more things scale, the fewer jobs we need) is like a hidden compounding tax on modernity - and we are about at the place where that tax is going to break the current model of tech innovation and entertainment consumption. A new model will surely replace it; let's just hope it is not some kind of Mad Max paradigm."
Or perhaps the scalability "tax" on modernity will combine with a reduction in credit, income and wealth and a rise in costs and taxes to