The elephant in the room has a name: debt levels

Living sustainably in the Lockyer Vally Region isn’t JUST about what we do on our quarter acre, bush lifestyle block, or farm.  All of that happens in regional, national and global contexts which impinge on what we do and, in the case of permaculture and self-sufficiency, the urgency with which we do it.  For that reason we need to understand some rather large issues – including debt levels.  For all the talk about “turning the corner” on the global financial crisis, signs of take off in the economy, improved business or consumer sentiment, etc. there is a very large elephant in the room, and its name is “debt levels”.

I’ve posted on debt before, and there has been a lot written about economies (both global and national) and the level of public and private debt.  Some of it is so convolutedly technical as to be unreadable, some of it is easier to fathom. But until now no one has put it into poetry.  Now, from a most unexpected source we have an article that connects high debt levels, the global financial crisis, ongoing ( so far unsuccessful) attempts to kick start national and regional economies, Homer Simpon, and Edgar Allan Poe.  AND in a story that, though long and complex, presents the debt issue in a fairly understandable form.

The person who has achieved this is John Mauldin – not a “prepper“, not a professional doomsayer, but a financial expert with a wide following, a New York Times best-selling author, a pioneering online commentator who publishes a regular blog with the title Things That Make You Go Hmmm…..

No, this is not a paid advertisement – they guy is just incredibly well informed, highly productive, and publishes material that generally makes enormous sense.  If I have one major issue with him it is that he doesn’t seem to get it when it comes to the futility of continuing economic growth based on finite resources on a finite planet. But in terms of explaining the debt issue he is spot on.

Today’s issue of Things That Make You Go Hmmm….. is a comprehensive round-up of the problems generated by massive public and private debt levels throughout much of the world.  It’s long, but well worth reading, and can be seen as a linked series of very important ideas and facts, so even if you don’t read it all at once, it’s worth taking a look, or at least skimming it until something grabs your attention.

I can’t possibly summarise it, or even present most of the key points here.  But here are two excerpts that sort of point to his conclusion, but you really do need to read it for yourself.

If you want to live high on the hog, you have to accept that when the bills come due, they must be paid. In 2008 those bills came due, but the payment of them would have caused so much creative destruction that the politicians (and central bankers) felt compelled to step in. They found the trouble, diagnosed it incorrectly, and then applied the wrong remedies.

2008 was two things:

1) The result of far too much debt

2) The nearest thing to a truly global financial calamity the world has ever seen.

However, since 2008 the debt level has been increased massively and shifted to the public balance sheet in order to fix the problem. Now, with “recoveries” being hailed left and right, households are once again taking on new debt, which is seen as a sign of confidence.

Has the old debt been expunged? No. Have governments taken on debts which they intend to pay down as soon as the ship is righted? Of course not.


Folks, rates WILL have to go up again. They cannot stay at zero forever. We all know that. When they DO, because of all the additional debt that has been ladled atop the existing pile, the whole thing will come tumbling down.

All of it.

There is simply no way out, I am afraid. But that is clearly a problem for another day. Right now, everything is fine, so we can all go on pretending it will continue that way.


The whole article is here.

Oh, and the poetry is right at the end. Enjoy.

2 thoughts on “The elephant in the room has a name: debt levels

  1. Good article….. though you misspelled Mauldin’s name in your link to his website! I follow him too… People don’t understand debt, and when you try to explain to them how money is created as debt, they howl you down…… This turned up in my mailbox this morning..:

    The Incredible Debt Spider: It’s Time to End the Private Fed

    By Rand Clifford

    January 17, 2013 “Information Clearing House” – The “Federal Reserve Bank” (Fed) is not part of the United States Government. The Fed is a private, for-profit corporation ultimately owned by eight elite banking families:

    1. Rothschild’s of London and Berlin
    2. Lazard Brothers of Paris
    3. Israel Moses Seaf of Italy
    4. Kuhn, Loeb & Co. of Germany and New York
    5. Warburg & Company of Hamburg, Germany
    6. Lehman Brothers of New York
    7. Goldman, Sachs of New York
    8. Rockefeller Brothers of New York

    Magically, the Fed has exclusive rights to the dollar, and for them it’s even better than money growing on trees. Whether paying nominal U.S. mint printing costs for Federal Reserve Notes (like those papering your wallet), or simply entering digits into their banks’ computers, they lend this “money” back to us at a profit, making the following seem inevitable:

    “If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.”

    • Thanks Mike … for the compliment and for pointing out the blooper. I bet Mauldin gets tired of that typo.
      Yeah, the tricky thing for most people is that they think that all the dollar value in circulation is in physical money, and the idea that this is only a small fraction of it and is not what makes the economy “tick” is mindboggling.

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