Spiralling Government Debt Isn’t a Choice

the impact of retiring workers may turn out to largely be a wash, and as seniors reduce their spending in line with their falling incomes, that may well become yet another important reason to question whether economic growth will be sustainable.

If great contractions are caused by excessive debt and these contractions lead to deflation, then the Fed can only temporarily offset the inevitable deflation. Quantitative easing (QE) will only work by inducing another borrowing and lending cycle. This will mean that the economy will add more leverage to an already overleveraged economy. Thus, the

The author of this report highlights that most of the obligations countries now have is to their pensioners and senior citizens. Naturally, governments could cut Social Security or Medicare and reduce the future liability. There is no way that would fly politically. The complication is that as countries grow older, most of the voters also happen to

life expectancy alone is not enough. There has to be a suppression of degenerative diseases that currently turn the older cohort into massive consumers of resources rather than producers. Diseases that kill quickly are economically sustainable. Keeping people alive who can’t produce is economically debilitating.

As I will show, some of these responses require an unsustainable increase in debt, and so are temporary. There are, it turns out, two sustainable responses to a forced increase in the savings rate in one part of the economy. The first is an equivalent increase in productive investment. The second is an increase in unemployment.