Taking out new debt seems to have an increasingly counterproductive effect. It seems as if the marginal return on GDP per additional unit of debt is gradually declining. This means that economic output cannot any longer be stimulated by taking out additional debt. As soon as the dose of debt cannot be stepped up anymore or as if this course of treatment has to be discontinued altogether, the withdrawal effects will be painful. Gold should come out of this situation on the winning side....
Excessive debt causes the room available to the government to shrink, because debt service eats up a growing portion of public spending. David Hume described this scenario in his 1752 essay “Public Credit.” Excessive debt leads governments to pawn their future revenues and to lapse into faintness and incapacitation. A number of concrete examples substantiate this notion: In Germany, the three cost segments of social benefits, public sector pay, and interest and redemption of debt account for almost 75 percent of the federal budget. This means that only a quarter of tax revenues provide room to maneuver.
“The greatest shortcoming of the human race is our inability to understand the exponential function” Albert Bartlett
The following chart shows the increase in dynamics. Public debt today is more than 5,000 times that of 1913, when the Federal Reserve was established. On the following chart we can see that “total credit market debt owed” would double every decade. We have recently seen some sideways consolidation, but if this pattern continued, the United States would be faced with a total credit market debt of $107 billion in 2012.
“Problems cannot be solved by the same rationale that created them.” Albert Einstein..."
at http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/5/18_The_Seeds_For_A_Much_Bigger_Crisis_Have_Now_Been_Sown.html
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