CHAPTER 11Debt
If something cannot go on forever, it will stop.
—Herbert Stein, economist (1916–1999)1
The United States and much of the developed world suffer from a condition I call “too much debt.” It's not exactly profound to most people, but our leaders don't seem to understand or care about the impact it has on the rest of us.
We could spend an entire book just on the subject of debt, because (a) it's that important, (b) it's a very complex subject packed with data and a long and rich history, and (c) the trajectory of our debt is completely unsustainable.
But we're only going to spend just enough time on debt to support my main claim: Debt markets are making an enormous collective bet that the future economy will be exponentially larger than the present. It is a dangerous wager, and one which, if it doesn't pan out, places the collective wealth of entire nations and everyone's future prosperity at risk.
When debt markets were disappointed in the past, standards of living suffered, governments were tossed, currencies destroyed, and countries collapsed. We therefore care very deeply about whether our debt markets are at risk of being disappointed, and, if so, what the source of their disappointment might be.
What Is Debt?
In Chapter 7 (Our Money System), we learned that all money is loaned into existence. When money is created in our current system of banking, the other side of the ledger carries the loan that was made. In other words, we have a debt‐based money system. ...
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