muses of the moment

January 25, 2013

The Great Transfer of Risk

Following up with yesterday’s post…..

Many real economists have been talking about how the global financial crisis has not been fixed, but the risk of implosion has just been transferred to the taxpayers and/or bond holder. This transfer doesn’t keep the system from imploding, it just changes who might be affected more than another.

Of Two Minds lays out the details of this transfer and the frightening problems that will surely bubble up in the future. Click here.

The problem with transferring risk to future generations is that it is a self-fulling prophecy. The lack of financial security and stability of the future generation will guarantee the further collapse of the system. The only thing it might buy you is time. But we are also facing the added “whammy” in first world countries of an aging population requiring money out of the system, not putting money into the system. We would be facing the further collapse of economic growth even if the younger generations were not saddled with future debt and higher taxes.

The only remaining questions are:

  • Is it a slow burn?
  • Timing? Or length of time?

The contraction in debt and the following lack of growth is guaranteed.

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