Marc Faber nails the collapsing U.S.

I'm working my way through the Collapse of Complex Societies. Marc Faber has probably read this book, but even if he hasn't, the arguments echo in this segment. It's after the midway point, when he begins to discuss the breakdown of the system.

One of Tainter's arguments (I'm not finished with the book) focuses on the marginal productivity of complexity. As complexity rises, there are benefits to society, but like all things, at a certain point, increased complexity leads to losses. I haven't reached any counter-points by Tainter, but at this point, breaking down the system, such as decentralizing some aspects of society, or reducing the geographic area under control of the society, etc., should produce increased returns. Historically, the behavior of people in similar circumstances shows this to be the case, as pieces of the Roman Empire sought to break away, for example.

Marc lays out the dysfunction in the U.S. system. On the one side, many people do not produce and take from the government. On the other side, there are wealth producers who feel they are cheated by the system. Think about the incentives inherent in th U.S. system. Does government policy create incentives for more unproductive behavior, or less? Does government policy encourage business to invest at home and play by the rules? Or does it encourage them to move business overseas, along with their assets? Think of all the middle layers of bureaucrats needed to operate the system. Think of all recent geopolitical events, such as 9/11. The U.S. spends more money, time and labor on security, for no increased benefit. It now has three wars underway, none looking successful. All of these policies dumping money and blood in the desert are only designed to prevent greater losses, not generate positive returns.

These are some major initiatives, but if you think through the myriad of government policies, you will find the same scenarios repeated over and over. More administrative positions, more rule compliance, etc. Spending more money to deliver the same results, or worse, spending more on a failed program in the hopes of obtaining a better result.

It's not limited to government either, think of the billions in student loans and rising cost of higher education; the higher cost of healthcare; the higher cost of research and development that produces less breakthrough discoveries. Tainter identified these as being at the point of generating diminishing gains back in the late 1980s. On healthcare and education, we are now at the point where spending additional money actually increases the loss to society.

Monetary printing designed to prop up the economy is part of the dysfunction. Without money printing the economy would contract to its sustainable level and there would be "no" wealth for the rich and "no" transfer payments to the poor or the retired. (There would still be money of course, but the amount of losses would staggering. Even now, the U.S. government is borrowing 40 cents of every dollar spent. ) The money being pumped into the economy by Bernanke & Co. is inflating a blown-out tire. Some people are using the time bought by the printing to move assets overseas, some are moving out of paper currency and into stores of value, the ultimate being gold.

No comments:

Post a Comment