Wednesday, October 13, 2010

Societal Hysteresis Effects

Hysteresis is the tendency of an object or group to retard or minimize the changes caused by an external event. In a society, it can be the group resistance to facts that contradict widely-held notions.

In Europe, America and Japan, the bills for decades of profligate spending are adding up. In the US, servicing our $13T debt would cost us $520B a year at a very modest 4% interest rate. Putting a stop to the borrowing that is causing these costs to rise would force us to make large-scale changes in the role of government in our lives. The current deficit is about $1.3T. Cutting even half that much from the budget would wipe out whole departments and slash services. There's no way to carve $520B from the budget with efficiencies and earmark spending pledges. The government will have to do less. A lot less.

Instead of coming to this conclusion, we and the Japanese and the Europeans are starting to print unbacked money on a massive scale. It's not because this makes sense or because it's part of a long-term strategy for sustainable economic growth, it's just societal resistance to fact.

Can we continue to live with cradle-to-grave security? Yes we can!

The question is this: What will lead us to accept the fact that you can't spend more than you earn? What will the change look like? Lots of people have predicted a day of reckoning for a long time now, but we keep coming up with ways to dodge our problems. Is printing trillions of dollars the last step?

3 comments:

Jeff Burton said...

It's social security/medicare that is/will be killing us. And your post is on target with respect to those two bankrupting programs. And the societal resistance to changing them ranges from ignorance such as "Keep government out of my medicare" to the falsehood that they are retirement accounts ("I'm just getting my money back").

They are really transfer payment welfare schemes, and should be run on that basis (for the indigent elderly). I expect they eventually will be.

K T Cat said...

I'm sure you're right. Retirement ages will be raised and means-testing will be established. That will take a lot of future pressure off, but those two programs aren't cash hogs yet. They're still at break even or a little bit above.

Anonymous said...

The money is there. It is simply not distributed evenly enough. Milking the small people has its limits and we see them here. It's time the big corporations step up to their social responsibility. Too bad that won't happen in the US anytime soon, though.