Executive Summary

• The real (and growing) risk of one or several systemic breakdowns
• What to expect during a breakdown of our
  • Economy
  • Energy systems
  • Environmental systems
• The importance of intelligent stewardship, and focusing on controlling the variable you can

If you have not yet read Part 1: If We're Going To Borrow Against The Future, Let's Borrow To Invest available free to all readers, please click here to read it first.

But what if don’t invest in our future as outlined in part I?  What if the powers that be and system-wide inertia combine to simply deliver us more of the same going forward? 

What if we simply have a profound failure of leadership and none of that good stuff happens, and the next round(s) of QE simply fatten up the trading profits of large banks and hedge funds?

One sign you’ll have that we’re headed nowhere fast in the US is if the next election for president involves a Bush and a Clinton.  That will be a choice between status quo option A and status quo option B, which is no choice at all.

As Winston Churchill said about Americans, you can always count on them to do the right thing…after they’ve tried everything else. 

Unfortunately, we don’t have time in this story to try everything else first and if we don’t do things differently, then I see no other outcome besides a huge, systemic breakdown occurring across one, two or all three of the E’s.

Economic Breakdown

The big premise of the economy – or what people have been endlessly conditioned to think of as ‘the economy’ – is that it has to grow.  Not just a little bit, but exponentially.  Forever.

A very important derivative of the economy are financial assets.  Stripped of their honorary doctorates in complexity, financial assets such as stocks and bonds, are nothing more than claims on the economy.  After all, who cares if you own a billion dollars worth of 10 year US Treasury bonds if, in ten years, there’s nothing to buy with the returned proceeds from those financial assets?

What we care about are real things that we can buy with our money, or stock dividends, or bond receipts.  Money is merely a claim on real wealth.  Debt is a claim on future money. 

As any child can work out, if your claims on the future economy are growing then it means you expect the future economy to be bigger.  Not the same size, nor smaller, but bigger.  And if your claims are growing exponentially, then your expectations are for an exponentially larger economy in the future.  Otherwise, why bother lending money or storing up your claims?