from Interest.co.nz – didn’t he put it well!

  1. AndrewJ Says:
    March 11th, 2010 at 10:16 am I liked PeterR’s response

    # PeterR Says:
    March 10th, 2010 at 11:20 pm

    powerdownkiwi,

    I think we broadly agree on the destructiveness of compounding anything. Debt and wealth being a couple of the few things we as a culture expect to grow exponentially.

    Those with wealth (countries, corporates or individuals) assume wealth should compound. That requires compounding growth – something that worked (from the perspective of the wealthy) so long as there were new colonies, populations, or resources to exploit. Which there were for a few centuries up till the early 1970’s.

    But there are limits to compounding growth and they were for all practical purposes reached.

    From there growth became increasingly notional. Currencies were debased. Inflation grew. Credit expanded. “New” wealth was created in anything from personalised plates to radio spectrum to IP. For the last 10 years growth came largely through asset bubbles, government spending and drawing down consumption from the future.

    Much of that notional “growth” is now collapsing with deflation as it must – the event only ever being a question of timing. We have already arrived at the point where debt cannot be repaid – irrespective of the availability and price of oil or the efforts of governments and central banks.

    If peak oil had occurred before now then it may well have forced the deflationary collapse to occur earlier. Whether loans, debt and interest repayment could be continured beyond the peak supply of energy is now a moot point because we got there before we reached peak oil.

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