Final Excerpt from How You Got Screwed: The End Game

Final Excerpt from How You Got Screwed: The End Game from The Burning Platform

Author’s note: This is the third chapter excerpted from How You Got Screwed, posted courtesy of The Burning Platform. (You can find the first two chapters here and here). If you liked these samples, note that there are 14 more chapters in the book, which is less than $10 on Amazon. While much of this may be old news to TBP readers, I hope you’ll agree it could serve as a good eye-opener to people who don’t frequent this site. Buy in bulk, and buy often. 🙂

Chapter 16: The End Game

The Point: No one knows for sure what the end game looks like, or when it happens. But it won’t be too long, and it won’t be a happy ending.

Let’s be clear: I don’t know how things are going to play out in the future, nor do I know when we’ll hit any sort of a breaking point that would welcome in a crisis. (No one else does, either, so be cautious of people who say they know what’s going to happen in the coming months or years.)

But I do know that we’re not on a sustainable path. All of the problems described in this book are growing and build on one another to create a sort of “pressure cooker” environment that cannot go on forever. Just think about how the trends we see today feed off each other to create the ideal conditions for some sort of economic or social disruption:

  • Despite the government’s claims of low inflation, the price to consumers of most things—including but not limited to food, housing, medical care and education—continue to rise.
  • Debts of all kinds—personal, corporate, and government—are rapidly increasing. The federal government’s debt is sitting at the $20 trillion mark, making America the greatest debtor in the history of the world.
  • After a 35-year decline in interest rates, allowing more and more borrowing, we have bottomed out and started to move back up, making borrowing more expensive and killing the longest-running bond bull market in history.
  • Wages have not risen in real terms since 1979.
  • We have a huge percentage of the population moving into retirement age, where they will stop contributing to the tax base, start requiring more government services, and depress asset prices as they sell their investments.
  • Income equality is at the highest level since the Great Depression, and movements such as Occupy Wall Street show an increased awareness—and resentment—of that fact.
  • Our social tapestry is fraying, with trust in various institutions at or near record lows and domestic movements ranging from the Tea Party to Black Lives Matter.

The economist Herbert Stein offered Stein’s Law, which said that “If something cannot go on forever, it will stop.” With that truth in mind, think about whether any or all of the trends above can go on forever. How long can prices continue to increase while wages remain stagnant? Can debts continue to rise forever as interest rates climb? What will those happen to the federal deficit as interest rates go up?

And what happens as some of these trends reverse? If the government cannot keep on borrowing $1 trillion per year, what happens to the wave of retirees who need Social Security, Medicare and other government services? If wages continue to stagnate, how long before peoples’ resentment of record income inequality leads to an active response?

What Would a Disruption Look Like?

As I said, I don’t know what will happen: There are a lot of very smart people who differ on even fundamental questions, like whether these factors are more likely to lead to inflation (or even hyperinflation) or deflation. A lot of it depends on what some powerful players, like the government and Federal Reserve, do in response to early crises, and there’s no way to predict with certainty how they’ll act.

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The Burning Platform

Hardcore and hard hitting economic analysis. The Burning Platform presents information and analysis you will not find anywhere else. Various authors from a variety of backgrounds. Jim's work is featured regularly on Zerohedge.