Why Growth Won’t Last

Why Growth Won’t Last by Brian Maher – Daily Reckoning

“One martini is alright,” counseled the late James Thurber.

“Two is too many”… “and three is not enough.”

As with the martini, so with debt.

Today we tell a woeful tale of substance abuse…

Assume an economy in doldrums. Debt appears to offer a hand up.

The initial dose of debt brightens the economic spirits, livens the pace of commerce, sets the idle machines of industry awhir.

The customer rapidly yields to debt’s liquidy charms… as a man yields to the womanly charms of the enchantress.

He is hot for more and orders a second round.

The first — after all — set things swinging.

But this second dose of debt dizzies the senses… and fogs the judgment.

In an economy prodded by debt, projects are undertaken that would not otherwise be. Popular industries are targets of overinvestment. A spree of debt-fueled consumption is soon underway.

But a cardinal fact soon emerges…

This business is unsustainable in the absence of more debt. The preceding boom will collapse in a heap without additional debt to hold it up.

“If Only He Had Declined That Second Martini”

The barman is instructed to mix another libation — the third.

It keeps the night going. But this dose lacks the stimulating effects of the second, much less the first.

That is, the third drink is “not enough.”

Only a fourth round of debt — an even stiffer round — can work the trick.

Down the gullet it goes.

But a fifth, stronger round is required to hold the previous four together.

And so a fifth, stronger round it is.

By now the poor fellow is 100% out of his wits, all senses deranged.

But he demands more.

Comes a point when the barman will serve him no longer. He is presented with a tab — and what a tab.

The roughneck manning the door then drags him outside and heaves him upon the pavement.

He is a man undone.

If only he had declined that second martini…

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