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Why Your Own Plan Better Be Different

Because the cavalry isn't coming
Tuesday, January 21, 2014, 2:40 PM
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Executive Summary

  • Why the insolvency hole the U.S. is in may be much deeper than appreciated.
  • Current 'best case' assumptions show us doubling the size of our economy TWICE over the next 75 years. Why that's just not achievable.
  • Why the above assumptions get even worse when the energy story is taken into account.
  • Why action at the individual level is your best bet now.

If you have not yet read Part I: "Endless Growth" Is the Plan & There's No Plan B available free to all readers, please click here to read it first.

A Big Hole

When the Treasury Department estimates that the U.S. has a ~$65 trillion NPV (Net Present Value) shortfall in its main accounts, it's saying that using its assumptions, the U.S. government would need to have $65 trillion today in an account, earning a stated rate of interest, in order to be solvent.

Since the U.S. government don't have that have that kind of scratch, it's insolvent. 

But the real picture is likely worse. The Fed calculates the NPV shortfall to be closer to $100 trillion. And if you believe Lawrence Kotlikoff's math, the figure is closer to $200 trillion. Either way $65 trillion, $100 trillion, or $200 trillion the sum cannot be paid.

So it won't be.

And the real trouble is that all of these numbers make the same implicit assumption: The future will more or less resemble the past. That is, some form of future growth exponential future growth of the economy is at the heart of every single calculation.

But we might question that, because somewhere between here and there, economic growth will have to come to an end. Or at least a pronounced deceleration. Why? Quite simply, because the earth is finite.

Now, we might comfort ourselves with the belief that our future date with hard limits is lifetimes away. But when we do, we shortchange ourselves (if we're wrong) and our progeny (if we're right). After all, the time to make an adjustment is when the resources and energy exist to make that change.

And that's now. Or, really, decades ago...

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