US Public Debt...vs Peak Oil

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mainebob's picture
Status: Bronze Member (Offline)
Joined: Jan 13 2009
Posts: 97
US Public Debt...vs Peak Oil

Here's an interesting chart:
Seems like the government is causing the biggest problem
with the debt by funding wars and continued tax cuts...
If those were eliminated the line would be mostly flat...
ie... only slight increase in debt....

So how does peak oil figure into the debt picture...
From what I'm learning here, it seems like the graph would
go straight up if peak oil factored in...

I have trouble understanding the Funny Money.
Please shed some light.



sundarb's picture
Status: Bronze Member (Offline)
Joined: Jan 10 2011
Posts: 72
effect on GDP


I'd think that peak oil associated energy shock will have a direct impact on the GDP. Lower GDP and the same/increased debt level (due to deficit spending) will translate into a higher debt-to-GDP ratio. The productive output of the economy is used to pay down the consumptive portion of the economy and this 'paying down' gets harder.

As a result, the country moves further close towards a debt default. 

Nobody puts it more succinctly than Ludwig von Mises:

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."


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