“Choking On the Salt of Debt”

That’s the title of a very thought-provoking article at Acting Man.  We’ve spoken about the perils of debt, and the damage it’s doing to our economy, on several occasions.  This article puts a new perspective on the problem, and highlights how bad it’s become.  I only have space to quote a few paragraphs from the author’s extensive treatment of the subject, which you should read in full.

Debt based stimulus is both sustaining and killing the economy at the same time.  No doubt, this is a ridiculous situation.  Here we will look to California’s San Joaquin Valley for parallels…

. . .

In the San Joaquin Valley, vast irrigation networks convey water thousands of miles to make the desert bloom.  But as surface water is conveyed along the open California aqueduct, it both evaporates and collects mineral deposits. The combination of these factors concentrates the water’s salt content.  Then, as it is applied to irrigation, the residual salts collect in the soil.

After decades of this, along with the over-application of fertilizer through mechanized fertigation systems, the salt in the soil has built up so that it strangles the roots of the plants.  To combat this, over-watering is required, because the irrigation water – while salty – is fresher than the salt encrusted soil. By applying excess irrigation water, the soils around the plants are temporarily freshened up so that crops can grow.

Yet, at the same time, this over-watering accelerates the mass quantity of salt being applied to the soil.  There is no outlet for the salt to flush to; the valley is the basin’s terminus.  Thus, in this grand paradox, the relative freshness of the excess water that is keeping the farmland alive is, at the same time, the source of the salt that is killing it.

. . .

So, too, goes the U.S. economy.  After nearly a decade of rapidly expanding its balance sheet, and pumping cheap credit and excess liquidity into financial markets, the Fed has produced a similar paradox.  They must keep expanding the money base to keep the economy afloat… but in doing so they are ultimately killing it.  [Click the image for a larger view.]

This, in short, is why it doesn’t matter if the Fed raises the federal funds rate or cuts the federal funds rate, or if Uncle Sam borrows more or borrows less.  At this point, there is no way out.  The present financial order, like the salty crop fields in the San Joaquin Valley, is doomed to choke on the salt of debt.

Only several lifetimes – or more – of fallow conditions will restore economic growth and fertility to the country.  The demise of the San Joaquin Valley as an agricultural region, however, will be indefinite.

There’s more at the linkHighly recommended reading.

I’ve said it before:  debt is killing us, as a nation, as a society, and as individuals.  It has short- and long-term consequences for everyone and everything.  The truly frightening thing is, none of our elected political leaders, irrespective of their party affiliation, appear to be serious about doing anything about it.  They just carry on spending more and more money we haven’t got, adding more digits to the already un-repayable national debt, and never turning off the tap.  They don’t believe they can do that without being thrown out of office by those who’ve become dependent on the “debt tap” to pay for their way of life.  They’re probably right in that . . . but their approach is still cowardly.

“The salt of debt”.  An interesting way to put it . . . and, given the example of the San Joaquin Valley, a very appropriate one.



  1. It's why Captain Capitalism has the book "Enjoy the Decline". There is no way to stop the collapse that's coming, so you may as well enjoy your good life while you have it.

  2. The government borrows money by selling Treasury bonds. They sell zillions of dollars worth of Bonds to 'our ally' Saudi Arabia, which is where we bought our gasoline for a long time. Besides buying bonds, Saudi Arabia also spends a hefty chunk of change buying weapon systems from the USA. As long as the Kingdom of Saudi Arabia keeps giving us money, why should we bother to control our spending? If we spend our money fast enough, we can all become kings. Question is, can we do it before the Kingdom of SA collapses?

  3. I am not a financial person, by any stretch of the imagination. But I saw this coming from a mile away. Just waiting now for the coming inflation that must follow. The fed gov cannot simply print money and create wealth out of thin air. Printing more money only serves to dilute the value of that which is already in circulation.
    It seems like the Weimar Republic had a similar condition. Take a wheelbarrow to buy bread. Not to carry it home in, but to carry all the useless money it takes to buy a loaf of bread. I have no doubt that it could happen here, especially if too many other countries decide to go off of the dollar as their standard.
    Back in the early 1980's, we had 20% or higher interest rates. Because of the same thing, people were afraid of not getting the same value back for what they lent out, if they were paid dollar for dollar.
    Like the saying goes, those who do not learn from their mistakes are doomed to repeat them.

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