Interesting take in the network that allows us to get together in cyberspace.Mikehttp://dailyreckoning.com/the-internet-is-a-dud/print/The world today looks almost identical to the world of the 1960s because there have been very few important innovations since then. But you will leap to reply — the internet! Alas, electronic technology does not seem to noticeably increase output of stuff. The Internet affects our quality of life in many ways, but not our standard of living....The Internet cannot create GDP growth....The real federal deficit for 2012 is not $1.1 trillion as widely reported. Include unfunded Medicare and Social Security obligations and it is more than $7 trillion. GDP increased during the same period by about $320 billion. In other words, debt is going up 21 times faster than the economy that supports it. Already, if you reported the liabilities of the US government correctly, according to GAAP rules, such as every corporation is required to do, it would show a hole $86 trillion deep. And at the rate deficits accumulate, it will get twice as deep in the next ten years — to more than $150 trillion, or nearly 10 times the size of the economy.Another way to look at this is to think again about how modern democracies finance themselves. Since the days of Bismarck, they take in money from citizens and pay much of it back, in the form of various social spending programs. The successful politician allows spending to outstrip revenues as much as possible, but not so much that he appears irresponsible. The more benefits he can plausibly promise to the voters, the more likely he is to gain power…and the more resources he can also shift to favored groups.Growth over the last hundred years — in population, GDP, wages, prices — made it possible to expand government spending greatly, anticipating larger, richer generations that would support their smaller, poorer parents.The mathematics of this system held up fairly well — until recently. Now, population growth rates are falling everywhere in the developed world — including the US, with a huge bulge of baby boomers preparing to retire and voting themselves the most lavish benefits in history. Without growth, this system of public financing is doomed to spectacular failure. More spending will not be better; it will be calamitous. The more dry debt tinder on the ground, the bigger the blaze.
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