The Elephant in the Room


In the upcoming presidential election, candidates are debating a plethora of important issues. However, the issue of budget deficits as they relate to the national debt have been widely ignored. It’s no secret why—raising taxes, cutting popular subsidies, and decreasing government programs is widely unpopular. In a democratic political environment, it’s hard for long term initiatives to be passed because more often than not, they’re unpopular in the short run making it nearly impossible for officials to win election. As a result, cumulative deficits have exploded. According to the U.S. Debt Clock, the national debt currently sits at $19 Trillion dollars with a federal budget deficit of $489 Billion dollars—two striking sums. However, the $101 Trillion dollars of unfunded U.S. Liabilities represents the truly sobering sum. These unfunded liabilities represent (among other things) the future social security benefits that the United States government is expected to pay, but hasn’t raised funds for. Based on the campaign so far, it seems unlikely that this important topic will receive attention. My apocalyptic scenario results from the United States defaulting on its debt. Although it’s extremely unlikely this will happen, it’s startling to consider the extent of the national debt and its impact on modern society if left ignored.

 

Compared to some of the other apocalyptic scenarios presented by other posts (zombies, nuclear fallout, AI invasion) the United States defaulting on its debt doesn’t seem that bad. Many of you might think “what’s the worst that can happen” or “what is the rest of the world going to do if the United States decides to default, I mean we’re pretty awesome.” Much to their surprise there would be several very important consequences. First, the United States’ near perfect credit rating would be destroyed—resulting in higher borrowing costs. The value of the U.S. dollar would collapse as confidence in the currency would disappear resulting in more dollars needed to pay for imports essentially making everything more expensive. In addition, the collapse of the dollar would lead to hyper inflation obliterating U.S. consumers. Companies would be crushed, unemployment would rise, credit would dry up. Due to globalization, these effects would be transmitted throughout the planet. Countries that hold U.S. debt, international trade partners, and foreign investors would all suffer. The cumulative effect: a spiraling global recession. If this were to happen, I’d like three people on my post apocalyptic team: Enron’s Jeff Skilling, Zach Alerhand, and Warren Buffet.

 

In the midst of a global recession nothing is more important than self preservation. As evidenced by his time with Enron, Jeff Skilling proved his ability to utilize his influence for personal gain. It’s been said that Skilling can “out argue God” proving invaluable in acquiring as many goods and services as possible. He has a pragmatic sense of judgment and is willing to sacrifice his ethical values for personal gain. Although, I’d need to keep a watchful eye on Jeff, his commercial expertise and argumentative excellence would greatly benefit my apocalyptic team. Next, Zach Alerhand—extremely well rounded will be essential to our team. Through his knowledge of business, markets, and sustainability he will prove resourceful in our efforts to combat the extremely poor economic environment. Lastly, Warren Buffet has proven his ability to effectively allocate capital throughout all economic conditions. He has a formidable work ethic and and has been successful in outlining potential areas for growth. He also has a strong understanding of the various forces that affect the economic environment through his vast experience with monetary policy.

 

http://www.usdebtclock.org/

 

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8 thoughts on “The Elephant in the Room

  1. This should be published as cutting political commentary. Well said, Ryan. Skilling though? Skilling? His name alone is nefarious enough. You could have a chance to start over and rebuild the system Ryan, don’t let him corrupt it before it even has a chance to mature!

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  2. Proooobably the most likely and realistic of all the Apocalypse scenarios haha, well done. I like how you kept an eye on the core of the problem (the economy, not the collapse of society) and chose people who would be minded in those fields.

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  3. I am honored by my inclusion on your team, Ryan. My only question is how have we been appointed to save the economy? Are you now the president of the United States in this situation? I know you are writing this as purely fiction but what if this situation pans out as you’ve described but the people that hold the positions that would effectively save the economy don’t act. How do we get the right people in that position?

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  4. Interesting take with Warren Buffet as your third team member. When approaching this prompt, I didn’t even consider the allocation of capital as a depleting resource. Definitely a smart move to have someone on the team who understands the economic environment and can asses areas of growth, as you mentioned, in a time of crisis.

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  5. If the securities markets still exist to make use of your superstar team, then is it really an apocalypse? Just wondering what is the cutoff for “apocalypse” versus “tough times.”

    I wouldn’t let Skilling near the internal risk controls for your save the economy team! But maybe you let him spin up some innovative ideas, Zach makes sure he doesn’t get fast and loose with accounting, and Buffet helps you allocate capital for these ideas.

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  6. There is a cutoff between tough times and an apocalypse. However in this situation, I envision society returning to an economic system closely resembling that of hunter gatherers. With no faith in government, currency, or trade protection the entire idea of a “securities market” would be rendered obsolete. This doesn’t mean that personal property won’t exist, it will just be acquired and protected in very different ways. I think Skilling would be helpful in creating innovative ideas to acquire property and Buffet would be instrumental in finding effective ways of utilizing the existing property for our benefit.

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