Neurotoxicologist Chris Martenson offers a compelling "crash course" explaining why the global economy most certainly will crash in our lifetimes. His basic argument is that since the 70s, the US has been accumulating debt and printing money at a much faster pace than its economy is actually growing.
By Al Lewis
Feb. 6, 2013, 9:56 a.m. EST
DENVER (MarketWatch) — When the global economy finally collapses, we might look back at the work of a neurotoxicologist named Chris Martenson and say, well, I guess that guy was right.
Meantime, it will be easier to listen to the loudest economic cheerleaders and question whether a neurotoxicologist has any business diagnosing the economy in the first place.
Martenson runs a website where he offers a compelling “crash course” explaining why the global economy most certainly will crash in our lifetimes.
He identifies plenty of toxins, but his basic argument goes like this: Since the 1970s, the U.S. has been accumulating debt and printing money at a much faster pace than its economy actually is growing.
Exponentially compounding debt is OK if we have an exponentially growing economy to pay it off. But our economy can’t keep growing exponentially because we are running out of cheap resources.
Some economists were surprised last week by a report showing that the nation’s gross domestic product shrank in the fourth quarter. They were quick to write it off as an anomaly due to decreased defense spending. They focused instead on an annualized GDP growth rate of 2.2% for 2012. Paul Ashworth at Capital Economics called it “the best-looking contraction in U.S. GDP you’ll ever see,” which sounds like something a farmer might say about a hog at the county fair.
For Martenson, it doesn’t really matter if the economy is shrinking at 0.1% or growing at 2% or 3%. However you spin these numbers it, it’s just not enough.
“I don’t think we ever actually got out of the last recession,” he said in a telephone interview. “When the government is borrowing 8% to 10% of GDP, and GDP is growing at 2% to 3%, it tells me that the real economy is shrinking by 5%-7%.”
Martenson says there never has been a resumption of rapid economic growth with oil at or near $100 a barrel. The economic engines just don’t rev on this expensive energy.
To keep America in the race, the Federal Reserve will print another $1.14 trillion in new money in 2013 through its so-called quantitative-easing activities, Martenson notes. “This is an unprecedented experiment, which might end well, or it might end badly.” He believes the odds of an unforeseen shock to our fragile, debt-laden systems are a lot higher over time than the odds of the Fed’s plan actually succeeding in spawning significant growth.
Meantime, the Fed’s money-printing schemes continue to widen the gap between America’s rich and poor, ensuring more economic instability, he said. “The recent explosive widening in the gap between the uber-wealthy and everyone else is largely a matter of simple Fed policy, not a failure of tax code,” he said.
Martenson, age 50, grew up in Connecticut. At age 13, he became so obsessed with fly fishing that he started raising roosters for their hackles so he could tie his own flies. He’d put on snorkeling gear to observe how they looked underwater, making constant refinements.
Driven by such voracious curiosity, he went to Duke University for a Ph.D. in neurotoxicology and Cornell University for an MBA. He has worked as a vice president for Pfizer Inc. and Science Applications International Corp. He told me he once worked for a “dot.bomb” and “spent six months learning how to run a business into the ground.” He’s also worked as a consultant: “What I was really doing was helping big companies make the same mistakes this year that they made last year.”
Martenson is a student of biological systems and, to some extent, what poisons them. The economy, he argues, is not an abstraction apart from the natural world. It depends on the natural world like any organism.
He began studying the economy after watching his portfolio shrink in the dot.com bust. He ultimately admitted something to himself that economists don’t always admit to their clients.
“I lost faith in a system where I couldn’t assess the risks,” he said. “I knew that if the future I saw coming, comes, then doing the job I was in was not the right job.”
He said he sold his oversized ocean-side home and moved onto a rural tract of land near Amherst, Mass., where he could prepare himself for the future. He said he now makes his living primarily from his subscription-based website, which is aimed at helping people thrive in the face of a looming economic collapse.
One thing Martenson has going against him is that we’re four years out of the 2008 crisis and the economy hasn’t collapsed. The U.S. government’s debt may be on track to eclipse the $20 trillion mark during President Barack Obama’s current term. The Fed may have to buy $85 billion a month in Treasurys and mortgage-backed securities to keep everything afloat. But many other nations are worse than the U.S., which means all their money is coming here, and we can keep the party going.
Arguably, this cockamamie plan is working. A larger crisis was averted. The housing market is slowly improving, and even some jobs are coming back.
But it’s all because of a massive credit bubble, Martenson argues. He concedes he can’t predict when it will pop but maintains that our global financial system is dependent on growth compounding forever.
“Any sixth grader can tell you that nothing can compound forever.”
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