Chess board with exponential rice

Three Solutions to the Mounting Debt Problem

08.09.2016 • Gold and Natural Resources

From Tim Price – London Investment Alert (Great Britain) –

Legend has it that chess was invented by a mathematician who worked for an ancient king. The king was so impressed by the game that he promised the mathematician anything he wanted. The mathematician replied: place one grain of wheat on the first square of the chess board, then double it and put two grains of wheat on the second square. Put on each subsequent square twice the number of grains that were on the previous square.

By square 64, there are 263 grains on the last square. The total number of grains on the chess board will be one grain less than 264.

How much wheat is 264 grains? It’s approximately 500 times the 1976 annual worldwide harvest of wheat. “This amount is probably larger than all the wheat that has been harvested by humans in the history of the earth!”

Exponential growth is characterised by doubling, and a few doublings can lead quickly to enormous numbers.

Or consider our problem with debt. My “base case” is that there is now so much debt in the world, it can never be paid back. Whether you agree or not, what is undeniable is that the global store of debt is growing, not contracting. In its February 2015 report “Debt and (not much) deleveraging”, McKinsey pointed out that since 2007, global debt had grown (not shrunk, as some politicians would have us believe) by the order of some $57 trillion. Nor has any major economy managed to reduce its debt-to-GDP ratio since 2007.

If you accept that we have a significant problem with debt, there can only be three ways of resolving it.

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