No Bang for Our Borrowed Buck

Nothing lasts forever.

Plain spoken and no-nonsense, this is a saying that governs all aspects of our lives. And when it comes to the markets, this impermanence is the shadow that is always lurking behind the scenes.

Vern Gowdie, author of The End of Australia, hammered in this point throughout his speech at Port Phillip Publishing’s Paradox of Prosperity conference. An event where influential financial thinkers from all over the world have come to put in their two cents about the state of the markets.

As Vern began his talk, the realist attitude that he’s known for in his writing shone through. And the questions he posed reflected both the concerns of many Australians, and the critical tone that pervaded the speeches of the day.

Now that we live to 100, how are we going to afford it? It’s a very good question.’

Tomorrowu2019s Gold: A... Marc Faber Best Price: $21.37 Buy New $38.10 (as of 02:25 EDT - Details) Economic sustainability is a topic that Vern cares deeply about. And with rapidly evolving technology, rising debt and a changing economic landscape, he believes it’s a topic we should all be paying attention to.

As Vern pointed out, the consequences of our rapid innovation are easy to see. With Netflix came the death of video rental stores. Newspapers disappeared as our screens multiplied. And with the rise of robotics, traditional labour will likely vanish as well.

But even with all of this innovation, our economic growth is slowing. The reason for this, Vern argues, is that we have failed to be adaptive in our economic model. And now we are drowning in debt and are struggling to keep our economy stable.

Although we are accustomed to our GDP always rising, and our living conditions becoming ever-better, it’s an expectation that we need to rethink. As decades of economic prosperity has come with trillions in promises from the government. We are now left with an unsustainable welfare system, falling productivity and non-productive debt.

As Vern confirmed: ‘Borrowing our way to growth is a model with a finite life. It’s impermanent. We know that.’

Vern then noted that increasing immigration and debt to drive growth was a Ponzi scheme. But as it’s political suicide to suggest any drastic change to our financial system, things are unlikely to change anytime soon. And Vern believes that this complacency will likely lead to the next recession.

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