Deleveraging, Deceleration and the Double Dip

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Much optimism flowed from last week’s declaration by the National Bureau of Economic Research that the US recession officially ended in June 2009. How nice of them to let us know.

Markets reacted warmly and the 8 per cent rally in US stocks through September seemed more important than the revelation that the US Fed is worried enough about deflation to be planning another round of quantitative easing – dubbed ‘QE 2’.

I wish I could share the market’s (and the NBER’s) irrational exuberance, but the key indicator that explains where the US economy and its already disastrous employment situation is headed implies that even QE2 won’t set the US on a course to renewed prosperity.

It’s also important to note that the ‘strong’ Q2 US earnings figures seen in July are partly the result of dramatic cost-cutting in US firms – a nice way of saying mass lay-offs. Nonetheless the stronger bottom lines keep producing market exuberance, even if the factors behind those bottom lines will lead to future deflation rather than a boom. As Forbes writer Joshua Brown puts it “there is an effervescence in the air as we head into the Q3 reporting period (starting October 7)”. He thinks the market will once again turn south, and based on that pesky fundamental called the real economy, it should.

So should it on the basis of the key indicator that explains the origins of the apparent stabilisation that led the NBER to declare that the recession was over in June 2009.

For a long time I’ve focused on the contribution that the change in debt makes to aggregate demand, in the relation that “aggregate demand equals the sum of GDP plus the change in debt”. An obvious extension of that was that “change in aggregate demand equals change in GDP plus acceleration in the level of debt”—which would imply that change in unemployment is driven by changes in the rate of growth of debt.

Though I was aware of this implication of my analysis, I held off from testing it because I was concerned that this was pushing the data one step too far.

A physical system with a similar relationship between velocity (the rate of change of one variable) and acceleration (whether the velocity of another variable is increasing or decreasing) would generate a large volume of sufficiently detailed data that the relationship could be empirically tested.

But the economic system, with the large time lags in data collection, survey methods rather than direct measurement, and the dodgy practices statisticians are forced into by politicians and economic bureaucrats who often don’t want raw information to be available? I just thought that the relationship, even though it made sense, wouldn’t be discernible from published statistics. So I held off.

It turns out that I shouldn’t have been so cautious: the data well and truly supports this, on the surface, weird causal relation: the change in employment is strongly affected by the acceleration or deceleration of debt. This can give the paradoxical result that the level of employment can rise, even when the economy is deleveraging, if the rate of deleveraging slows. This phenomenon has driven the apparent stabilisation of the US unemployment rate (though of course the more meaningful U-6 measure has risen to 17 percent, and Shadowstats puts the actual unemployment level at 22.5 percent–well and truly in Depression territory), and it is highly unlikely that it will last.

My uncharacteristic timidity means that I have to doff my cap in the direction of the three economists who first published on this topic: Biggs, Mayer and Pick. They first showed the correlation between what they called “the credit impulse”—the rate of change of the rate of change of debt, divided by GDP—and both GDP and employment (for those who have access to research from Deutsche Securities, they have a simpler explanation of their analysis in Global Macro Issues for December 17 2009: “The myth of the credit-less recovery”).

The chart below shows my confirmation of the relationship with the data on the annual change in unemployment in the USA and the annual rate of acceleration of private debt since 1955. The correlation is -0.67: a staggering correlation of a first and a second order variable over such a period, and across both booms and busts.

The two dotted red lines labelled “S” and “E” show when the NBER thinks this recession started and ended, and they neatly coincide with turning points in the credit impulse—an indicator that the NBER is not even aware of, let alone one that it considers when attempting to date recessions.

Superficially, one might think that since the credit impulse does indicate when unemployment is going to rise or fall, then the current data implies that the recession is indeed over—even if the NBER doesn’t understand the actual causal dynamics at play.

But the chart also shows that there has never been a turndown in credit like this one—the peak rate of deceleration of debt was over 25 percent, versus a mere minus 6 percent in the deep recession of the 1970s. And though the rate of acceleration of debt has the most direct impact on employment, ultimately all three factors—the level of debt (compared to GDP), its rate of change, and whether that rate of change is increasing or decreasing—must be taken into account.

It’s complicated, so an analogy with driving makes it easier to comprehend.

Consider a drive from Los Angeles to some destination East (if you’re an Australian reader, consider a drive West from Sydney), where the drive out represents increasing debt, and the drive back home represents falling debt.

The level of debt compared to GDP is like the distance to be travelled, and today the US has a lot further to travel than it did in the 1950s: 5 times as far, in fact. It’s like the difference between a drive to New York and back, versus a return trip to Utah.

The rate of change of debt (with respect to GDP) is like your speed of travel—the faster you drive, the sooner you’ll get there—but there’s a twist. On the way up, increasing debt makes the journey more pleasant—the additional spending increases aggregate demand—and this experience is what fooled neoclassical economists (who ignore the role of debt) into believing in “the Great Moderation”. But it increases the distance you have to travel when you want to reduce debt, which is what the USA is now doing. So it’s great when you’re driving from LA East (increasing debt), but lousy when you want to head home again (and reduce debt).

With that far to travel back home, you might be tempted to accelerate—which is akin to increasing the rate of change of the rate of change of debt (it’s a measure of the g-forces, so to speak, when they can be generated by either rapid acceleration or rapid deceleration). Acceleration in the debt level when it was rising again felt great on the way out: booms in the Ponzi Economy the US has become were driven by accelerations in the rate of growth of debt. Equally, acceleration in the opposite direction feels dreadful: as the rate of decline of debt increases, aggregate demand collapses and unemployment explodes.

What actually feels better in the reverse direction is deceleration—reducing the rate at which debt is falling—and that’s what’s been happening in the last year.

But here’s the problem: too much deceleration and you actually reverse direction: you start heading East again, rather than returning home. That wouldn’t be a problem if all you’d done was drive to Utah, but instead you’ve hit New York instead: drive any further, and you’re in the Atlantic.

With the level of debt the USA has accumulated, the prospect that any sector of it (apart from the government) can be enticed to go back into accumulating debt once again is remote. So the deceleration in the rate of reduction of debt that is occurring right now will ultimately give way to at best a constant rate of decline of debt, and at worst another acceleration—and the dreaded “double dip”.

These next two quarterly charts emphasise the dilemma: the stabilization in employment has occurred because the rate of deleveraging has slowed, which registers as a positive in the “rate of change of the rate of change”:

But the rate of change of debt is still negative: it’s just risen from a low of -6% to -2%. For the deceleration effect to continue, the US debt car would need to stop its return drive from New York to LA, and head back towards New York once more: the level of debt relative to GDP would need to rise.

This is highly unlikely when all sectors of the American economy bar one (non-financial business) are already carrying more debt than they were in the depths of the Great Depression, when the debt ratio had been driven higher by deflation.

So the deceleration in deleveraging should give way again at some point, and then the NBER may be forced to begin dating the next recession—which is still a continuation of the current Depression.

About Steve Keen

I am Professor of Economics and Head of Economics, History and Politics at Kingston University London, and a long time critic of conventional economic thought. As well as attacking mainstream thought in Debunking Economics, I am also developing an alternative dynamic approach to economic modelling. The key issue I am tackling here is the prospect for a debt-deflation on the back of the enormous private debts accumulated globally, and our very low rate of inflation.
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200 Responses to Deleveraging, Deceleration and the Double Dip

  1. bb says:


    Thanks for your feedback…very much appreciated.

    Try not to differentiate from deposits and equity. They both sit on the same side of a Bank’s balance sheet. They are both needed to fund the assets (loans).

    When the assets become impaired and a bank needs to recapitalise, all that happens is a trasnfer from deposits to equity. Some deleveraging occurs since bank assets have fallen..but since banks operate on an 8% capital margin, this does not de-lever the system by much.

    The small amount of deleveraging comes coutesy of the old equity holders of the bank who lose their money (wealth transafer from equity owner to borrower).

    Most of the deposits remain in place. A small amount of deposit get reclassified as equity to replace to old equity which has been written off to delever the system. This process is done via a rights issue or placement.

    So even during asset deflation Assets = Liabilities at all times. You just need to treat equity as a liability as it sits on the same side of the balance sheet as deposits.

    But as SK says, the de-levering has to occur slowly. I now understand why. And the issue remainsn. too much private debt, and therfore too much private capital (capital in the form of equity and deposits).

    I’m now so obsessed by this I am finding it hard to sleep.

  2. bb says:


    I just read your post. Agree.

  3. mahaish says:

    yes vk, i think we are in agreement, not really questioning the logic of double entry book keeping,

    i was more interested in the macro level effect of a large scale write down of bank assetts would have on the deposit base if any.

    ultimately all roads lead to the equity account of a bank, and thats where the bank will take it in the neck unless the central bank intervenes. but a creditor bank can go after any collatoral including an individuals deposit base

    however in a deflation, does the process of liquidation realising values at lower than book value add to or draw down the deposit base, thus reducing non bank capital

    if i have to liquidte in a hurry at a loss, then that is going to necessitate my having to tap into other parts of my assett base including bank deposits to cover my position.

    the question is whats valid at the micro level , valid at the macro level

  4. mahaish says:

    hi bb,

    “Try not to differentiate from deposits and equity. They both sit on the same side of a Bank’s balance sheet. They are both needed to fund the assets (loans”


    assetts(bank resources) = liabilities + stock holder equity( both claims on resources)

    the problem i have , is that in a market where assett values are falling, the liquidated values realised are going to be lower than the book value,

    nett equity on the balancr sheet , takes a hit,

    i cant see how this situation is consistent with the notion of there being too much capital, when reductions in nett equity are tantamount to a destruction of capital

  5. vk says:

    @127 mahaish

    Please check my comment 336 here:

    debtjunkies also added a bit a few posts below.

    The accounting entries are the same regardless of the environment (inflation or deflation).

    A bank cant “draw down the deposit base” to offset loan losses (unless it is declared bankrupt and there is no government guarantee).

    A bank cant “tap into other parts of my asset base” to offset loan losses. As strange as it sound it should use a liability account – provisions for doubtful debts, main capital, retained profits, etc – to balance the loan write-offs.

    Hope this helps.

  6. mahaish says:

    “A bank cant “draw down the deposit base” to offset loan losses (unless it is declared bankrupt and there is no government guarantee”

    hi vk,

    not talking about the bank side of the equation,

    im referring to the non bank counterparty

  7. bb says:

    “the problem i have , is that in a market where assett values are falling, the liquidated values realised are going to be lower than the book value,

    nett equity on the balancr sheet , takes a hit,

    i cant see how this situation is consistent with the notion of there being too much capital, when reductions in nett equity are tantamount to a destruction of capital”


    The problem is that bank capital only represents c8% of the loan book. So at most private debt can only get reduced by 8% at any one time, then the banks need to significantly recapitalise. Yes there is a corresponfing fall in debt, but this is very low in the context of private debt to GDP of +150%.

    The reality is that writeoffs probably have to come at a slower pace than this to stop the entire system collapsing.

    This was the experience in Japan where asset writedowns were the norm for more than 10 years.

    If the de-levering process takes time, it means there remains too much impatient captial on the sidelines.

  8. bb says:


    “A bank cant “draw down the deposit base” to offset loan losses (unless it is declared bankrupt and there is no government guarantee).”

    I disagree.

    The legal process to do this is via a rights offer, or private placement. This is the legal process to transfer deposits to equity.

    My problem is its does not de-lever (or eliminate capital) at a very past pace.

  9. mahaish says:

    hi bb,

    how much of that capital has a debt obligation attached to it,

    may be the issue is not too much capital,

    but, impaired nett worth /equity

    furthermore the value of capital is being erroded by lack of full capacity utilisation, hence high unemployment, leading to lower nett present value of future earnings from that capital which effects stock equity, which errodes the value of capital

    you’ve got a lot to answer for bb, starting this discussion, hope i dont catch the disease,;)

    always a pleasure, im always enlightened by these discussions

    and much obliged vk

  10. bb says:


    “how much of that capital has a debt obligation attached to it”

    All of it (the way I see it).

    When SK says private debt/ GDP is 165% (US), then he is also saying private capital / GDP is 165%.

    Since GDP is a known quantity, the amount of return available for the growing pool of capital has to be lower over time (as debt increases).

    This comes about by entrepreneurs puting more capital to work, increasing productive capacity whether the economy needs it or not. The result is continued excess capacity. leaing to lower prices and deflation.

    We have seen this in Japan…hence my chart.

    Just for fun I am going to post it again.

  11. burrah says:

    Interesting posts. As a non-economist, I hope you don’t mind if I make a few comments to clarify in my mind where you are coming from. Your speculations remind me, for all the world, of John Law’s speculations 300 years age. Laws was the proto-Keynesian, practically all his suggestions were popularised by Keynes in a more mature form.
    His major theoretical failing was to believe that stocks were liquid and a near substitute for money.
    Next issue is the use of the term “private capital” for bank liabilities. It is too close to financial capital which is borrowed from the banks for the payment of the factors of productivity, which as ak points out is good debt, Personal bebt on the other hand can

  12. burrah says:

    That post took off on its own 🙂
    Personal debt on the other hand can be ephemeral, from the purchare of flat screen t.v’s to the payment of medical bills.
    Finally how does your theory fit in with this article:
    Bondholder `Diplomatic Immunity’ to Losses Challenged as Irish Bail Banks?

  13. Jason Murphy says:

    In the Australian context you guys would be familiar with the APRA role and the Prudential Standards numbers it runs. The base clause is a Prudential Capitol Ratio [PCR] of 8% being Capitol Base to Total Risk Weighted Assets.


    Credit Risk – Standard:
    Credit Risk – Internal Ratings:

  14. bb says:

    HI burrah

    Thanks for the artcile.

    I’m not sure how I can relate the artcile to my thoughts, but here it goes.

    Irish Bond holders seem to face two potential issues – liquidity and solvency.

    Wrt liquidity, they could seek redemption from the bonds at maturity. The investors would then have liquid funds (Cash) to buy other bonds and stocks. The sellers of these stocks would then have the liquidity to buy the newly issued irish bonds which replace the old bonds.

    No matter what happens, there is enough liquidity in the system to solve the problem so long as investors are comfortable with the second issue – solvency.

    If the Irish bank is insolvant (liabilities > assets), the junior senior bond holders become equity (if the losses are large, senior bond holders become equity). The old equity is extinguished along with the bad loans. The result is deleveraging. It is the same economic effect as individuals paying down debt – except for the uncomfortable fact that a major financial institution is collapsing.

    Under this scenario, the system is still in balance. Assets = liabilities.

    My concern is there still remains a huge amount of capital in the system and will remain so for quite some time.

  15. Aac says:

    ak at 76 wrote:

    “So what?”

    Thank you for pointing out that corruption has always been a problem. What would you do ak if you came across a burglar robbing your neighbours? Would you say “So What” its happened before or would you act.

    Karl Denninger has documented the fraud better than anyone else and if anyone is in any doubt that this is all about fraud then please read the latest that I found referenced on Dinninger’s site;

    Economist Joseph Stiglitz: Put Corporate Criminals in Jail

  16. John Prentice says:

    Corruption has always been a problem………..since the beginning. Corruption is always a problem.

    However I suspect when you pull the tide out and delever, we will find the west as been gutted and stuffed. Leaving me understandably aware that even politicians who were against the economic order of the last 30 years, scared for their political career and hence didn’t push through anti-corruption measures that would dampen “growth”.

  17. aangel says:

    bb, forgive me for jumping in but your timeline needs to include oil production in it or it simply doesn’t reflect the future accurately. I’ve just returned from the Association for the Study of Peak Oil and Gas 2010 Conference in D.C. and I will attempt a short synopsis.

    Despite high oil prices, oil production has not increased since 2004 i.e. we are on a production plateau. (See slide 5 of

    The giant and supergiant oil fields, which provide ~60% of world oil, are declining at 6.7% per year (, p. 43).

    The various oil megaprojects databases, which catalog future oil production accurately within a six-year horizon (the time it now takes for a new oil project to produce first oil since all the easy oil is already in production) indicate that surplus capacity will be exhausted by 2012. We could face a 10 million barrel per day shortfall by 2015 (U.S. Joint Forces Command 2010 Joint Operating Environment Report).

    Net exports fall faster than top line production by a factor of 3. Peak Oil Versus Peak Net Exports–Which Should We Be More Concerned About?.

    Oil comprises ~35% of the world primary energy supply (IEA 2007). As oil declines, the world economy will contract at roughly a 1 to 1 ratio discounting debt effects. Mitigation of maximum world oil production: Shortage scenarios, Hirsch, 2008.

    According to the recently leaked German military report:
    “The above mentioned chain of events shows clearly that the energy supply of the economic cycle must be assured. The energy supply must be sufficient to allow positive economic growth. A shrinking economy over an indeterminate period presents a highly unstable situation which inevitably leads to system collapse. The risks to security posed by such a development cannot even be estimated (p. 50).

    Putting the Bundeswehr report in context

    I encourage you to investigate the situation with oil and include it in your forecasts. The public agency models are completely wrong. For instance, we have discovered only 1/3 of the oil the United States Geological Survey predicted we would by now back in 2000 but the agencies have not revised their forecasts to reflect that.

    Just as the general economist should listen to Prof. Keen, so too should people be listening to the analysts at the Association for the Study of Peak Oil.


  18. BH says:

    I don’t know how to reconcile the loans creates deposits view with the comments made by bankers regarding their funding. Can anyone help here on this?

    For example in the article hurrah linked above I read…
    “It’s very hard to wipe out the bondholders because they are the source of funding to keep the banks going,” said Philip Hampton, chairman of Royal Bank of Scotland Group Plc, whose Edinburgh-based bank received 45.5 billion pounds ($71.5 billion) in the biggest bank bailout in the world during the financial crisis.

  19. bb says:


    I don’t know alot about peak oil. My sense is that peak oil is a two dimensional proble. “peak oil at a certain price” seems to be a more appropriate description.

    My (very uneducated) thoughts are

    1. We heard about peak oil in 2008 when the price of oil was US$150 per barrel. The price has halved since then which would be inconsistent with peak oil theory

    2. If you pick up any annual report of a major oil producer it is clear the average cost of production per barrel of oil is about US$30-40 per barrel. It would be weird if all of the fiancially viable oil was priced at such a low level. Surely at $80-90 per barrel, more sites become profitable. Of course this could take years to come on line.

    just my 2c

  20. bb says:


    Banks create deposits the moment they make a loan. So on day one, they are fully funded. Assume this original loan comes from, say, Bank A.

    Day 2, when the person who received the loan spends the money, one of three things happen.

    1. The money is spent on domestic consumption (eg: build a house, etc). The providers of this product (ie Builders)recieve the money and put it in bank A. Therefore Bank A remains fully funded.

    2. The money is spent on domestic consumption (eg: build a house, etc). The providers of this product (ie Builders)recieve the money and put it in the bank (say Bank B). Since this is different to Bank A, Bank B will have a cash surplus equal to the amount Bank A has a cash deficit. Bank B will tend to lend money to Bank A in the money markets to get an adequate return on their cash surplus.

    This transaction represents “overnight cash”. Very risky for Bank A to Fund itself with short term cash, so from time to time it may issue longer term bonds to repay the short term loans from B. The cash from the bonds comes from the depositers of B who are looking to make an investment in Bank rated papaer. B’s depositers decline, but thats ok, its short term loan from A just got repaid.

    So far the system remains in balance. Its just banks may have different balances and need to lend to each other to cover deficits or put excess capital to work.

    3. The money is spent on foreign consumption (eg: Plazma TV from Japan). The buyer sells $A and buys Yen to purchase the TV.

    The buyer of the $A has a problem. Where do I put this money I just bought?

    They may buy an office tower, or shares, a house or iron ore. No matter what they do, the seller of the Office tower / shares / house / iorn ore has to put the money somewhere. Either Bank A (bank A remains fully funded) or Bank B (and we go back to point (2) above).

    So you need to look at all of the banks in total to come to a conclusion that the banks are self funding. At an individual level some banks may have deficits and some may have surpluses.

  21. Philip says:

    That was an interesting article about Stiglitz in the DailyFinance.

    One group of people who are never held accountable are economists. The economists in the central banks, treasuries, regulatory agencies, universities, etc. have got away free like the bankers.

    I would recommend that economists be subject to firing, fines and imprisonment, if economic disasters occur on their watch.

    Furthermore, as the U.S. is one of the last Western countries to employ the death penalty, if the rich demand that corporations have the right of personage, then corporations should also be subject to execution.

  22. Steve Keen says:

    Hi bb,

    It’s worth researching King (really, his first name was King) Hubbert, an oil engineer who first developed the concept of Peak Oil. It’s a mathematical proposition derived from the fact that there is a finite amount of oil that we began exploiting pretty much in the 19th century. Given that there was a set amount to begin with and no more is being produced (certainly not on a human time scale, though it may be being generated on a geological one), if we continue using it then at some stage we will exhaust it. The simplest relation for the remaining amount of oil at any point in time is an inverse sigmoid (which reflects an exponential increase in initial mining when it’s all virtually surface level when it’s easy to exploit, and decrease towards zero as we taper to having no oil left), and the differential of this specifies the rate of flow of oil at any point in time.

    The differential is effectively a bell-shaped curve, hence “Peak Oil”.

    Using this formula and fitting it to US data in the mid-1950s, he predicted that the US would hit its own Peak Oil in 1970. He was derided for his prediction at the time (I know the feeling), and was proven correct when US oil production peaked in the 1970s.

    There’s a lot more to it than that, but that’s the beginning. On the price issue, consider the following:

    “[T]here is a different and more fundamental cost that is independent of the monetary price. That is the energy cost of exploration and production. So long as oil is used as a source of energy, when the energy cost of recovering a barrel of oil becomes greater than the energy content of the oil, production will cease no matter what the monetary price may be.”

  23. ak says:


    I have no doubts that the financial sector (especially in the US but not only there) has been involved in committing a systemic fraud by pushing debt to people which they cannot repay (and a few other little things).

    The fraud has been committed in the name of “free markets”, “competition” and “efficient resource allocation”. Everything scientifically proven by Milton Friedman and the others.

    We should be thankful that this happens as the alternative would be much more worse for (some of) us: state regulation and intervention, maybe even nationalisation of banks or printing money. There would be actually people responsible for making decisions. Now “an invisible hand” is stealing wealth from us. Free markets and corporations. This is way better than the old Soviet Communist Party. Nobody is responsible for anything. A corporation can sue and ruin an individual or bend the law but there is no way a corporation can be brought to criminal justice as they are all superhuman. You cannot sue gods and you cannot put bankers in jail.

    The managers? “I was only cleaning up the office here, I don’t know anything”.

    Oh and the British Treasury has “objectively” run out of money and they are shutting down the state. Bad luck, nothing else can be done about it.

    We tried feudalism, capitalism, Stalinism, “real socialism”. Now it’s time for little masochism.

  24. aangel says:

    BB, Steve has it correct. And I can understand why he feels like Hubbert! Hubbert was eventually vindicated in his life but it took several years past the peak of U.S. production before people generally acknowledged that production was in terminal decline and no amount of technology or money thrown at the problem was going to change that fact.

    It turns out that your thinking is common, that higher prices will bring more production, and that is often true but only within the bounds of the bell-shaped curve. I’ll attach the curve for conventional oil to this post.

    It’s important to distinguish between conventional, liquid crude and unconventional oil. The discovery of conventional oil peaked in the early 60’s. Since then each decade has found less oil than before. We will continue to find oil but currently we are using between 3 and 4 barrels for every barrel we discover. In other words, we have been drawing down our oil inheritance since the 80’s when production exceeded discoveries.

    If you begin to follow this story, you will hear that there are trillions of barrels of oil in the Alberta tar sands or off the coast of Brazil. But it’s not only the quantity of oil we are concerned about: it’s the flow rate. If it takes 10 years to add another 1 million barrels per day of tar sand production, that really doesn’t help if the liquid crude is declining at 4 million barrels each and every year. Same with Brazil’s oil. The remaining oil is really difficult to get, really expensive and simply won’t come online quickly enough to stop us from falling off the plateau we are on.

    The oil fields to watch are the giants and supergiants, which provide 60% of world production. A colleague of mine at the Global Energy Systems Group in Uppsala University studied them in depth. Just 20 fields provide 25% of world production. In other words, as they decline, it pretty much doesn’t matter what we do with all the smaller fields: world oil production will decline simply because they make up such a high portion of overall production.

    Unfortunately, most economists (not Steve!) understand only the price mechanism and thus think that a higher price will always bring more oil to market. Because they do not understand the geology of the problem, they are gravely incorrect. The price mechanism must work within the physical bounds of the problem.

    Probably the best explanation is the report by The UK Industry Task Force on Peak Oil and Energy Security. However, a report to the New Zealand Parliament that was released a couple weeks ago is a very good, much shorter synopsis.

    The consensus by the petroleum geologists as this conference was that we fall off the production plateau we are on between 2 and 5 year from now. Then world oil production declines at 2% to 4% per year forever. This will, understandably, rearrange the world economy.


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