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The Economy Is Like a Circus

The Economy Is Like a Circus

The reason the circus stays in town is because the economy stays in sufficient balance that the economy can go on. This is much like the way many other self-organized systems function. For example, our bodies continue to function as long as there are suitable balances in many different areas (oxygen, food, water, air pressure). Ecosystems continue to function as long as there is sufficient rain, adequate temperatures, and enough sunlight.

There are many different views as to what limits we reach in a finite world. Some people think we will “run out” of oil, or of energy products. Some think that the energy return will fall too low, as measured in some manner. I see the adequacy of the energy return as being very much tied to the financial system. Thus, the forecast by US Atlanta Fed GDPNow indicating that first quarter 2017 US GDP growth will only be 0.5% is likely to be a problem, assuming it is correct.

Our economy operates on economies of scale. Once we get too close to shrinking, or actually start shrinking, we reach a point where the economic circus starts to leave town. At some point, we will discover the circus is gone. The economy we thought we had, will have left us. If some people are survivors, they will need to pick up the pieces and start over with an entirely new system.

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