Posted by: Calmseas (Mike) | September 30, 2008

Dividing By Zero

Back in the day, when slide rules first gave way to calculators, I can remember having fun confounding these new-fangled, space-age electronic wonders by punching in a bunch of digits and then asking them to divide by zero.  These early LED calculators would promptly go nuts.  The lights would blink with varying intensities, and in no particular sequence, and all kinds of strange characters would appear briefly in the display before giving way to the next equally strange characters, and things just looked like they were short circuiting much like those old sci-fi movies where computers were fed an illogical mathematical argument, and slowly you could see the wiring heat up, and sparks began to fly, and one thing built on another, and soon the whole thing just exploded in a huge mass of fire and rock sinking the island where it all was located.  (And how is that for a Garrison Keillor-type endless sentence.)

As I watch the spectacle of incompetence unraveling on wall street this week, and an even more absurd and bizarre “plan of action” being unfurled by congress, I can’t help but think that these jokers (and this is the most complementary term that I can think of for them at the moment) aside from being clueless about economics 101, are trying to do on a massive scale what I tried to do with my calculator some thirty-five years ago—namely, divide by zero.

I am not an economist, but I do think that I have a certain amount of common sense; and a couple of things about economics seem axiomatic to me:

1. You can no more build an indefinitely sustainable economy on debt than you can divide by zero.
2.  You can’t borrow or print your way out of debt.

Most responsible individuals practice these two principles with their personal finances.  To try to build and sustain a lifestyle with debt (continually living beyond one’s means) is paramount to building a house of cards, higher and higher, and trying to live atop it.  Eventually, it will come crashing down under its own weight.  And the higher you build the house, the bigger the hurt when you hit the ground.   Furthermore, to get out of debt means that you must pay down your debt, buying your way out with real money not with more debt.  This is one of the reasons that debt consolidation is such a dangerous practice for most people.  It actually facilitates the building of the house of cards, rather than dismantling it as it portends to do.

In the case of the government, debt knows no bounds.  The United States government continues to operate at a deficit year after year, financing their operations with an ever-increasing mountain of debt.  And they finance this debt with more and more debt.  What they can’t borrow they can simply print, a luxury not known to the individual—at least not legally.

This week offers a terse warning for our nation.  The question is: Will we choose to heed the alarm?  We are already quite literally on the ropes financially.  China is buying America piece by piece.  And the parts they don’t get are going to the Middle East.  Unless we mend our ways and soon, we risk a failed financial system and an economy in ruins and, perhaps worse, economic domination by outside forces not always friendly toward us.  And that puts our very physical security and our continued existence as a sovereign nation at stake.

Will we soon wake up as a nation, and realize that dividing by zero is a futile endeavor?

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