By now it is also becoming clearer that the social impacts of contraction serve as a reinforcing feedback to the economy, worsening the debt crisis. A revealing phrase is being used to describe Europe’s financial mess: “the street has taken control.” As people express fears about the future of the euro by taking their money out of banks, the banks weaken and demand more backstops from governments, which have to run even bigger deficits in order to provide bailouts. Further, as people lose faith that government can address economic problems, they stop paying taxes—as is happening in Greece—thus making government even less effective.
Lack of social cohesion is itself a cost to the economy. It’s hard to make a formal economy work at top speed if it is being sabotaged, or if a significant proportion of its output has to go toward keeping people from deserting it in favor of a growing informal economy of black markets, subsistence, and barter.
War is a timeworn solution to economic problems. Surplus young males are kept off the streets; idle manufacturing capacity is engaged; dissent can be ruthlessly swept aside. But in our current global circumstances war is itself becoming increasingly costly, and the US (which is typically at the center of any international conflict
The economy needs fuel . . . and more of it all the time
The 2011 [disaster] total was undoubtedly much higher due to the Japanese earthquake, tsunami, and nuclear meltdowns, which by themselves caused roughly $1 trillion in damage