Four soultions to the West's debt problem...only one seems viable | Andromeda Capital Management

Ultimately, history shows the solution might be a more permanent devaluation. The Roman Empire serves is the archetypal example of what lies ahead. By the late second century, Rome faced rising military costs to defend its vast borders, while the tax base stagnated. Rather than cutting spending, Emperors began shaving coins or diluting the purity of the denarius. Under Augustus, the coin was nearly pure silver. By the reign of Diocletian, it was little more than a copper slug with a thin silver wash. As the silver content dropped from 95% to less than 5% over two centuries, prices skyrocketed. This debasement allowed the state to pay its soldiers and maintain an illusion of power, but it ultimately destroyed the middle class and forced a reset into a feudal, barter based economy where the state could only survive by demanding taxes in physical grain rather than coins.

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There are four potential solutions to the growth and debt problem in the West.

1. The best and most difficult option is to boost growth, potentially with new technologies – like artificial intelligence – in today’s case. Growing out of excess debt requires time, however, and currently the potential benefits from innovation are being more than offset by persistent deficits.