2024: The Year of the Inflection Point

Guest Post by Nick Giambruno

There was once a mathematician who supposedly invented the game of chess and presented it to his king.

The king, impressed by the game, asked the mathematician to name his reward.

The mathematician asked for grains of wheat, using the chessboard to calculate the amount. He requested that a single grain of wheat be placed on the first square and then double it for every subsequent square.

This means two grains on the second square, four on the third, eight on the fourth, and so on, for all 64 squares on the chessboard.

Initially, the request seemed modest to the king, who agreed.

However, the reality of exponential growth became apparent as the process unfolded.

By the time the board was half-covered (at the 32nd square), the number of grains was already enormous, reaching over four billion. As the squares continued to be filled, the numbers grew astronomically larger.

By the 64th square, the total wheat needed for the entire board reached 18,446,744,073,709,551,615 grains—about 18.4 quintillion.

To put this into context, let’s convert this to a more understandable measure, such as metric tons. The average weight of a grain of wheat is about 50 milligrams or 0.00005 kilograms.

18,446,744,073,709,551,615 grains * 0.00005 kilograms/grain = 922 trillion kilograms.

Since there are 1,000 kilograms in a metric ton, this equals about 922 billion metric tons.

To compare this with global wheat production, let’s consider recent figures. According to the Food and Agriculture Organization of the United Nations, the world wheat production in a recent year was about 761 million metric tons.

The 922 billion metric tons required for the chessboard is about 1,211 times the entire global wheat production.

This example illustrates the astonishingly large number that results from exponential growth, even when starting with something as small as a single grain of wheat.

Here’s another example.

Imagine you’re sitting in a large sports stadium that is completely watertight. A single drop of water is placed in the middle of the stadium, and the amount of water then doubles every minute.

At first, the growth seems slow. You won’t even be able to notice the water until it’s almost too late.

Let’s say it takes 48 minutes for the stadium to become full of water. At 47 minutes, the stadium would only be half full, and at 46 minutes, it would only be a quarter full, and so on.

By the time you become aware of the water’s presence, you are only a few minutes away from drowning.

These examples are used as metaphors to illustrate the power of exponential growth.

With exponential growth, things can seem under control or manageable for a long time. Then, an inflection point is reached, and the situation rapidly becomes overwhelming, growing to unimaginable scales.

Exponential growth is a concept that is initially deceptive because humans are more accustomed to recognizing linear growth rather than exponential patterns.

That’s precisely why many people are missing what could be the most important financial trend of 2024.

The Debt Spiral

Ray Dalio is one of the world’s most successful hedge fund managers.

His success is due to his consistent ability to get the Big Picture right.

He recently said this:

“We are at a point in which we are borrowing money to pay debt service.

When you keep having debt growth faster than income growth, that means you have debt service encroaching on your spending, and you want to keep spending at the same time.

As that happens, there is a need to get more and more into debt. It accelerates.

We are at the point of that acceleration. We are near that inflection point.”

Dalio is warning about the explosive nature of the US government’s compounding debt situation.

We can see this in the below chart from The Heritage Foundation. It does a good job illustrating Dalio’s point about reaching the part where the acceleration occurs, the inflection point.

It’s worth noting that the chart only goes to 2022, and the situation has significantly deteriorated since.

The financial position of the US government has been gradually deteriorating for decades, so it’s not surprising that many people are complacent. They’ve long heard about the debt problem, and nothing has happened.

However, it is now reaching the tipping point.

That’s because the US government is now borrowing money to pay the interest on the money it has already borrowed, as Dalio noted. Politicians are adding more debt to solve the problems of prior debt. It’s creating a self-perpetuating doom loop.

It will result in the total debt growing not linearly but exponentially.

The debt increases at a faster rate over time because it is compounding. Each calculation period adds more interest to the total amount owed, which requires more borrowing and causes a larger interest expense.

As the exponential growth of the wheat on the chessboard and the water in the stadium illustrated, the dramatic change happens very quickly after a long period of seemingly slow growth.

It took 48 minutes for the water to fill the stadium, but the water only became evident in the last couple of minutes.

The inflection point—where the growth accelerates and spirals out of control—occurs near the end of the process. It’s when the effects of exponential growth become dramatically evident.

Similarly, the US government’s debt has grown steadily over decades but is now rapidly increasing.

Dalio says the US is near the inflection point where the debt growth will accelerate and explode into previously unimaginable levels. I think he is correct, and that has enormous implications.

Below is a chart of the US federal government’s interest expense. The inflection point at the end of the chart is clear.

It appears we are at the moment where the water is becoming noticeable in the stadium.

Unfortunately, most people have no idea how bad things can get when their government goes bankrupt, let alone how to prepare.

We will likely see incredible volatility in the financial markets that could decimate many ordinary people’s life savings and retirement assets.

But I’m not just talking about a stock market crash or a currency collapse…

It’s something much bigger… with the potential to alter the fabric of society forever.

It’s created an economic situation unlike we’ve ever seen before, and it’s all building up to a severe crisis on multiple fronts.

It could all go down soon… and it won’t be pretty.

It will result in an enormous wealth transfer from savers to the parasitical class—politicians, central bankers, and those connected to them.

Countless millions throughout history were wiped out financially—or worse—during periods of profound change because they failed to see the correct Big Picture and take appropriate action.

Don’t be one of them.

That’s exactly why I just released an urgent new report with all the details, including what you must do to prepare.

It’s called The Most Dangerous Economic Crisis in 100 Years… the Top 3 Strategies You Need Right Now.

Click here to download the PDF now.

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