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2024: The Year of the Inflection Point

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.

by Nick Giambruno Doug Casey’s International Man