“The starting point to know the future is the realization that there are two different, though complementary, approaches:
1. Finding and exploiting the time lag between the appearance of a discontinuity in the economy and society and its full impact—one might call this anticipation of a future that has already happened.
2. Imposing on the yet unborn future a new idea that tries to give direction and shape to what is to come. This one might call making the future happen.
Looking for the future that has already happened and anticipating its impacts introduces new perception in the beholder. The need is to make oneself see it. What then could or should be done is usually not too difficult to discover. The opportunities are neither remote nor obscure. The pattern has to be recognized first. Predicting the future can only get you in trouble. The task is to manage what is there and to work to create what could and should be.”
—Peter F. Drucker
On the first page of my two-page introduction to The Daily Drucker, I gave a word of advice to readers: “Look for the future that has already happened. If you can identify and act upon trends that are just now emerging, you will carry forward in practice the Drucker Tradition.”
One of the first things I read yesterday morning was the lead editorial in The Wall Street Journal, which described what I believe to be a certainty that is upon us in the United States. It warned about the future implications on our present national debt and its expected rate of growth.
There will soon come a time when the Treasury is unable to borrow anymore at today’s “subprime” rates. The interest payment on our Federal debt is now below what it was in 1997 when our Federal debt was approximately one-third of what it is today. The interest rate risk on our debt will eventually rise, which added to inflation will bring interest rates on U.S. Government securities back to normal. So, what will happen when interest rates rise? Our debt level will explode as a ratio to GDP and exceed 100%. We will look like Greece does today.
In its November 17, 2005, obituary on Peter Drucker, The Economist quoted President Nixon as saying, “Mr. Drucker says that modern government can do only two things well: wage war and inflate the currency. It’s the aim of my administration to prove Mr. Drucker wrong.” Of course Nixon, did not prove Drucker wrong on either war or currency.
The combination of deep spending cuts and increased tax rates necessary to bring our “debt-to-GDP” ratio back to levels that are prudent seems unlikely. So prepare now for the time-tested tool of government in periods like this—sustained levels of relatively high inflation to reduce the burden of our national debt.