The hard limits are hidden, and we will discover them only when it’s too late to modify the self-destructive behavior and policies we’ve pursued as “safe” and “forever.”

Why do hard limits matter? Because we only change when we’ve run up against them. Those extra few pounds we’ve put on? Humans being what they are, few change their behavior before the heart attack: the extra pounds stimulate high-minded attempts at reform that are soon abandoned as too painful and difficult. It takes the hard limit of a heart attack–change your diet and fitness or die–to actually trigger transformative changes.

This same dynamic is repeated throughout human life: debt piles up and we reckon we can maintain our Status Quo lifestyle with a consolidation loan, etc., but the only thing that really forces transformative change in spending/saving behavior is the hard limit of no more credit/bankruptcy.

Life without hard limits is a series of phony reforms to placate critics, fudged numbers, self-serving justifications and doing whatever is necessary in terms of appearances to keep doing what we’re doing: make a show of skipping dessert in front of others, and then consume a carton of ice cream at home when nobody’s looking.

We avoid change, pain and difficult endeavors if at all possible. This makes short-term sense: why take on the risks of changing what’s worked for years/decades?

What do I mean by financial finagling? I mean expanding claims on real world assets without increasing real-world assets. Here’s how this works in the real world: Continue reading →