Wednesday, August 19, 2015

We can only hope...

The global era of socialism, entitlements and debt spending is about to come to an end
by: J. D. Heyes

For years, sociologists, political scientists and economists have been warning that increased government spending on entitlements, welfare and other Left-wing-inspired socialist benefits would bankrupt communities, cities, states and even entire countries. Such Keynesian schemes have historically never ended well, and with each new collapse, one might have thought that lessons would have been learned and history would not be repeated.

Halfway through the second decade of the 21st century, however, it is apparent that few governments, especially those in the democratic West, have learned this lesson, judging by the number of governments that are currently operating well into the red.

That said, many are about to get a first-hand look at why socialist Keynesian economic schemes are destined to fail, and why free-market capitalism (defined and described here) is a superior economic model because it is based on far more realistic economic principles.

A great definition of "capitalism" is that it's

...a social system based on the principle of individual rights. Politically, it is the system of laissez-faire (freedom). Legally it is a system of objective laws (rule of law as opposed to rule of man). Economically, when such freedom is applied to the sphere of production its result is the free-market.

Economic models that have failed time and time again

Products and services compete with each other, with superior products and services garnering the most customers (and greater income) while inferior products and services lose business and fade away. Products and services are not an artificial creation of the state; they exist because there is a natural need or desire for them from the general public. Companies are self-interested, meaning they are in business for their own enrichment; this is not a bad thing, for this gives owners incentive to make superior products and services in order to increase the wealth or value of the company, and the result is customer satisfaction. And so on.

None of these principles exist in socialist/Keynesian systems. Take Venezuela, Cuba and the former Soviet Union; there, the economies are planned and "managed" by state bureaucrats. Prices are artificially set by government to win favor among the masses, not set by companies seeking profit – which is why companies fail (they cannot charge a price that sustains the business model) and citizens then do without; services are created and imposed by the state (not naturally occurring because there is a need or market for them); and massively bureaucratic welfare and benefits programs seek to provide every good, service and need to citizens, thus killing incentives to work and create wealth. Soon, there are too many takers and not enough producers to provide for them.

Western democracies tend to be more capitalistic in nature, but in recent years governments representing these democracies have increasingly adopted socialistic economic models which are imperiling their long-term solvency. As The Economic Collapse Blog reports, there are currently a record number of governments with debt-to-gross domestic product (GDP) ratios that exceedingly, and dangerously, imbalanced.

Specifically, the blog reports, the entire world's debt-to-GDP ratio is currently at 286 percent, meaning there is nearly three times more debt in the world right now that income. That amounts to about $28,000 of debt for every person – man, woman and child – on Earth. And the ratio is getting worse.

This level of debt is simply unsustainable.

They all cannot be 'bailed out'

While the world's attention of late has been on Greece, which has teetered on the edge of insolvency since 2012, when Athens managed to secure a bailout loan it nearly reneged on recently, there are many more governments that are in equally bad shape. Of the major economies the United States, with a huge national debt of $18-plus trillion dollars and an unfunded liabilities debt in excess of $210 trillion, is one of the world's biggest debtors. Japan, too, is in trouble.

One major country's financial collapse will trigger the collapse of the entire financial structure. Like dominoes, one by one will fall.

For now, the countries in the most danger of failing are small – nations like Cyprus, Croatia, Lebanon, Laos. However, so many collapsed economies will inevitably create additional crises in the "solvent" nations, such as mass immigration, which will unleash its own set of problems (societal upheaval, increases in government spending, etc.). They all cannot be "bailed out;" there isn't enough money on the planet.

All of this adds up to one thing: The era of socialist, Left-wing Keynesian economic models is (once again) ending. And it won't be pretty.

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