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Government Insolvency?
By John | November 20, 2008
In the early 1980s I predicted that the U.S. Government was headed for insolvency in my lifetime. By abandoning the gold standard in 1971 and resorting to a fiat currency, the previously built-in discipline to resist excessive money creation and deficit spending was abandoned. The U.S. culture changed, as more people looked to the Federal Government to meet their needs. Politicians were being elected based upon their promises to solve all economic problems and take care of the population. The more these promises were made, the more the population came to expect the Big Daddy in Washington to take care of them.
During recent times, economic expectations have continued to escalate. Today’s younger adults expect to start off with the standard of living of their parents, and to improve from there. What were previously seen as luxuries came to be perceived as entitlements. If you don’t have the money, borrow it. Savings? Asians save. We spend!
And yet, surveys of young people entering the work force reveal an unwillingness to sacrifice. Life style is selected over economic opportunity. A college degree entitles one to rewards, whereas earlier generations saw a college degree as opening the door to opportunity, so that future rewards might be earned.
This mentality, and this behavior, are not sustainable.
Although I cannot foresee the U.S. Government undergoing a formal bankruptcy, I do expect it to reach the point where it cannot meet its expanding obligations. Are we close to that point now?
I have been expecting the re-inflation of our economies and our currencies, worldwide, in response to the current economic crisis. However, plunging stock markets are warning us that governments may not be successful in returning world economies to “business as usual.”
Most people still expect this to be a serious recession, but nothing more. At some point in my lifetime I expect to see something more. I expect to see the promises of the U.S. and other governments as empty. Despite all-out efforts, the economic slide will not be curtailed, and governments will appear helpless. Should we reach that point, how will the population respond?
Let’s hope we are still Americans, as that term used to describe us: Self-reliant. Independent. Responsible. Entreprenuerial. If we have become something less, as recent behavior would tend to indicate, we could be in for real trouble. Soon.
Topics: Government Excesses |
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