THE COMING COLLAPSE OF DEMOCRATIC SOCIALISM

THE COMING COLLAPSE OF DEMOCRATIC SOCIALISM

THE QUESTION IS NOT IF, BUT WHEN? 

 

Watching the news we see economic crises worldwide. While we are not currently in a major downturn, we have been sort of treading water for the last 8 years. The  underlying problems with most economies, particularly western Europe and the United States, have not improved. In fact, the amount of debt and the future ability to deal with a downturn is a lot more unstable than before. The amount of debt held by Western countries, businesses and individuals, has actually increased since 2007. This election year we hear from some who believe if we just raise taxes on the wealthy all will be well. Others contend that all will be well if we can just instill confidence that a solution is near. Sorry, All will not be well. Taxes would have to be doubled in most cases, which will cause an economic collapse, or government spending would have to be cut in half, which will also cause a collapse.

Of course the problem is that there has been an accumulation of extraordinary debt by all governments, corporations, and individuals. There is not a precedent for this situation in human history. While the housing bubble was the symptom that was burst, when gas rose to $4.00 a gallon, in the US the massive debts held by everyone was the real problem. Debts of individuals can be traced to central banks that have not been willing to clear excess debts since the early 1980’s. Instead, they have encouraged and enabled individuals to borrow beyond their means to repay. We now see a classic debt collapse scenario where people are having a hard time servicing the debt they have and banks are raising standards to stop losses...with the economy stagnating until the debts are reduced to normal levels. This may take decades rather than years. 　

A far bigger problem is the debt of governments, particularly in Western Europe and the US. These debts are a direct result of massive spending and the whole idea of democratic socialism where votes were bought by promising unsustainable benefits...to individuals, spending on projects, surveys, studies, ad nauseum... to the well connected. When fulfilling these promises could not be sustained by raising taxes they just borrowed the money to be consumed. The spending on projects, etc. is more easily addressed by just saying "NO"...BUT the spending on benefits is much more difficult to address. The real culprit in all this is that socialism has been a dismal failure whenever it has been tried. I should qualify that by distinguishing between voluntary and involuntary socialism.

Voluntary socialism is self limiting. An example is fire insurance. If the incidence of loss becomes excessive, premiums go up and some people may refuse to buy insurance. If losses become excessive insurance companies may refuse to enter that market. There are natural limits for both parties.

The first instance of collectivist failure was recorded in the New Testament. The early Christians, thinking that the end was near, sold there possessions, dined together and shared with each other. It was not long until Paul, hearing complaints from the responsible members of the community, wrote to them saying, “He who does not work shall not eat.” Human nature and the voluntary basis of this experiment was a natural remedy.

Another example was the Puritans who landed in Plymouth in 1620. They formed the, "Mayflower Compact," an agreement to share all property and work in common. After 3 years of this experiment, they were barely able to survive. The Puritan's endeavor had been financed by investors in Europe who hoped they would reap a profit by the Puritans repaying their debts with furs and other goods. After 3 years of no return, investors refused to send any more support and the idea was scrapped. The Puritans then distributed land to each family and they were on their own - the result was the beginning of prosperity for all.  It was chronicled by William Bradford that while the number of people who were either too weak or incapable of work grew, and the young and motivated were increasingly unhappy with the communal arrangement, many who formally were unable to add much to the community instantly became more productive when they were able to keep the fruits of their labor.

Remember the 1960’s  communes, where a few self motivated people bought a ranch and lived off the land? It was not long until they were supporting a larger and larger number of new disciples, who agreed it was wonderful, except for the motivation part. Again it ended in a natural turn of events and human nature.

Now to involuntary socialism. Of course the greatest example has to be the Union of Soviet Socialist Republics. This experiment was immediate total government control that in the end was a dramatic failure. It may take Russia several generations to recover from the debacle. While touted by Socialists as the wonderful system of the future, (including Eleanor Roosevelt who visited the country many times in the 1930s when the worst atrocities were being committed), Solzhenitsyn and others saw and reported the true nature of the experiment. It's interesting to note that from the revolution in the USSR in 1917 to its collapse in 1989 was 72 years. If we take 1935 as the "embrace of socialism" in western Europe and the US, we end up at 2007. Does it take roughly this long for the failures of socialism to become unsustainable? While we have not had total control by the governments of western Europe or the US, we have been progressing in that direction for decades...hence the term progressivism. It has been a slow incremental movement that has taken control of most industries through regulation and has encouraged dependency by promising a safety net to those displaced by their policies. The part of the private sector that has not been effectively controlled by the government is the food and energy sector. They are in the process of taking over the energy sector and when they can control food they will have complete control of the economy and the people. Remember the winners of socialist economies are the ruling class who often live well off on what they skim off of the redistribution schemes. Even in the Soviet Union they lived well in their dachaus and had access to  travel and benefits that could only be dreamed of by the rest of the population.

While it all appears wonderful in theory, Unchangeable Human Nature has not been taken into account. Humans will help each other to some extent, but most will not jeopardize their or their families well-being for others. On a voluntary basis, many are willing to help those in need, in danger, etc. but as soon as it becomes involuntary, there will be resistance. This is just the nature of human survival instincts. While it may not measure up to the expectations of the ideologues of socialism, it is probably superior to all other organisms on earth. The Soviet experiment ended when there were no longer any incentives left. The Russians who have weathered one form of dictatorship for their whole existence were noted to remark to each other, "We pretend to work, and they pretend to pay us." In the end the only prospering part of the economy was the black market and flea markets.

So what has happened in every case of involuntary socialism?  Those who believe they are taxed too much will resist by finding ways to pay less; those who believe they are restricted in some way will find ways around the restrictions. Too much tax will usually create less revenue, etc. At first this is accepted or minimally enforced, but as the deficits grow, enforcement must increase and we see a cycle of increased enforcement, then less activity, then less revenue and if left to follow a linear path to forced labor and slavery.

In the U.S. there was once a work ethic and pride of self reliance - many would not accept charity, but after decades of increasing regulation and taxation it seems all restraint has fallen off and everyone will take and pursue more benefits, even if liquidating assets and claiming poverty is necessary. The dam has broken. The tipping point has been reached. It will not likely be restored by government action, or by acts of Congress, the same applies to Western Europe.

So what is the solution? At this point there is no easy solution. All solutions will require much pain and suffering. It may be limited by economic suffering and the necessary austerity to liquidate the debt and begin a new start with liberty and self reliance the foundation...OR...it may be that more enforcement will be needed until we return to feudal type society where basic necessities will be provided to the productive and compliant and those that do not conform will be eliminated from society by the powers that be. This is the question that will be answered when the coming collapse reaches its fulfillment.

originally published 2/11/2016

update 9/1/22   We are about to see the fulfillment of this narrative, possibly within months in Western Europe and then on to the U.S.

update 3/10/2023  We see the new budget is increased by 1 Trillion dollars. Debt of over 31 Trillion. Inflation destroying buying power. It is all unsustainable. 

update 11/16/2023, all the problems are now more severe, $34 trillion debt, $2 trillion deficit. Bond market in trouble. Any attempts to fiscal responsibility labeled extreme. 

update 5/24/2024, U.S. now incurring debt at the rate of $1 trillion every 100 days. Gold $2450 oz. While all seems well, it is all unsustainable, Economic crisis on the horizon.

Update 2/19/2025. U.S. debt nears $37 trillion. Gold $2940. Trump and DOGE attempt to reform spending and fraud in budget. Many would rather go down with the ship than change this unsustainable course.

Update 7/21/2025. U.S. debt now over $37 Trillion. deficit near $2 Trillion. Gold $3300 per oz. All unsustainable.

Update 2/25/2026. U.S. debt now near $39 Trillion, deficit near $2 trillion, 25% of budget. Gold over $5100 per oz.  A major economic event could trigger the crisis of the century.

Update 6/3/2026, U.S. debt near 40 Trillion, 25% deficit, high energy prices and increased defense budget and continued war could be the tipping point. Europe eyes reducing social spending as economies suffer under effects of war and increased defense spending. Gold has replaced bonds as the safe reserve haven. Social unrest can be expected. Classic Mises described stock market BlowUp is underway.

Ukraine and Iran war heat up.

 MASSIVE AIR ATTACKS ON KIEV 

U.S. BASES IN KUWAIT AND BAHRAIN TARGETED

War is intensifying on both the major conflicts, Russia has increased the intensity of attacks on Kiev and Ukraine is continuing attacks inside Russia, while Russia is accelerating aggression in most areas on the ground. Will this soon create the conditions for an end to this conflict?

The U.S. has attacked areas in the strait of Hormuz and Iran has attacked U.S. bases, how long will this continue until all out war breaks out again?

The fighting in Lebanon is intense with serious damage being inflicted on both sides, one must wonder how long this this can go on at this intensity?

While lots of civilian casualties are reported in Lebanon, the internal pressure in Israel both economically and psychologically has to be taking a toll. Does Israel have any economy after 3 years of escalating war?  The massive amount of ordinance that is being expended can not be sustained indefinitely.

Russia and Ukraine's losses are massive but the whole of the EU is suffering with high energy prices and now even shortages. The German economy is being devastated and the risk of social unrest is growing. 

We still hear little from either NATO nor the U.S. establishment questioning their policies, it seems it is still just escalate. It is becoming clear it is amore about hubris than ever seeing a positive result from these conflicts. Maybe, they will continue until economic collapse makes it no longer possible to continue.

It has to be be indicated that China's policy of non intervention is paying off in ways that are in their best interest, both economically and politically. While most of the major powers in the world are destroying themselves, China is just building and surpassing everyone. There is more lasting prosperity in peace than war.

Day 95, Peace talks suspended, Ceasefire over?

 IRAN THREATENS TO ATTACK ISRAEL

THERE REALLY NEVER WAS A CEASEFIRE

Yesterday, Iran announced that the peace talks have been suspended and that it is preparing to strike Israel military in northern Israel. The reasons for this are Israel's continued expansion into Lebanon and the daily attacks by the U.S. on Iranian assets in the Hormuz area. 

Israel never stopped the assault into Lebanon and the United States continued to destroy Iran's radar and defense positions around the Hormuz straits. The U.S. claimed that those sites threatened U.S. military assets. Iran had responded by striking U.S. bases in Kuwait.

It appeared that U.S. hoped to systematically degrade Iran's military in the Hormuz area, possibly in preparation for some kind of assault. 

Israel is in the process of leveling much of southern Lebanon with a high level of civilian casualties and paying a high price in the loss of equipment and soldiers. Israel never really participated in the ceasefire, which seems to be standard set in Gaza and other attempted ceasefires.

As of today we are not yet back to full out war, but again, it could start at any moment, along with the dashed hopes of any resolution that would normalize oil prices and preserve the global economy.

A brief history of money.

A BRIEF HISTORY OF MONEY

Money, we are all familiar with it, most want more, some to the point of  excess. It has been described as the, "Root of all Evil".  Realistically, we do need a certain amount, but I would like to talk about a simple brief history of Money.

Originally, most financial transactions were a form of barter,"I'll trade you a goat for that woven shirt that one of your wives made". Or,"I am tired of goats, how about we trade for some of your sheep". This all worked out well and good, but eventually someone got the bright idea of converting wealth to some form of exchange.

There is some record of salt being a form of exchange, or round stones with holes,  but most items were quick to lose their value when someone either found a pit with enough salt to flood the market or a method to mass produce stones with holes.

Eventually they settled on gold and silver as a form of money. Early records show that, as early as 2150 BC, the Shekel and Talent were used in the middle east, These were measures of weight,  A shekel was .36 of a troy weight oz. A Talent was equal to 60 manehs and 3000 shekels. This standard of weight was used by Egypt, Babylon, Phoenicia, Greece, Persia etc.  The ratio was 15 shekel's of silver = 1 shekel of gold.  Everyone had a balance scale to do business.

Finally, as governments grew and became more sophisticated, the minting of money began. This consisted of coins which were of a standardized weight, usually embossed with the image of  the King or individual in power at the time. It made trade much simpler and must have caused a recession in the scale business.

As is usually the case, it did allow for some skullduggery, clipping and shaving of coins was known to happen. Then Kings sometimes made the coins smaller with the same designation. This may have been the first form of Government endorsed inflation.  "Honey, were did we put that old scale?"

Interestingly, the size and weight of coins varied over the years, but the ratio of gold to silver was fairly constant from 500 BC up to the 20th Century.

Biblical  times-  12-1             Rome          12-1         Europe     0-1492        10-1

Early Greece      13-1             Early Japan  8-1                          1492-1834   15-1

Alexander          10-1             Early China  12-1        England                       16-1

The United States settled on the ratio of 15-1  The Constitution stated that all money was to be gold or silver coin.

O course, we have been talking about gold and silver coins. What about paper money?

In medieval Europe, gold and silver was the medium of exchange. When someone had a little more than needed for survival, they often placed it with a Goldsmith, who had a natural need for security in his business.  He would account for their items and give them a receipt.  The Rothschild's started out this way.  Humans sometimes being a little lazy, and not too careful about things, began to exchange the receipts for other goods and services and leave the gold with the goldsmith.  Goldsmiths, who were a little sharper than the average person of the day, soon realized that his receipts were as good as gold, and no one knew how much gold he really had stored for people. He was able to purchase Real-Estate, finance explorers to the new world and many other endeavors with his own receipts that did not represent gold in his possession. I could expound forever about how they used this power, but I will resist.

There were many known instances were these early bankers got a little too greedy, rumors circulated that there was more receipts than gold, and a run for their gold started.  When they could not produce the gold,  he might have been found hanging somewhere.

Remember, Politicians and Governments always take note of a good idea to increase their power and wealth.

Early paper money was a receipt for a weight of gold or silver, In the USA. a silver dollar was .7734 troy oz. of silver.  20 silver dollars could be exchanged for 1 Oz. troy of gold, a $20 gold piece. This was a ratio of 15-1. I personally remember silver certificates, which were supposed to be redeemable for 1 silver dollar. Up to 1934 you could exchange a $20 bill for a $20 gold coin. The US dollar had the reputation of being, "as good as gold". The gold-silver ratio today is 72-1.

In 1914, with passage of the Federal Reserve Act,  money no longer represented an asset, but would now represent Government debt. A promise to repay by the government.

In 1934, President Franklin Roosevelt, by executive order, ordered all citizens to turn in their Gold Coins in exchange for paper $20.00 bills. Private possession, or exchange of gold was outlawed. When the government decided they had confiscated all the gold they were going to get, they raised the price of gold to $35.00 oz., this was used for trade between countries. Those wonderful paper dollars they exchanged with the citizenry just became worth 43% less than the gold coins they exchanged.  Citizens were threatened with $10,000 fines and 10 years in jail for not cooperating.  Gold ownership was again legalized in December of 1974.

Silver still circulated as coins till 1964,  when they were replaced by alloys with no intrinsic value.

So now all money that exists, has  no intrinsic value, but only the confidence that someone else will exchange goods and services for it. While there are many instances in modern history where that confidence evaporated, so far most people are still willing to accept modern currency.

Currency itself is now in the process of being replaced with electronic currency, Bitcoin, Debit and Credit cards etc.. Endless possibilities, that will make the ancient clippers, shavers and dishonest goldsmiths envious.

originally published Oct. 12, 2015

It appears we are now coming to the end of fiat currency era, that is currency without any real built in value. What will replace it is yet to be seen. Big government would of course love to have currency that is just a digital entry, that they could manipulate, block, or devalue with a click of a computer. It seems some of the world is exploring another option that would be some form of real money. There is one of those age old truths that good money will always drive out bad money. That is true as long as there is an option of good money available. I expect we will seeing the new options in the near future. 
5/8/23

We now see the plan to introduce a central bank digital currency. Indeed, a monetary unit without any intrinsic value, unable to be held personally. It will allow governments to view every transaction, determine what transactions should be allowed, confiscate all wealth with the click of a computer key and in effect give government ultimate power over the people. It will be the end of all freedom of choice in a free market. It will give government the ability to tax, inflate, confiscate and dictate what can and cannot be traded. It will create all kinds of methods to avoid this trap and will be accompanied with the penalties to enforce that this is the only alternative money.

8/24/23

We can expect the unsustainable debt and deficits of the United States, accompanied by the desire of other countries to flee the use of the dollar, to reach a crisis in the near future. It is very likely that it will soon be clear that this debt will no longer find those willing to risk this haven for their real money. We can expect schemes to rescue this situation with possibly forced investment by IRA and 401's into U.S. debt or a sudden crisis followed by the end of this current fiat money system. We expect the cure to be total control of all assets.

5/3/2024

The EU is pushing to get its CBDC launched this year. As the debt situation in most of the western world is escalating many predict some sort of reset of the financial system. It will most likely be preceded by a debt crisis and then the roll out of the promised solution.

9/27/2024

We now see flight from U.S. bonds from countries around the world. It seems that interest rates are now possibly needed to rise to sell this debt. Those liquidating U.S. debt seem to be buying Monetary metal. The answer to shoring up the U.S. dollar and debt market is a balanced budget. With a $2 trillion deficit either raising taxes or cutting spending will cause a economic recession at best.

1/14/25

The purpose of this article is to hope to make people aware of what money is supposed to be. A store of value, an asset, not an instrument of manipulation by governments. 

3/17/2025

Gold is now $5200 an oz. silver $89.00 an oz. 57-1 ratio. No balanced budget in sight by any pollical party. The debt and deficits are unsustainable. The flight from fake paper money around the word continues.

2/27/2026

Debt continues to rise, gold and silver rise has paused during this Iran war, but the western banking and currency system is unsustainable. I reprint this with the hope that more will understand that money should be an asset under your own control.

6/1/2026

Message is clear, Nuclear weapons are best deterrence.

 CAN WE NOW SEE MORE NUCLEAR COUNTRIES?

CAN THEY ALL BE RESTRICTED BY MILITARY FORCE?

On January 29, 2002 George Bush 2 made a speech declaring the axis of evil of Iraq, Iran, and North Korea. On March 20, 2003 the U.S. invaded Iraq under the pretext that they sought nuclear weapons. North Korea and Iran then began their quest to become nuclear deterrent countries, with Iran suspending that program because of an edict by the Ayatollah Khomeini in 2003. North Korea became a nuclear power in 2006 and remains the only country not attacked by the U.S. 

While it is true North Korea has limited resources desirable by the United States, any country with resources may now be very well considering their only way of establishing a deterrence is by becoming a nuclear armed country. This would especially apply to Saudi Arabia and Turkey, one with resources and one already being listed by Israel as a possible threat and the keeper of a strategic choke point.

The message being heard by many countries is that their only assurance of real deterrence against some sort of attack is nuclear weapons. It is very likely that more countries are going to entertain the idea that it is in their best interest to go down that road. Large countries in South America have the capacity and skills to accomplish this very quickly, with open threats from its neighbor to the north and the example of Venezuela and Cuba they are probably considering this option.

Saudi Arabia already has a  defense agreement with nuclear armed Pakistan and the money to just purchase these weapons. Does anyone doubt that North Korea would sell weapons to those it found to be safe customers?

Japan swore off nuclear weapons after WW2, but that was a different generation, they may soon decide it is time to join the nuclear club, especially with the increased pressure to choose sides in the pacific region,  same with South Korea.

The technology is now 75 years old and the ability to manufacture these weapons is available to many nations. There is no longer any need for testing, just the ability to copy the plans and tests of some other nuclear country, which is most likely available. 

It may soon become impossible to play whack a mole by military force to stop the proliferation of nuclear weapons. The world political scene now indicates that nuclear weapons are going to be used somewhere in the near future. 

Ukraine conflict heats up.

 MOSCOW INFORMS WEST TO EVACUATE EMBASSIES

BOTH SIDES ESCALATE

In the last few weeks Ukraine has attacked inside Russia in an increasing escalation, Russia responded with massive drone and missile attacks all across Ukraine. A few days ago Ukraine attacked a school dormitory that killed 22 students and injured scores, now it appears Russia is planning a massive attack on Kiev. 

There have been much speculation that Putin is under increasing pressure to bring this conflict to a close by increasing the level of military action, this may now be what is about to happen. 

Ukraine with the assistance of NATO members has used large numbers of NATO supplied drones for most of these attacks, even using NATO airspace for attacks inside Russia. Leaders in Russia are advocating attacking the sources of these drones, which will be an attack on some NATO members, then they will have to decide if they are ready to go to war with Russia.

In the next few days we can expect some unprecedented attacks on the decision centers of Ukraine in Kiev as NATO countries have all been informed to evacuate their personnel from Kiev, what comes next is still not clear.

Zelensky asked Trump for more air defenses but it is doubtful that any more is available.

Russia has lots of weapons to use to escalate and lots of targets to expand the conflict. Does the West have resources and the will to match that escalation?

Day 88, Talk of Peace, just talk, no substance.

 KEEPING MARKETS CALM

NO TALK OF ADDRESSING ROOT CAUSES

We are subjected to the daily narrative that peace is at hand and much progress has been made. In realty, the ceasefire is at the same place it was over 6 weeks ago, still looking for a way to defeat Iran without crashing the global economy. This week we saw U.S. attacks on Iranian boats and infrastructure supposedly in self defense even though the boats were close to the Iran's shore. This and drone and other flynear attempts all seem to be just hoping to locate Iran's air and other defense positions to be targeted in a future attack. There really is no desire for a lasting peace treaty with Iran, Israel wants the country destroyed and Trump wants control of the oil. It is just that simple.

Now we hear Trump proposing that part of the peace deal is for all countries in the region join the Abraham accords and recognize and normalize relations with Israel. What is missing from all this talk of peace is any mention of the Palestinian question and what is still going on in Gaza and the west bank. The very question that started this whole war and the very question that has been ongoing for near 8 decades. Very interesting, that it is never part of any talk about a regional normalization of relations. 

If there really was a hope of a comprehensive change in the political climate in the region, yes all parties should be involved, and that would include some resolution of the Palestinian problem. 

I suspect the focus on an end to the Iran war and the hope of not destroying the global economy is in some way a distraction from any real effort of a lasting solution for peace in the region. It may be time for the international community to lay out the real borders of Judea and also to carve out some place for the Palestinian people, otherwise this will continue for another 8 decades or until it is ended by nuclear war.