Recession, Inflation, temporary or the end of Democratic socialism

PAPERING OVER SYSTEMIC FAILURES HAS COME TO AN END 

WE HAVE NEVER ADDRESSED THE 2008 COLLAPSE

We see debate over if we are in a recession, if inflation is just an transitory phenomenon resulting from the pandemic and how increased redistribution is the only answer to these problems. We are now at a point, possibly an irreversible point, were long term solutions are going to be very painful. It is likely we will not be able to paper over these problems with increased easy credit, government stimulus spending or other attempts to prolong the long term economic problems associated with Democratic socialism. This applies not only to the United States but any country that has adopted this inevitably failed economic philosophy.

We have seen 14 years of zero interest rates for savers. Extremely low interest rates on any borrowed money. This has been an attempt to keep things going without addressing the systematic failures that became visible in 2008. The huge amount of debt, by consumers, business and the federal government.

A debt, particularly by the government, that has exploded. Knowing the patterns in Washington it will now become an economic mushroom cloud over the western world economies.

The Federal Reserve has raised interest rates and expects to raise them more to dampen inflation. The debt has exceeded $30 Trillion, and servicing that debt will take more and more of the federal budget. One solution would be to cut government spending, but much of the economy is now dependent on government spending, millions of government workers, entitlement programs, and even much of the private sector spending, any real cut to expenditures will trigger a deep deep recession and possibly political unrest.

Then, of course there is the democrat go-to of raising taxes, supposedly on the rich. New taxes will take money out of the private sector and give more money to the government to continue in their wayward financial ways. It will also slow the economy as private economic activity slows. This will likely result in less government revenue. 

Right now the government both state and federal have been having record increases in revenue, but to no avail as they have also had record deficit spending. 

As the economy declines, which can be expected to become drastic by the end of the 3rd quarter, there will likely be calls for more taxes, more stringent regulation and oppressive enforcement to get more revenue, this will result in less economic activity, less revenue and very likely the end of this economic experiment. 

Simply, you cannot spend more than you have indefinitely.  You cannot increase the non productive population with increased benefits forever. You cannot increase the number of government workers who do not enhance the Gross domestic product, but are in effect an expense. Not all jobs create and grow wealth, but just live by taking from others. Without the production of material goods, or the taking of wealth from other countries, the national wealth shrinks.

All this and then it is not happening in a vacuum, we also have international competition and now adversaries. We have real and imaginary enemies, and its seems we are willing to challenge them all. We have squandered the good will of many, both allies and enemies. We have created enemies, like Russia by our own misguided domestic and foreign policy.  We have created economic adversaries by our corporate and political greed, like China. Now we believe that we can threaten and bluster it all away. We cant.

It seems our adversaries have a more objective view of our vulnerabilities than we do. Our media, financial institutions and politicians will continue to spin that we are the greatest, invincible and all is well. Inevitably, you cannot spin yourself into economic or national security. The real world laws of finance and sustainability are about teach the western world a very sobering lesson.