This time last year I was relaxing in the Hellenic sun. Whiskey was cheap, the beaches were beautiful, and the people were friendly. Surrounded by mountains and boasting of an impressive array of historical ruins, Athens might be the most scenic city in the world.
Greece’s islands are no less gorgeous. On top of that, I’ve noticed my Greek friends are a fairly intelligent lot, and the locals I spoke with seemed to possess an understanding of political realities. Unfortunately, I also noticed a massive wealth gap. The shopkeepers I spoke with were working 12 hour days, six days a week, and their standard of living didn’t reflect it. Homelessness was rampant, and beggars were desperate.
How could a people that gave us logic, democracy, ethics, and liberal education, have fallen prey to a disastrous economic system? The answer is obvious – the siren song of deficit spending.
Greece has the second highest debt-to-GDP ratio in the world. Money leaves the economy through taxation and it goes to those who finance the deficits – it impoverishes the working class and enriches the wealthy – deficit spending is the wealth gap.
Keynes taught that when an economy is sluggish governmental deficit spending will be fruitful and economically multiply.
If road workers were hired they would spend their money on movie tickets, housing renovations, perhaps even a new vehicle – employing the theater worker, the construction worker, and the auto manufacturer, which would, in turn, employ the actor, the construction worker’s assistant, and the auto mechanic.
Sadly this isn’t how the economy works in the 21st century (it’s debatable whether or not it ever worked even in the 20th century).
When a Canadian road worker receives their paycheck they spend it on toys manufactured in China, cars made in Japan, electronics from South Korea, Florida oranges, and scotch whiskey.
I am a strong advocate for free trade and an even stronger advocate for scotch whiskey, but the point is that Keynes no longer works. The government will deficit-spend with a minuscule economic return for their jurisdiction. The government’s deficit spending leaves the economy and leaves the taxpayer with a cross to carry.
A night out on the town can be blissful if done on one’s credit card; what’s less pleasant is the month’s end credit bill. When nations have to repay the debt it can be something worse than hazardous.
The U.S.’ federal debt stands at $20 trillion.
Given that their federal revenue only stands at $3.2 trillion and that interest rates have hit 20% during the last 35 years in an inflationary crisis, it would only take another extended inflationary crisis to cause interest payments alone on their current levels of debt to equal 125% of their federal revenue; because of their utter recklessness with deficit spending and current unheard of levels of debt.
The U.S. will face total economic collapse in this hypothetical – this is the death of their nation not through ISIS or Iran, through their own folly.
Canada is approaching the insanity of the American debt levels. We spend nearly twice as much on debt servicing ($29 billion) as we do our own military ($15 billion). With those funds we could bestow upon every homeless person tonight, a salary of $900,000 – but unfortunately, our previous leaders left us with a legacy of debt and no such generosity is possible.
My parents’ generation was the first to be told that their use of fossil fuels was turning this planet into Venus through greenhouse gas emissions, and in response, they bought gas-guzzlers as vehicles.
They also went into bigger debt than this planet has ever witnessed and debt is deadly. It has the capacity to kill an economy.
It’s a slow death – a death where the conditions of the working class face a Marxist decline into despotism. It’s a death where the perilous conditions of debt-servicing remain at the mercy of inflationary pressures.
I can only hope and pray that our generation is far more alert – failing that I’ll have to ensure my investments are the ones profiting off the deficits. Just because everyone has to suffer doesn’t mean that you and I who understand the debt crisis have to suffer.
Brandon Kirby
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[…] Debt: A Bigger Crisis than Terrorism – Freedom Philosophy – July 5, 2017 […]
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