RE: debt ; deep deeper deepestHarry,
There is no question my mind about what is coming and there hasn't been for the last 10 years. One need only to look back at history to understand what the future will bring. Things change due to technology, but the fundamental behaviour of humans will always be the one thing we can count on.
Having said that, yes, what you see in Europe will also hit the West............and then it will hit the East, and lastly it will hit South America. Why? Because humans always make the same mistakes. I'll expresse my view as condensed as possible, and leave out a lot of detail, but it will serve to make the point.
A country or an economy is somewhat like launching a product...........you have a growth stage, a maturity stage and then a decline. This concept applies to many things in life, and perhaps to life itself, actually. The product is launched and growth begins, once the product has been purchased and has peaked, you can tweak it to get a little more out of it, but at some point, it becomes obsolete or something replaces it, and you must accept that there is a stage of decline, and then it is over for that product........until something else replaces it. Of course, this is a simply way to see it, but essentially, it will serve for my purpose of comparing the life of the product to the life of a society or an economy.
Take now this idea and apply it to a country where they are developing. The first stage is to "launch the product" , which could be considered industry and business, as well as a move to creating a middle class. This happens the same way in every country, bar none. Each will have their particular strengths and weaknesses, but will essentially grow in the same manner, because it remains a fact humans that are running things, and humans always repeat the same mistakes. Once growth creates a certain amount of wealth, we see that the size of government grows along with it, ever increasing and never decreasing. The growth stage brings about infrastructure, government services that are deemed to be "necessary".
This is the stage where there is no government debt, but only private debt, because the growth is so rapid and strong that governments are unable to spend all the money that comes in, and business and industry are humming, and there is a general feeling that all will remain good. Then we see the gov"t get bigger and bigger and infrastructure as well, and regulations come in to make sure that the wealth that is being created is spread out, because that has been deemed "necessary" by the people who are running the country, at the demand of the population, who are too busy to take care of themselves, and now require the gov't to take care of them. Taxes increase to pay for this "care" and gov't grows to the point where business finds it difficult to work and industry becomes less competitive, because another country has now entered the stage of growth and can make things better and cheaper. Now we skip some years and advance to the maturity stage of this folly. Government is so big that the revenues required to make it work are making it "necessary" to extract a very large portion of the money from the real economy to sustain itself. Infrastructure is in place for a huge economy, but now it is shrinking, because the wealth is now being created in another place that is in the first stage of the process.........at this point, the gov't is in debt to a large degree as well as the population, and there are only a few at the top who really understand what is going on, and they have made sure that they are protected. Manufacturing moves away to the "other place" where they are beginning the process. Finance and banking take over, and the decline stage begins.
Now, when in the growth stage, inflation was kept in line by increasing interests rates, because only the population had debt, so a breather would allow them to pay that off, and then interest could go down a bit to create a stronger economy. Problem is that like the population, the gov't is also made up of humans, and they spend even more freely, because the money is not theirs in the first place. By the last stage, the gov't is deeper in debt than the population, and it is impossible to raise interests rates, because the debt will never be paid as it has grown so large, that the death spiral now begins. The country can offer no decent return for investors, so they move their investments elsewhere, most likely to the place that is in the first stage............that place also gets all the money from much of the industry as it has also moved there. Now gov't has only one choice.....thus they increase taxes even more. This then increases the rate of the decline because there are fewer and fewer places to get the money as the big money has moved out. Money gets printed and the decline now goes to the last stage before a full default happens. There is at this point no manner in which to reverse this stage, as it is the destiny of every country that has developed or will develop.
The end game gets tougher all the time because we now have to enter into the equation the fact that resources and food will become a huge problem as well will water...........it gets tougher all the time as populations grow. But the basic stages remain the same.
The same mistakes are made once again and history repeats itself. You can easily predict what will happen in China and India in the next decades as it will reflect what happens in Europe and here in the West. Knowing that, you now know one of the reasons why I am moving to Ecuador.................yes, indeed...........they will be entering the first stage soon. That's the one I like. That's the one where gov't doesn't get involved in your daily life yet, where money can be made and businesses can grow freely. By the time it reaches stage three, I will be pushing up daisies.
Unfortunately, I do not have the time to fully elaborate on all the details and twists and turns that make up each stage, but I just wanted you to get an idea of how I see things....it is simply expressed here in this post, but there is much more to it. Even though, with all the details and developments, it still is something that plays itself out essentially in the same way in each country that develops itself. Yes, even Brasil will be a victim of this same "lifecycle."
The only question I still have is "When will humans realize that doing the same thing over and over again can only bring the same results over and over again?"
Didn't someone say that this manner of thinking had something to do with "insanity?"
cheers ............I hope this makes your day more interesting.
vwig