Thursday 2 May 2013

Debt is King II

Debt is King II

In the 1880’s Governments around the world were offered very generous credit and many took the offer. They believed something that Liberalism pushes all the time, the old ways are dead we live in a new paradigm now. It lead to a credit crash and a Depression and a commitment to not borrow so much again. Which lasted until the First World War when access to massive amounts of money were needed. 

The war changed how debt was used by Governments. Many wanted to return to a mostly debt free Government after the war debt was paid off but it was so large that it could not be paid back for decades. That gave an opening to those who wanted to fund more socialist policies, to use the growth in Government to help the poor. What was a little more debt as the Government already had so much. Then a little more and then a little more. 

When the Great Depression hit in 1929 Governments tried not to increase debt but the economy was so badly damaged that the normal efforts didn’t work. Keynes the British economist came up with a theory that Governments were already using, if private enterprise cannot or will not run the economy than Government should run the economy. Debt should be used to keep the economy running, after all the Government has the taxpayer behind it so in theory it has an unlimited ability to pay back any debt. 

We all live, no matter where we live with the consequences of those decisions. We live in an age where many believe that debt means free money, were the ability to pay back debt is seen as optional. The results are there for all to see in Europe and the United States, both will end badly because the underlying cause of the debt is being ignored. No person, family, business or Government can live beyond it’s mean, it is only a matter of time until the lender wants his money back. 

Liberalism believes in a world were money is free, but free money can be very expensive indeed.

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