Posts Tagged ‘Despotism’
Despotism or Tyranny?

Much of the developed world will descend into despotism. The failure of mainstream policies will fatally weaken mainstream politicians, parties and institutions. People will turn to the extreme left or the extreme right to restore their declining living standards. Vested interests benefiting from the status quo and those opposed to these extremes will fight to retain what they have, democracy be damned. Advocates of the left, right and status quo will all believe they are acting “for the good of the people” as they destroy our democracy and trash our way of life.

It matters little to the millions of dead whether they died in a NAZI concentration camp, Soviet Gulag or Cambodian killing field. They are just as dead. Treated as dispensable slabs of meat, to be used and abused so someone could create their version of a better tomorrow. Falling for the left to stop the right or for the right to stop the left is simply succumbing to the rhetoric of potential despotic tyrants. Psychopathic ideologues will deprive you of your life, liberty and property as readily as they always have. We denizens of the West have not escaped histories bloody embrace.

But the descent into tyranny is not inevitable. It is just the most likely outcome given how much the worldview of the spineless curs in positions of power diverges from reality. Churchill could have accepted the inevitability of a German victory in World War II. He did not do so. Instead he rallied the people, not by telling them to go shopping, not by claiming things were going well when they were not. But by telling the people what a hard time they had before them:

We have before us an ordeal of the most grievous kind. We have before us many, many long months of struggle and of suffering.

We too have dark days ahead. At this stage it is economic rather than military Armageddon we face. The latter may well come, but in the near term it is a lower probability outcome than one of debts being defaulted on and expectations not being met. For many the economic adjustment will be a disaster. People led their lives and made their plans according to a false set of societal operating assumptions. Our leaders need to explain this fact to prepare us for the hard times ahead. The money diverted to financial vested interests is money needed to feed, clothe and provide warmth to the poor. Our experiment in crony capitalism must end.

Churchill in telling people of the hard times ahead, knew just how bad they would be:

For the first time, the people had hope but Churchill commented to General Ismay: “Poor people, poor people. They trust me, and I can give them nothing but disaster for quite a long time.”

The march of the extremes into the mainstream is  but the first step in the unraveling of  our politically correct Joseph Goebbels like big lie:

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”.

Politically correct Western states are losing the ability to shield their people from the effects of the big lie. The shock of the adjustment will be large. We need to prepare people for it. Otherwise the shock may shatter our societies, enabling extremists or existing vested interests to seize control. But the mainstream media’s reiteration of politically correct perspectives amplifies the big lie. It befuddles much of our richer, better educated and empowered population segments. This has created a leadership class unaware of the need to prepare for the tough times ahead. Their ignorance and denial is effectively paving the way for the extremes and existing vested interests to seize the State.

Denizens of the developed world may think they have stepped out of history. Wars, famines, pestilence and mass poverty do not happen to us. They exist in history books or happen to other peoples. It’s natural for those in poor countries to slave away making trinkets and material items for our amusement. It’s natural for the majority of our “children” to spend the first quarter of their life studying and the last quarter in retirement. The half of our lives spent  working is punctuated by frequent holidays. The working day is not too long or onerous.

Well history has started again. States can not make good on their promises to their people. Governments are trying not to admit this. In so doing they are putting off the inevitable, at the cost of making it worse. Their policies can not work:

My Speech Delivered at the New York Federal Reserve Bank:  The noose is tightening on your organization, vast amounts of money printing are now required to keep your manipulated economy afloat. It will ultimately result in huge price inflation, or, if you stop printing, another massive economic crash will occur. There is no other way out.

Again, thank you for inviting me. You have prepared food, so I will not be rude, I will stay and eat.

Let’s have one good meal here. Let’s make it a feast. Then I ask you, I plead with you, I beg you all, walk out of here with me, never to come back. It’s the moral and ethical thing to do. Nothing good goes on in this place. Let’s lock the doors and leave the building to the spiders, moths and four-legged rats. – Read the whole speech.

The failure of mainstream policies will undermine the standing of all institutions associated with them. The appearance of corruption and rampant fraud will destroy the trust on which our society is built. Once gone it will be sorely missed. Without trust we will soon be poor. It is more than the value of the dollar in our pocket that is dependent on it. It is the foundation of civil society. Without it there will not be much innovation or affluence. Recreating widespread trust once lost could be a task of decades or generations. Its loss is worth resisting.

It may not be too late to avoid a period of persecution, anarchy and mass impoverishment.  But the only hope of doing so it to restore integrity. Integrity to our institutions, our budgets, our leaders and our laws. Without this, all roads lead to misery and tyranny.

Graphic courtesy of Zerohedge – read the post.

Default or experience austerity then default

There is something inevitable about feckless politicians being unwilling to tell the truth to their people. Perhaps even to confess it to themselves. No matter how much we may dislike reality, running from it is futile. Reality always wins, normally on the battle field.

Some problems become bigger if not addressed. No one likes being cut open, irradiated and injected with noxious substances. Yet many have opted for exactly that. As a consequence they have lived for many years more than they would otherwise.  Cancers tend to get worse over time if left untreated. Debt problems do as well. In an overly indebted society shifting excessive debt from one component of society to another does not solve the problem. The absolute magnitude is the problem. Shifting the debt around may mask the problem, and can delay the inevitable. But it does so at the cost of making the inevitable adjustment worse.

Interest accumulates on debt. New debt creates interest obligations. The principle has to be repaid. If the country has too much debt then shifting it around is akin to rearranging the deck chairs on the Titanic. Overly indebted consumers cut back on consumption. Overly indebted producers cut back on investment Overly indebted governments cut back on essential services and suck the life out of the other sectors of the economy. You do not want to become overly indebted as an individual or society. When you are there are no pleasant options. Politicians may seek to defer the pain, but it comes at the cost of the debt cancer growing and metastasizing or an inflationary destruction of price signals.

The optimal solution for a nation is not to become overly indebted.  A nation like an individual needs to keep an eye on the rate of growth of total debt to GDP. Having become overly indebted, the sooner one accepts the fact and sheds the excess debt the better. This means restructuring and defaulting, not borrowing more. Strangling consumption, investment and essential services to service the unserviceable simply puts off the default. It also devastates society and tries the patience of the people. In a democracy it greatly increases the chance of later slipping into anarchy or depression.

So what countries are overly indebted? In examining the following table of debt/GDP remember that with their level of debt, Greece defaulted:

Greek total debt/GDP was below the median. They defaulted before others because a high proportion of their debt is government debt and they have a cultural bias against paying taxes. Greece also do not have control of their currency and consequently can not just print money. Given the levels of total debt/GDP across the developed world as illustrated in the BIS table above, does anyone doubt others will follow?

There are historical precedents suggesting that sovereign defaults tend to be associated with many years of poor performance:

Having much of the Western world simultaneously in crisis can be expected to increase the effects compared to when problems are less widespread. The historical precedents could well be best case estimates given the extent of over indebtedness this time. The same applies to past great stagnations:

Decreases in absolute terms such as can be expected during depressions require proportionally greater increases to make good the loss:

The mathematics of loss followed by gain explains why it could be decades before we are as wealthy as we recently thought we were. Sadly much of the Western world has been living in the bezzle for years.

Our countries have been through experiences that are worse than an economic downturn. Our system need not lose legitimacy if it behaves in a legitimate way, even in a depression. But if the costs of the bust are put onto those who benefited least from the bubbles there could well be disorder. Defaulting on debt at the correct point, rather than when it has all been taken on by the government helps maintain the legitimacy of our system. Allowing vested interests to pass the losses onto government while keeping their gains undermines legitimacy, increasing the propensity to violent revolution.

Governments need to explain reality to their people, that they can’t meet their commitments, that they have been lied to. In effect eh Western social welfare state is a ponzi scheme and it is running out of new money. Printing money just disguises the problem for awhile at the cost of making it worse. But governments seem unable to explain reality to the people and implement sustainable policies:

Oops, German austerity fail: There’s an interesting article in Der Spiegel on Tuesday about how Germany has failed to reach its own austerity goals in 2011…

“SPIEGEL reports this week that the German government didn’t reach even half of its planned savings in the federal budget. Only 42 percent of the spending cuts named by Merkel’s coalition government, comprised of the conservative Christian Democrats and the business-friendly Free Democratic Party, were actually not implemented.”

Even the  Germans are having trouble implementing austerity. How do you think the likes of Spain and Italy will go? Governments should have been prepping their people and hording their treasure to assist those in real need during the times ahead. As for trying to avoid the issue through printing or borrowing more money, this needs to stop. Politicians need to start living the serenity prayer:

God, grant me the serenity to accept the things I cannot change, Courage to change the things I can, And wisdom to know the difference.