Dear Friends,
It seems to me, The world’s economy is teetering on the brink of collapse. I know, many “Henny Penny” pundits have been saying that for awhile, but I believe the portents are there to substantiate the thesis now. We are in this predicament because governments the world over are so in love with Keynesian economics, the welfare state and socialism. Japan and it’s Keynesian driven lost decade, France with it’s love affair with socialists and socialism, Germany trying to buck the trend, Russia more interested in expanding it’s sphere of influence than improving it’s core economy, South America’s fling with outright Marxism, the never ending wars and corruption destroying Africa’s economic future and China with it’s aggressive threat to expand it’s empire as well, our world is perilously close to an economic disaster that will lead to a world war. I hope and pray something can be done to head it off but I fear it is too late. Our leaders will never admit they were wrong about Keynesian tax and spend economic policy and their new class supporters would revolt if they did.
Japan had a huge budget surplus in 1990. Since then, they have spent so much on Keynesian stimulus they have built a huge debt, and have now stooped to monetizing their debt, in the name of “stimulus.” Their GDP is stagnant but the standard of living is falling due to rising inflation. All proving, no matter how much a nation protects it’s gargantuan corporations, unless small businesses are allowed to start and thrive an economy is DOA.
France sways between socialism lite and Marxism in it’s leaders. Even one of the most pro capitalist politicians in France, Sarkozy, is in love with the welfare state. France has gone from one of the primary engines of the Eurozone, to an empty freight car, that has to be pulled along with most countries in Europe. The southern nations of Spain, Italy, and Greece are in total economic collapse. Even Norway is having trouble with the low crude oil prices putting a damper on their economy. Europe is even intent on changing it’s demographic from Europeans to Middle Easterners, who have a totally different world view than Europeans, which is a social experiment never done before, with unknowable repercussions.
China has embraced Keynesian economics in a big way. They are following in the footsteps of Japan and the results appear to be the same as well. China has experienced a huge growth in the standard of living of it’s people, like Japan did after the war, because of it’s embrace of capitalism. It has done what Japan did, becoming a giant exporter of goods, and doubled down on the Keynesianism by ginning employment by building ghost cities. That economic paradigm can work for awhile, as we have seen in Japan, but once the economy matures to the point where cheap labor and crony protections stop being the primary driver of growth, China will, and we see it now, slow, stall then fall… as did Japan.
Africa is mired in a cycle of war, socialism and corruption. Even South Africa with it’s vast resources is faltering under the weight of it’s Marxist policies. There is not one functioning government on the entire continent! From Egypt and Morocco to South Africa and Namibia every government is either corrupt, outright socialist, at war, or some admixture. Despite the oceans of oil under Africa, the glittering mines of diamonds and gems, the uranium reserves as well as precious metals deposits, Africa’s economy has been in almost total free fall since the colonial powers were thrown out.
South America has gone down the road to serfdom in a big way. While Venezuela is the poster child of a dysfunctional economy, due to Marxism, the whole of the continent is staggering under the weight of Marxist insurgencies and policies. Venezuela stands a bit of focus, they didn’t buy the oil infrastructure foreign oil companies built, they moved troops into them and declared them state owned. Hugo stole anything he wanted. Despite getting the infrastructure free they cannot run it and it is collapsing. Argentina has more resources than 90% of other nations, yet continues to go through spate after spate of hyperinflation, because of their beloved welfare state. So much so they have obliterated the middle class.
The United States still has not recovered from the Great Recession despite the propaganda to the contrary. Even as the US economy continues to stagnate the government is intent on increasing regulations and taxes. Moreover, the US government has become enamored with becoming a police state, complete with total monitoring of all it’s citizens ala… 1984. The deficit has exceeded 100% of GDP at 18 trillion dollars on a 17 trillion dollar economy and rising another trillion a year. Even as the welfare state is destroying our economy, the new class calls for more welfare, more taxes and more regulations, while undermining wages with illegal immigrants, subsidized by welfare state policies. Proof is the US dropping in rank of free economies.
I like to compare the economic fortunes of places like Hong Kong and Singapore with the likes of Argentina and South Africa. The difference couldn’t be more stark. While South Africa and Argentina have vast natural resources, Hong Kong and Singapore have none, yet the economies of Hong Kong and Singapore are dynamic and bustling, while the economies of South Africa and Argentina are basket cases. The reason is simple, Hong Kong and Singapore encourage small businesses to start and grow, have minimal regulations and taxes, while South Africa and Argentina are highly regulated, high taxed and undermine the work ethic with their socialist policies.
All of this brings us back to my original premise, that our World’s economy is on the brink, and that brink could very well lead to world war. The collapse we are seeing in the price of oil is driven by diminishing demand because supply has grown less than reported World GDP growth. Since energy is a primary input for all economic activity, that lower demand is telling of the direction of our economy, of course it is a short termed event… due to the cartel. If our World’s economy does collapse, it will be because of the new class’ love of power and control over the lives and fortunes of the people, justified by the siren of socialism. Economic collapse will inevitably usher in another world war. WWII was driven by the economic collapse of the Wiemar republic brought on by the draconian terms of the Armistice and the Great Depression. This time it will be no different. The alliances might be different, but the result will be the same, poverty, violence and suffering on a global scale. Sadly, when it is over, our leaders will not have learned the lesson, again, they will go back down the Keynesian road of socialism and welfare state, again… with the same results, again.
Sincerely,
John Pepin
