An
excellent critique of the economic model that has destroyed the financial foundations of the modern world:
Keynes put forward the simple idea that modern governments should act like Pharaoh. They should run counter-cyclical fiscal and monetary
policies. In the fat years, they should store up surpluses. In the lean
years, they should open the doors of the granaries so that people might
eat. This seems sensible enough, until you realize that modern
governments do not run surpluses. Only deficits. The US hasn’t run a
real surplus (not including Social Security payments) since 1969. That’s
43 years without closing the granary doors. Not surprisingly, you can
look in there. You won’t find anything. Except I.O.Us. Instead of
actually storing up grain in the fat years, the feds ate every bit of
it. And more. Now, come the years of famine, they have no grain to give
out.
That might be the end of the story. But it’s not. Economists insist
that the feds can follow a pharaonic policy even with their bins empty.
How? By borrowing money…and in the extreme…printing it. You are probably
getting ahead of me here, dear reader. You are wondering whether that
would have worked in Ancient Egypt. Could Pharaoh have saved the expense
of stocking up grain, and simply borrowed it when he needed it? ...
Debt has become a major burden in the economies of the US, Europe and
Japan. It blocks them from saving, spending, investing and creating new
wealth. Why? Because the resources that might have been put to work
building the future have already been claimed by the past. Debt was
contracted. Now, it must be paid. It is as if Pharaoh had already
borrowed the needed grain…as if the grain needed to plant for next year
had already been eaten. Once consumed, it cannot be borrowed. It is
gone.
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