Guest Post Peter Wood
I didn’t write this article to impress the cognoscenti of the financial world, on the contrary, I wrote it for the uninitiated who, like myself before I investigated the subject, are probably only vaguely aware that all is not well in the world of money.
I’ve tried to describe a complex economic situation in a simple and understandable way without using complicated graphs, mathematical formulae, esoteric and arcane language. One might even call my explanation simplistic, and indeed it can be reduced down to one word, “DEBT”.
The inescapable conclusion to be drawn from what I describe is that we in the Western democracies have gotten ourselves into a very, very dangerous situation. As I see it, along with many others, the greatest threat which the world faces is not a nuclear armed Iran attacking Israel, North Korea attacking S. Korea, the success of al Qaeda or bird ‘flu, it is a systemic collapse of fiat currencies and the carnage which such a collapse would unleash on mankind. Global financial collapse would then serve as the catalyst which brings all those other dangers we face to being realities.
Although all political parties which have governed in the democracies have contributed to the situation in which we now find ourselves, it is the socialist governments which have inflicted the most economic damage. The left-wing economists who run the show at the moment in Europe and America would almost certainly take issue with what I’ve written while on the other hand adherents of the Austrian neo-classical school of economics would almost certainly agree with me.
My references to Keynes’ monetary theory is very general and superficial. I mention a small part of his theory because it’s that upon which current Central Bank action in Europe and the US is based and which most appeals to Socialist fiscal policy makers. To be quite honest I’m not an economist and a lot of his theory is about as understandable to me as the Chinese language.
Dancing On The Volcano - A Summary of Current Economic Practices of Western Democracies.
To understand how we got into the economic situation in which we find ourselves today we have to begin with the darling economist of European socialists and the current American administration John Maynard Keynes who, during the depression in 1933 published his work The Means to Prosperity which became the basis for the economic theory known as Keynesianism which he later expounded in his
The General Theory of Employment, Interest and Money published in 1936.
To put it simply he theorized that governments, which had up until that point run largely “budget neutral” economies along the lines of neo-classical economics, (neither surplus nor deficit, except in times of war after which debts incurred were repaid to the banks.) should use tax revenues as a “credit multiplier”, they should use part of their tax revenues as the basis for borrowing multiples any particular sum. His theory envisioned governments doing this in times of economic downturn in order that they be able to compensate for the private investment which generally leaves economies in such times, thus spending and stimulating the economy and avoiding a deeper recession/depression. He advocated that part of the money borrowed be invested at a higher rate of interest than that owed so as to partly offset the borrowing costs. His theory saw this scenario being adopted during times of economic distress; after crises, monies borrowed were to be repaid as the economy recovered – or more simply put: borrow in bad times and repay in good times.
So much for the theory, what about the practice?
Keynesianism, at least the borrowing part of it, began its heyday in the aftermath of the Second World War. Devastated European countries and their economies desperately needed money to rebuild infrastructure and finance private enterprise. Britain in particular had a large war debt to the USA which had to be repaid and the Labour government of Clement Attlee wanted to expand the social security and public health systems for those who had fought in the war, and so the borrowing began in earnest.
From the 1960s on most European countries: Britain, France, Germany, Italy, Holland, Belgium, post Franco Spain, post Salazar Portugal and post military junta Greece, borrowed money rather than using only tax receipts to finance burgeoning social systems, huge increases in the size of government and Cold War defense budgets.
They borrowed during recessions and they borrowed even more during boom years. Rather than reducing the borrowed principal they chose to borrow ever higher sums and pay only the interest thereon. In order to get their hands on ever larger sums the Nixon administration took the dollar off the gold standard in 1971 which marked the end of the Bretton Woods System.
Up until that time the amount of money in circulation was limited by the amount of gold banks possessed. In Western democracies central banks were limited by law to printing money at a ratio of nine fiat notes of the lowest denomination to one in gold. For example in the US every nine paper dollars had to be backed by one dollar’s worth of physical gold held in the bank’s vaults. Because the world’s supply of gold is limited and expensive it follows that the amount of paper money in such a system is thereby also limited. At the stroke of a pen, by requiring banks to have one paper dollar instead of one dollar of gold in reserve for every nine dollars they printed or gave in credit, the US government was able to expand M1(the amount of money in circulation) and ensure that a potentially limitless the amount of money was available to it. Soon afterwards the rest of the world followed suit.
The foolhardiness of politicians using borrowed money as a means of artificially maintaining a standard of living which the real economy of the country can’t support is demonstrated by the following statistics:
US public debt stood at $3.339 trillion in January 2001when George W. Bush became president and had risen to $6.369 trillion by the end of 2008 when he left office. Under Obama total public debt has increased to $16.4 trillion or 103.5% of GDP (http://www.research.stlouisfed.org) with interest payments on the debt now running at $396,000,000,000 a year. That’s right up there with Greece, Spain, Italy and Portugal. (http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm)
The worst is yet to come. Although the interest payments are currently at nearly half a trillion dollars a year, this is a relatively small amount as Ben “Helicopter” Bernanke of the Federal Reserve has engineered interest rates paid to lenders on US treasury bonds ranging as I write from 0.03% for 1 month through to 2.83% for 30 year bonds. At 2% the 10 year bond is about 4½% below its long term average
(
http://bonds.about.com/od/governmentandagencybonds/a/Historical-U-S-Treasury-Yield-Charts.htm). When all the trillions which he has pumped into the financial system eventually finds its way into the real economy instead of the stock market, which is happening at the moment, and hyper-inflation will begin, interest rates will have to rise and the US interest payments on its debt will be unsustainable.
Who’s buying US government debt? In 2008 before the financial crisis hit 97% of bonds were being bought by foreign governments and institutional investors and 3% by the Federal Reserve Bank, today the Federal Reserve is buying 90% of all US government issued debt – yes, that’s right, the American government is printing money and buying 90% of its own debt issuance (http://www.bloomberg.com/news/2012-12-03/treasury-scarcity-to-grow-as-fed-buys-90-of-new-bonds.html). If you think that’s mad you’re right, it is. It’s exactly what the Weimar governments from Fehrenbach to Stresemann did in the 1920’s which ended in hyper inflation.
Bernanke has painted himself into a corner. There are only two places where large sums of investment money are parked – in government bonds or in equities (the stock market) Along with his program of zero interest rates(0.25%) which has banks borrowing cheap money from the Federal Reserve and using it to play the stock market, by buying up huge quantities of US government debt he has forced private money out of the bond market into the stock market which is what he wanted to happen. His reasoning was that most working and retired Americans are invested either directly or indirectly in the stock market and it would be a good way of producing a “feel good” effect among the public in bleak economic times while at the same providing investment money to those companies benefiting from increased share value, not to mention being good for Obama’s re-election prospects.
All very clever one might say, only the economy hasn’t taken-off as expected and the money he’s forced into the stock market has produced a bubble of such magnitude that when it bursts it will dwarf the financial crisis initiated by the housing market collapse. Stocks and shares are being bought, not because their valuations justify doing so, but simply because the money managers have to park their money somewhere and return a profit for their clients – even when they know they are buying into a bubble; they are hoping they see the burst coming and are able to cash in and get out before it happens.
Bernanke’s dilemma is, if he stops, or even reduces his purchases of government debt, interest rates paid on treasuries will rise making debt servicing unsustainable and borrowing prohibitively expensive. The stock market, which is fueled by cheap money, would see an exodus of investors and, in a worst case scenario, could collapse. Added to this the banks are borrowing money from the Federal Reserve at 0.25% interest and instead of loaning it out to stimulate economic activity they are re-depositing it with the Federal Reserve in the form of excess reserves (money deposited with the Central Bank which is then used if banks get into cash difficulties). They are waiting for the cash bonanza they are going to receive when interest rates rise and with them the Federal Reserve’s interest payout on those reserves.
The billionaire Hedge Fund manager Stanley Druckenmuller commenting on the current state of the US stock market said: “We all know it’s going to end badly but in the meantime we can make some money”.
Any flight of funds out of equities and into bonds would only be temporary as the next crisis would follow almost immediately, as Michael Pento, president of Pento Portfolio Strategies pointed out on CNBC:
“The number one security issue we have as a nation is the preservation of the U.S. dollar as the world's reserve currency, it's a thousand times more important than a nuclear bomb being tested by North Korea. It's a thousand times more important that we keep the dollar as the world's reserve currency, and yet we are doing everything to abuse that status.
Five to ten years - that would be an outlier. I would say 2015, 2016, that would be the time when it becomes a particularly salient issue. When we're spending 30 to 50 percent of our revenue on debt service payments, we enter into a bond market crisis. The dollar starts to drop along with bond prices. That would set off the whole thing." (http://www.cnbc.com/id/100461159)
In Europe the same thing is happening. Banks are borrowing money from the ECB at 0.5% interest and buying stocks or peripheral European country bonds which return 3%, 4%, 5% or more in gains. This game feeds on itself. The more money which is pumped into equities the higher the valuations and therefore the higher the returns when sold. Since the beginning of the financial crisis in the summer of 2008 the German DAX has more than doubled from under 4000 then to over 8000 now. Can anyone really believe that the German economy has boomed in the last 4 years more than at any time since the Second World War? The American Dow Jones is at an all time high at over 15,000. Higher than in the boom years of the 1990’s when it was fueled by the home computer, internet and mobile ‘phone revolutions. Does anyone really think that the US economy has boomed in the last 4 years more than in the 1990’s?
The Swiss investment advisor and author, Marc Faber said recently: “When the stock markets are booming and the real economy isn’t, it can only end very, very badly.”
In Britain it’s a similar story. Under the 13 year Labour government of Tony Blair public debt almost doubled from that under the previous Conservative government of John Major As of Q4 2012 the national debt amounted to £1.347 trillion, or 88.7% of total GDP,# the debt is increasing by approximately £121 billion per annum, or around £2.3 billion each week. The annual cost of servicing the public debt amounts to around £43bn a year, or roughly 3% of GDP.
The rest of Europe is either in a similar situation or worse. Germany’s debt is currently 81.7 of GDP and interest payments on its debt run at 65 billion euros per annum or about 2½% of GDP. The government of Angela Merkel has underwritten debt guarantees for the bankrupt countries of Europe to the tune of more than one trillion Euros, and there’s more to come. When, and not if, the Germans are required to make good on these guarantees it will not only be the end of the Euro but will also bankrupt the German economy.
Total credit in the Chinese financial system is reportedly now over 220% of GDP, jumping almost eightfold over the last decade, with companies having to come up with $1 trillion in interest payments this year alone.
(http://www.telegraph.co.uk/finance/china-business/10120716/China-braces-for-capital-flight-and-debt-stress-as-Fed-tightens.html)
While private credit/debt (credit for the lending party, debt for the borrowing party) issued in moderation and directed judiciously can serve to promote beneficial economic activity, credit issued willy-nilly for all and everything in an attempt to produce economic growth and increase wealth which isn’t supported by the real economy can instead only produce credit/debt bubbles which, when they burst undermine financial stability.
The Americans might be able escape the consequences of printing tons of money for quite some time before their chickens come home to roost but the Europeans, who through the ECB are doing exactly the same thing as the Americans, will not be so lucky. Of course the government will tell you that inflation is a paltry 2.5%. Years ago they removed food, fuel, housing and energy costs from their inflation calculations on the ground that prices for these were too labile and could regularly go either up or down. I’ve never known rent, energy or food prices to go down. The “basket of products” used to measure consumer inflation is updated every nine years, which means that in the second half of the nine year period it is mostly out-of-date and largely meaningless.
The Socialists who are screaming “an end to austerity” haven’t said where they intend to get the money for their stimulus programs. “tax the rich” is a favorite one, only the rich don’t have enough money to bail out fiscally irresponsible governments, and anyway, as Harold Wilson, James Callahan and more recently Francois Hollande have had to learn, the world is home to the rich, they can simply get up and leave; which is why Marx advocated a communist system of government being enforced worldwide so not as to allow the rich any safe havens. A financial transaction tax is the current money spinner for the socialist governments of Europe, but they will soon discover that investors will simply move to doing business in a country which doesn’t impose such taxes. You can be sure, however, that direct and indirect taxes will be increased on employers, workers, pensioners and the unemployed.
Borrow the money? Institutional investors such as international pension and investment funds and foreign governments which have billions to invest have lost confidence that southern European countries will ever be able to repay the money they borrow, which just leaves the ECB to print the money and provide it at a 0.5% interest rate to the Spanish, Portuguese, Italian and Irish banks which then buy their government’s debt or invest it in European stock markets. Printing and spending money which is not underpinned by the real economy can only lead to inflation (currency debasement results in higher prices (inflation) which inevitably has the effect of limiting production and which in turn leads to too much money chasing too few goods and services) quite apart from the question of whether the ECB and its backers – the Germans, Dutch, Finns will ever see the money repaid, if not, they will have to cough up real money which has been earned as opposed to being merely printed. Added to this the rating agencies are ready to act and reduce the credit rating of any country which increases its public debt. A lower credit rating means higher borrowing costs for already over-indebted countries.
The Socialists argue that Europe’s problems all stem from the greedy banks, and while there may be an element of truth to this, it remains the fact that it has been the socialist governments of Europe which have borrowed the most money in an attempt to create their European socialist paradise. The borrower is slave to the lender. If the Socialists don’t like being the slave of the banks and money lenders then the solution is simple: repay the monies owed, don’t borrow any more and learn to live on tax revenues. The way to defeat the greedy bankers is not to regulate them out of business but to stop giving them ever increasing sums of tax payer money by repaying the principal sums borrowed and not borrowing any more. You can be sure, however, that when the inevitable happens and we’re crushed by the mountain of debt we’ve accumulated, the Socialists and left-wing economists will blame it on governments not having spent enough.
According to Germany’s mainstream political parties, with the exception of the AfD (Alternative für Deutschland), what is needed is “more Europe”. This meaningless expression in translation means “more socialist solidarity by way of increased spending and debt guarantees given to those countries in the European Union incapable of running even moderately successful economies. The Social Democtratic Party together with the Green Party want to communalise Europe’s debt by introducing a “Debt Fund” which would make the more successful economies liable for the future debt of their feckless neighbours. While the intention is to reduce borrowing costs for the over indebted members of the union by having the stronger economies stand guarantor for the weaker ones, the inevitable result will be that those whose borrowing costs are now low will, very shortly after the introduction of the fund, become considerably higher.
The Socialist dominated European Parliament in Brussels under the presidentship of one of most intransigent German Socialist Democratic politicians, Martin Schulz, refuses to accept the reality of the economic times in which they live and agree to a 3% cut in the EU’s € 960 billion community budget. On the contrary they insist on getting an extra €1.7 billion. The EU parliaments’ “sacred cow” economic development and stimulus programs are shared out among the thousands of industry lobbyists who arrive in Brussels with suitcases full of money for the MEP’s “re-election campaigns”; from the megalomaniac, 50% over budget multi-billion, Galileo Project to give the world a European GPS system because the socialists were unhappy with the American military having control over satellite navigation to the railway stations and highways in Spain where no trains go or cars drive.
European politicians of all parties are driving “Project Europe” with the same fanaticism which the Soviet Union strove to promote international Communism back in the 1950s, 60s, 70s and 80s, and, as with all socio-political projects which are driven by ideology at the expense of sound economics, it will most likely suffer the same fate.
You can read about some of the insanity here:
http://www.businessinsider.com/the-most-ridiculous-spending-charges-by-the-european-union-2011-6?op=1
http://www.taxpayersalliance.com/eu/2012/07/eu-outdo-230million-project-barbados.html
Socialist fiscal politics aren’t about sound economics they are about getting power and holding onto it. Unlike Conservatives, who have to appeal to a cross section of society to obtain power, Socialists need only appeal to the largest group which they are given to emotively and variously describing as “the poor”, “the underprivileged”, “the deprived” and “the disadvantaged”. I can’t think of the current epithet but I expect it’s probably something like “the financially challenged”. As the lawyer Vladimir IIyich Lenin said “…make words mean what you want them to mean and you will control the dialectic.”
Governments have increased their public debt during the financial crisis in order to avoid the worst economic consequences of allowing and even promoting the blowing of financial bubbles. Not surprisingly they were reluctant to sufficiently oversee the institutions from which they were borrowing their money. They have sought to apply Keynesian economic theories to the problem – borrow and spend in the bad times, which can’t possibly succeed for one very simple reason – they’ve forgotten the other half of Keynes’ formula – repay in the good times. Keynesian economic theory cannot work in the current situation because Western governments began the current crisis already overloaded with debt. No one wants to lend money to someone whom he sees is already overly indebted. As we’ve witnessed in the cases of Greece and Cyprus there’s a good chance of you loosing your money.
Governments have always fooled themselves and the public into believing that their economies are going to magically start growing at a wonderful rate some time in the very near future and solve all their debt problems. That’s exactly the belief behind the “all we need is monetary stimulus and we’ll grow our way out of the recession/depression” argument. It isn’t going to happen. The world has changed, but the money guzzling social systems of Europe and America have yet to reflect that change. China and other Asian countries are no longer just places to where European and American jobs have been outsourced, they are now themselves producers of competitive, high-tech, quality products, and China is rapidly replacing Europe and the US as the main trading partner of other Asian countries, Africa and parts of South America; not to mention it using its trade surplus dollars to lock up huge quantities of the world’s resources. The countries of southern Europe can never be economically competitive so long as they have the Euro as their national currency - and possibly never will be regardless of which currency they have.
In the 1980’s mathematicians and economists at Harvard University were asked by Wall Street investment bankers to design investment vehicles (financial investment packages) containing different grades of product (investment products are graded from the highest AAA down through 23 decreasing grades to D, the lowest investment grade is BBB everything below that is considered non-investment grade and colloquially called “junk”) which were to be opaque to anyone but the most expert (the former Federal Reserve chairman Alan Greenspan said following the crash that even he, with his relatively good grasp of mathematics, hadn’t been able to understand them. A remarkable admission since it was during his tenure that these investment vehicles were pedaled with his explicit blessing.) and which could be quickly leveraged (multiplied in price).
What they came up with were investment vehicles known as “derivatives” (because they derive from debt) simple in concept and complicated in practice. One can analogize them to the cocaine industry. The Colombian cocoa farmer sells his crop to drug dealers for $5000, the drug dealers distil it into 1kg of pure cocaine and sell it on for $500,000, the buyer opens up the package and dilutes it with some baking powder, splits it up into smaller packages and sells it on for $1,000,000 the next buyer does the same and sells it on for $2,000,000 the process is repeated until it reaches the end user, the “junkie” by which time the original amount has grown to 10 kilos - the original one kilo of pure cocaine and 9 kilos of adulterants and now costs/sells for $10,000,000.
It’s easy to see what has happened. There is still only one kilo of cocaine in total, the price has increased twenty fold but the intrinsic value is still the same, $500,000. At the beginning only a handful of people are involved in the transaction but by the time it reaches the end of the chain thousands of pushers and users have become involved. This, in principle, is how these “financial vehicles” worked. Each new buyer opened the package, broke it up into several packages, and mixed it anew with slices of ever lower grade products, no one knowing the real value of what they had bought and wanting to turn a profit and sell it on as quickly as possible before the investments “matured” (payment became due) - the financial investment equivalent of musical chairs.
There is only one difference between derivative financial products and the cocaine analogy, the original kilo of cocaine is usually pure whereas the derivative investment packages of AAA rated financial products are adulterated with non-performing loans and junk rated products from their inception.
Although the financial crisis triggered by the collapse of the American housing market in 2008 precipitated the Euro-zone crisis it was not the cause of it. It is however, an example of how greed, the lack of financial understanding and oversight of financial institutions by the political classes brought governments into great financial difficulty by having to bail out banks which had bought worthless investment products from Wall Street. This event triggered a contraction of credit which then led to the sovereign debt crisis as banks were and are the main buyers of government issued debt, and the real estate crises in Ireland, Spain and Portugal etc. A wave of bankruptcies and insolvencies took place which, if nothing else, irrefutably demonstrated that Western democracies have allowed themselves to get to the point where they cannot survive without being on an intra-venous credit drip.
To make the madness complete, the Obama administration is going all out to introduce European style socialist policies in the USA. Ninety-nine weeks’ unemployment money, welfare benefits, free health care, food stamps and subsidies for everything. Socialist governments become an end in themselves and, like all socialists, Obama wants to build an entitlement nation with its citizens totally dependent upon a (Democrat) government for all their needs. After all, independent citizens are anathema to socialists, what counts is the collective who are dependent upon an “Uncle Joe/Sam” for their survival. Socialist politicians, the vast majority of whom have never built a business or provided someone with a job which wasn’t paid for from taxes, don’tunderstand how wealth is created neither do they know how their largess is going to be paid for as the work force ages and there are fewer working people to support the beneficiaries thereof.
How stupid to think that the problem is the messenger in the form of the so called “Tea Party” rather than the disaster they are warning of. The problem isn’t the “Tea Party” Mr. President; it’s what they are warning you, and all politicians, regardless of party affiliation of – AN UNSUSTAINABLE DEBT!
At the same time, on the other side of the coin, the greedy bankers of the world have been leveraging meager deposits nine to ninety times. Before the 2008 financial crisis began debt was packaged and sold and resold many times over as derivatives and this often multiplied the original debt of a thousand dollars a thousand times so that it was in the millions. When the 2008 meltdown happened a few of these derivatives began to unravel and brought down old, established banks and investment houses like Lehman Brothers. Worldwide derivative exposure was only about 600 or 700 trillion dollars at the time. Instead of reigning in this debt and stopping the practice, derivative exposure has now soared past one quadrillion dollars. World GDP is roughly 70 trillion US dollars, which means that these “investment vehicles”, which Warren Buffett, the owner one of the world’s largest investment funds, has called “financial weapons of mass destruction” have been leveraged (inflated) to a nominal debt-investment return 15 times greater than the total world GDP. There is no longer any relationship between what we produce and the amount of money in circulation.
The problem is one of too much debt incurred by unaffordable social systems, bloated public worker sectors, private sectors made uncompetitive and inefficient by over-regulation and spend-thrift governments. It is impossible for the solution to the problem to be the same as the problem itself – namely more debt. That just leaves the printing presses, and believe me, they are working overtime. As long as people in Western democracies demand more and more for doing less and less, populist, vote buying, socialist and socialist oriented governments will oblige by giving them the illusion of wealth, the illusion of having more. It’s an illusion because it’s achieved on borrowed money which has to be paid for in the form of higher taxes, which then stifle private enterprise and the domestic economy.
I’m not arguing against having a social system but rather, out of self interest, I’m arguing for a rational and affordable one. If we stay on the course we’re on, when this house of cards we live in comes crashing down, people like myself will be the most affected. Wouldn’t it better for the people in the over indebted countries of the world to make-do with less than to have nothing at all? If you think the pictures you’ve been seeing of the social unrest in southern Europe are shocking just wait until we’re suddenly forced to return to using a gold standard and hundreds of trillions of paper dollars, euros, roubles, yen, renminbi etc. are removed from the global financial system. Unlike the title of Keynes’ book The Means to Prosperity implies, countries cannot borrow or print their way to prosperity.
A collapse of fiat currencies would put everything which has gone before in the way of depressions, recessions, hyper-inflation etc. in the shade. Money is needed for everything a health service, law and order, education, pensions, defense - the list is practically endless. What happens when the money stops? The United States buys peace around the world or at least tries to. It gives Egypt billions of dollars not to attack Israel, it gives Israel billions of dollars not to attack hostile neighbors, it gives Pakistan billions of dollars not to attack India and gives India billions of dollars not to attack Pakistan. It guarantees Taiwan and Japan military protection against China. It guarantees South Korea protection from attack by North Korea. Then there’s NATO - more money. On the humanitarian front the Europeans and Americans are practically alone in feeding the starving of Africa and are first responders in nearly all of the world’s natural disasters.
Systemic, global, financial collapse would change the world in a way which few of us can imagine. Perhaps the most serious consequence for the Europeans and Americans would be the inability to continue the fight against radical Islam. How do you keep trillions of dollars worth of high-tech military hardware operating on a fraction of the money you had before? The low-tech terrorists would bring their war to Europe and America in a way which up until now we have only seen on the streets of the Middle East and Afghanistan.
Although the authorship of the following passage is disputed it indisputably describes the state of modern democracies. Some sources attribute it to Alexander Fraser Tytler, (Lord Woodhouselee 15 October 1747 - 5 January 1813) from his work The Fall of the Athenian Republic.
A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury. From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship. The average age of the world's greatest civilizations from the beginning of history has been about 200 years. During those 200 years, these nations always progressed through the following sequence:
From bondage to spiritual faith;
From spiritual faith to great courage;
From courage to liberty;
From liberty to abundance;
From abundance to selfishness;
From selfishness to complacency;
From complacency to apathy;
From apathy to dependence;
From dependence back into bondage.
One might add to the list of reasons why democracies [will] always commit suicide, corrupt politicians who have their hands in the public treasury, along with other phenomena which didn’t exist when it was written, such as unscrupulous trade unionists who demand ever higher wages for their members regardless of deservedness and affordability and the dishonest wealthy who hide their money in off-shore bank accounts in order to avoid paying taxes. At which stage in the cycle do you think Western democracies are at in the present? I would say without a doubt “dependence”.
Peter Wood
Nuremberg August 25th 2013