When the cost of money is low, governments will waste it and businessmen will not invest.
You have to make it profitable for businessmen to take on risk. Otherwise they will not invest because there is no measure of return. Lending to the government does not count because it’s an implied tax that robs the private sector of the wealth needed for innovation and growth.
I am appalled to learn that the Federal Reserve itself bought 77% of new Federal debt in 2011 according to Stanford Economist, John Taylor (we do have the Internet in the hereafter, too). That is simply not sustainable. The people cannot benefit from the Fed’s actions since it is the people, via the public treasury, who are buying the majority of new debt issued.
Bread and circuses will not placate the masses for long. In ancient Rome, our emperors used to pay privately for circuses, gladiatorial contests and public food as a means of distracting our population from the hopelessness of their situation.
It worked quite well for a while. But eventually people figured out the bread was rotten and that the circuses really were a colossal waste of their money and did nothing for their future.
I see a direct parallel. You have 330 million people and they seem to be focused on the possibilities of more bailouts rather than building their own future.
Your government already faces a fiscal gap of $222 trillion dollars, according to Professor Lawrence Kotlikoff of Boston University…up $11 trillion from a year ago. Social Security, Medicare, Medicaid…you can’t keep creating money from thin air any more than we did.
If you are to fix this, Kotlikoff estimates an immediate 64% increase in Federal taxes or a 40% cut in benefits. Neither is appealing and neither is likely to work in your time any more than it did in mine.
By the time we realized that radical fiscal reform was necessary to build a stronger Roman Empire and a more balanced economy, it was too late.
And finally, exceptionalism is not a mandate for internationalism
In Rome we learned the hard way that we were not exceptional. We tried to foist our elitism on those we conquered.
Although it worked for a time — several centuries, in fact — once our elite no longer saw the necessity to serve the people, much less in our military, we broke down.
Our Empire failed because we did not appreciate the need for mutual obligation and appreciation.
Certainly you could counter by charging that the United States has not colonized anything in years except perhaps Hawaii in 1959. Literally, you’d be right. But figuratively, you’d be quite wrong.
The United States has engaged in a highly charged morally-based international business model since it was founded. This may have worked well for more than 200 years given that the rest of the world was unable to compete and eager to do business with you, but ultimately it will fail.
Other nations now have options of their own and the incentive to take corrective action–or risk being dragged down with you.
One last thing. Don’t be so arrogant to believe that it can’t happen to you.
If the Roman Empire can collapse, yours can too.
Last Emperor of the Roman Empire