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Governments Are Going Broke Worldwide

by Mark R. Crovelli

by Mark R. Crovelli: Does
Donald Trump Realize He Just Made a Complete a*s of Himself?

b6d2b lg share en Governments Are Going Broke Worldwide

When I talk
to self-identified “conservatives” today, I am surprised
how many of them have finally awakened to the fact that governments
all over the Western world are bankrupt. It has taken a long time
for them to do the math, but it is finally dawning on them that
when a government’s debts and liabilities massively outweigh its
current and future assets and “income” (a more accurate
word would be “loot”), that country is headed for disaster.
While they cannot be praised for their quickness in recognizing
something so blatantly obvious, at least these “conservatives”
have bested their “liberal” friends in solving the problem,
since most of the latter are sadly unable to add and subtract numbers
with 12 zeros.

While I am
pleasantly surprised that many so-called “conservatives”
can now spot an obvious bankruptcy when they see it, I am less than
impressed with their understanding of what bankruptcy entails for
a government. Almost invariably, they naively assume that government
bankruptcy is analogous to the bankruptcy of a private company.
Just as a bankrupted company like Enron shrivels up and disappears
from the economic stage, they assume, bankrupted governments will
shrivel up and, if not disappear from the world stage, at least
take on severely limited roles. The bankruptcy of governments is
thus assumed to be a positive development for individual liberty,
according to many so-called “conservatives,” because governments
will be forced to live within their means and abandon most of their
unsustainable and meddling schemes. A golden age of liberty and
respect for the Constitution is assumed to be right around the corner.

This idea that
government bankruptcy is a positive development for individual liberty
is just plain wrong, however. More than that, it is just plain delusional.
Governments are not in any way analogous to private companies, and
it cannot be sanely assumed that they will shrivel up or disappear
like private companies just because they are bankrupt. Governments
obtain their wealth by “taxing
people, and bankruptcy in no way impedes their ability to seize
wealth (unless they, like the Romans, stupidly neglect to pay police
and military salaries). On the contrary, their desperate need for
money during bankruptcy should be expected to induce them to try
to suck even more money out of their subjects than they did before.

And why shouldn’t
they? A politician’s job always entails spending other people’s
money. Some of this money is seized in the form of taxes from the
hapless taxpayers of the country, some is printed out of thin air,
and some is borrowed from people or politicians in other countries
that are too stupid or economically ignorant to know better. When
a government goes bankrupt, as Greece and Italy are currently in
the process of doing, and the flow of funds from the suckers abroad
dries up, the government only loses one of these three sources of
other people’s money. It can still tax the daylights out of its
own subjects and it can still print money. What’s to stop it?

The example
of interwar Germany is instructive in this regard. As a result of
the disgusting Treaty of Versailles following WWI, the German government
was made insolvent in exactly the same way that today’s Western
governments are insolvent. The gigantic war “debt” foisted
on the German government’s books was literally impossible to pay
off, just as most Western governments today have debts and future
liabilities on their books that cannot possibly be honored. What
was the result of this de facto bankruptcy of the German
government in the 1920’s? Did it automatically usher in a golden
age of individual liberty and limited government in Germany in the
1930’s? Did the German government stop taxing its subjects or printing
money? Did the German government learn its lesson about wasting
its people’s money on pointless and extravagantly wasteful wars?
(NB: if you don’t know the answer to these questions, you are about
as bright a “conservative” as Newt Gingrich or Mitt Romney.)

The problem
with assuming that governments will shrivel up just because they
are bankrupt is that governments, unlike private companies, can
still strong-arm people into giving them money even when they are
bankrupt. When Enron went bankrupt, it was not in a position to
send armed thugs to the homes of its investors to hustle-up more
money. Nor was it able to simply print a pile of money in order
to pay off its mounting debts. In other words, it went down, as
it should have gone down
, because it couldn’t force people
to keep funding its idiotic and wasteful operation. Government,
by contrast, does have a literal army of enthusiastic and sadistic
men on the payroll that will follow orders to kick in doors, bust
heads, and gas people in order to hustle-up money to keep the wasteful
operation rolling along. (NB: if you think people pay their taxes
out of the kindness of their hearts, instead of out of fear that
cops will haul them away to the American gulag, you, too, are about
as bright a “conservative” as Newt Gingrich and Mitt Romney).

Moreover, governments
are very careful to continuously
waste a very large chunk of money on the military and the police
After all, governments claim that their primary purpose is to “protect”
their subjects from foreign threats, so they are mindful to spill
a nice chunk of their budget on these strongmen when times are good.
(Whether government does in fact “protect” its subjects
from foreign threats can be gauged by the fact that governments
often bankrupt themselves trying to fund their militaries. With
a “protector” as financially irresponsible as Enron, how
much protection are we really getting?)

So, when a
government goes bankrupt, there exists a giant horde of armed men
in the military and police who expect to get paid, and who will
not take kindly to budget cuts. Ever mindful that a horde of armed
men is a constant threat to the civilian government when they are
unpaid and unhappy, the political class should be expected to do
whatever it takes to keep paying the salaries of the horde. And
where, do you suppose, will this money be hustled-up when the government
has bankrupted itself and can no longer borrow money from foreign
suckers? (NB: If you don’t know the answer to this question, you
are definitely as bright a “conservative” as Newt
Gingrich and Mitt Romney).

Hustling enough
money up to pay the salaries of the military and police (and other
privileged and militant bureaucrats, as in Greece) is not always
easy, however, because subjects don’t often appreciate have more
and more of their money confiscated by wildly irresponsible politicians.
Fortuitously for governments, shaking people down ain’t what it
used to be. They no longer need to send their armed thugs to kick
down doors, crack skulls and gas their subjects in order to confiscate
money. They can simply print money out of thin air and – Voila!
– now they can make payroll! If their subjects are stupid enough
to trust paper money, then why not skin them a little in order to
“solve” the government’s problems? Do you really think
that an organization with a budget problem that has the ability
to print money will not choose to do so for its own benefit? Do
you really think Enron would have refrained from printing money
to prop itself up if it had had the ability to do so?

The reason
so many so-called “conservatives” cannot grasp these obvious
and foreseeable consequences of a government bankruptcy is that
they do not have a true understanding of what government is.
Government is not a private company or a charitable organization.
It does not abide by the same laws as the rest of society. It can
continue to exist – nay, thrive – even when its debts vastly
outweigh its assets and income. It can print its own money and continue
to tax its subjects even when it has bankrupted itself. Hence, government
cannot be likened to an Enron or a Lehman Brothers as a relatively
benign entity when it goes bankrupt. It is an economic vampire that
will not shrivel or die easily. It can continue to suck and nourish
itself even when the absurdity of its balance sheet is evident to

Hence, if you
are a self-identified “conservative,” and you are sick
and tired or scared to death of the government we have today, you
should not look to our government’s impending bankruptcy as some
sort of cathartic and purifying event that will usher in a new age
of liberty. It will not. More than likely, if history is any guide,
the slew of government defaults that are in the pipe in the Western
world will usher in a golden age of government.

bankruptcy is not a substitute for the hard work of liberty-minded
people to advance the cause of freedom. In and of themselves, a
thousand government defaults would not advance the cause of liberty
one iota. What is needed in the time leading up to the government’s
default is a cadre of devoted, almost fanatical, freedom-fighters
who are willing and able to teach the masses about the nature
of government
and the nature
of money (PDF
). Only with the persistent help of this devoted
cadre, will there be any chance of fighting the growth of government
and the devaluation of money that government default will inevitably
tow in its wake.

7, 2011

Mark R.
Crovelli [send him mail]
writes from Denver, Colorado.

© 2011 by Permission to reprint in whole or in
part is gladly granted, provided full credit is given.

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