It seems that there is no political will to make real cuts nowhere in the western world. The debt is now being accumulatred for almost 5 decades, and the western population is used to live in debt. Thus it seems that there is no other option available then a total bankrupcy of all western states, or hyper-inflation in all of them. Do you think any other future scenario is possible? Are there Austrians who make these kind of predictions? If there are, can you place a link?
Eugene: Are there Austrians who make these kind of predictions?
Are there Austrians who make these kind of predictions?
I don't see how anyone could make different predictions and still call themselves Austrian.
So who here thinks there will be a total collapse, and a depression such as one we never experienced?
I too believe most governments will implode in total chaos that we never before seen. Heck, even during the Great Depression, the US government was standing strong.
These "something for nothing" programs that many countries, particularly in Europe, are going to see their days numbered. What I mean by "something for nothing" are welfare programs, universal healthcare, social security, and other freebies that politicians use to get the masses of people to reelect them. The elected leaders hope and pray that the massive accumulated debt can be indefinitely pushed sometimes in the future and certainly when their time in office is up. These "something for nothing" programs which accumulates in one big pile of doo-doo will be a nasty surprise. Maybe at this point, folks will wake up and even start questioning democracy itself.
I think there could be a total collapse, but I'm not so sure it would be due to debt. I think it's more likely that people would be murdered by the American state in numbers never before seen. The military is really the cause of the debt in America, although it's also giving to people who really, really don't need it even if the welfare-warfare state were somehow ethical (of course it's not).
The power to create credit/coin money/create legal tender and to tax gave us a slippery slope downhill from the Articles of Confederation and society has never been allowed to by law to be anywhere close to laissez-faire.
Some people say that the anarchy couldn't work, but if the excrement breaks the fan (Ron Paul is the only one who can stop it), I hope that everyone will realize that the chaos that ensues was due to government, specifically having a military.
The big problem I see right now is not a "market collapse". It's the fact governments are desperately trying to maintain the status quo. In doing so they are causing more and more resources to be shifted from the productive sector to the improductive sector. How do they plan to make up for this capital destruction? Easy enough, through "easier lending to productive activities". In short the private sector will have to hand over more capital to governments but will be allowed to make up for it through lending. May I ask where this money will come from? "Unlimited liquidity from central banks and tighter regulation to make lending from commercial banks easier".
I don't want to sound like a Debbie Downer or a Negative Nancy but I've seen this before and it didn't work. Central banks from all over the world poured untold billions into the system in 2008. They lowered interest rates to make lending easier. It just didn't work. This isn't a liquidity crisis: in fact there's far too much liquidity today, and it's causing a whole lot of price volatility, which in turn causes uncertainity, which in turn make people uneasy. And uneasy people don't go out and take a loan to buy a new McMansion.
I may offer an example of the problem: in my area we had a giant housing bubble. It crashed in 2008 because, plainly put, people stopped buying. Yet the construction cranes and the dozers are still busy at work. Why? Because banks were instructed to keep on financing builders, no matter what, because there was a robust attempt to replace manufacturing activity (slowly dying down because of problems common to the rest of Europe) with housing. This resulted in rows of McMansions waiting for a buyer. Because of price inflation and the fact these houses were built on finance prices aren't going down: in fact they have been going up this year. This is the perfect storm waiting to happen: increasing inventories carrying increasing price tags, banks lending to a sector which is overloaded with debt and unsold stock, people who cannot afford to buy because of increasing costs (lending may be cheaper to builders but surely isn't for individuals) and local governments highly dependent on housing revenues to make ends. At least in Spain banks stopped lending to builders: once money run out the building sites were simply abandoned. People know the housing bubble is over and won't come back. Here they think the good times will start rolling again as soon as "people will start buying houses again".
I don't know what the world has been smoking the last few decades but I advise you all to stay clear.