How is it that reports like this are not splashed as headlines across the globe? The UK's Telegraph actually published this, (and just before Christmas! How dare they!)…
In a sombre report on the outlook for next year, [Moody's,] the credit rating agency raised the prospect that future tax rises and spending cuts could trigger social unrest in a range of countries from the developing to the developed world.
It said that in the coming years, evidence of social unrest and public tension may become just as important signs of whether a country will be able to adapt as traditional economic metrics. Signalling that a fiscal crisis remains a possibility for a leading economy, it said that 2010 would be a “tumultuous year for sovereign debt issuers”.
[ad#200-left]Writers such as James Howard Kunstler have been riffing on this theme for years, particularly related to what could happen to the Wall Street types if the public were to grasp the level of underhanded mischief these characters have been handing the nation.
Some further support for the idea of this tension in the financial system comes from statements like this…
Duncan is part of a group of economists like Marc Faber, Nouriel Roubini and James Grant, who believe the financial crisis is a symptom of something structurally wrong with the United States economy that will not be solved by the end of recession.
The institution of capitalism has been so corrupted by binges of borrowing financed with money printed on demand that governments now indefinitely have to take the reins of economies, Duncan argues in his book.
"We can't describe this economic system as capitalism, I describe it as statism," he said.
The world has not seen such debt levels in modern history. This debt is not serviceable. Imagine that total debt is 557% of GDP, without considering entitlements. The interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt.
It assures a period of economic devastation. In a last, desperate attempt, politicians at the federal and local levels will raise taxes to astronomical heights to raise revenues. And that only assures destruction of the economy. Forget the fable of economic recovery. Unless there is a change in Washington by next year's election, there will be no way to turn back.
Bailouts, stimulus spending and massive deficits tend to increase the unease of the general population, particularly if the CEO's of banks and car corporations are still sitting pretty while the guy down the road is turfed out of his home and ends up living in the parking lagoon behind Walmart. There is a psychology at work here, and the principle of "the Tipping Point" is being tested by the powers. Here in Canada, I imagine we are less prepared for civil unrest than in the US, however, I have no illusions that if the tie comes for a response to riots or other moderately scaled social disruption, it will be swift.
The democracy we enjoy has been propped up by cheap consumer goods and a high level of service ranging from utilities and transportation to policing, health and education. If any part of this appears to be crumbling, the house of cards will show signs of distress.