Some people have assumed that in the wake of the financial crisis that capitalism is dead. They point to the near destruction of our financial system, our high debt levels and the rise of communist China.
On the surface, these claims might appear to have merit but really they show the exact opposite to be true.
For years before the financial crisis, Europe was touted as the future superpower and America as the declining empire. There was a popular book published in 2005 called “The United States of Europe: The New Superpower and the End of American Supremacy.” The book reflected much of the popular thinking of the time.
However, now the European debt crisis has shown what a mess the quasisocialist states of Europe have created. Many countries in the EU have for years been running up large deficits, but no one seemed to notice until the financial crisis erupted.
The reason for the increasing debt was due to the European countries paying for lavish social programs that they simply couldn’t afford.
Whenever anyone thinks of a good program they would like the government to pay for, I respond that I can think of hundreds of things the government should do to improve things like roads, schools, etc. but how are you going to pay for that?
I love to help people but we have to fund things before we buy them.
Our nation now is like a child with their parents’ credit card (China), with an unlimited credit line. However, it is only a matter of time before our parents take away the credit card from the irresponsible child.
The euro nations ignored that question for years and are now paying the price for their idealistic and unrealistic thinking. I am not only referring to the PIIGs (Portugal, Ireland, Iceland, and Greece), many of the larger “stronger” European countries are facing high debt levels coupled with low population growth rates.
Many investors are worried that Spain is next after the PIIGs. But it does not stop there … Standard & Poor's Corp. lowered its ratings outlook on Belgium to negative from stable earlier this week. Countries like England, France and even Germany, which is considered the strongest European country has a debt to GDP level of 72 percent (according to CIA figures), making it the 19th largest in the world.
By contrast, Portugal which has the distinction of being one of the PIIGs, is No. 17 on the list.
Most of these European countries have very high personal tax rates and high VAT sale rates. With the exception of several European countries like Switzerland and Denmark, the whole socialist system seems to be the one collapsing.
So why is America in trouble? Because we have been following the failed European model for the past 10 years. It consisted of politicians promising anything and everything to their constituents without a thought of how to finance it. It is not only the Democrats; the Republicans have also been borrowing and spending.
I call the Republicans the party of spend and borrow and the Democrats the party of spend, borrow and tax.
So if anything the financial crisis has taught us not that capitalism has failed but that we must go back to the capitalist system with lower spending, and make sure everything is funded in the budget.
The pundits have it all wrong. The financial mess we are in is due to too much spending.
Lowering spending and balancing the budget is the real way to solve our problems.
© 2022 Newsmax Finance. All rights reserved.