I have a standing theory, a paradigm really. Governments, especially democratically elected governments have a voracious need to spend. They begin by financing their spending by direct taxation. Taxation is a tax on present income. They tax everything they can, and push those taxes to the limit. When they run out of taxation (politically), they proceed to tax the future by borrowing money. When they borrow so much that they can borrow no more, they proceed to tax the past through inflation. Inflation is a tax on money that you earned in past and had socked away. Inflation is the last option (short of out and out confiscation of property) that governments have to feed their spending addiction. After that, collapse.
Confiscation of wealth will follow inflation (remember FDR stole every American’s gold). Finally war will be induced.
This is always the cycle. It is always caused by a government seized by totalitarians under whatever name they choose to call themselves.
Here and now they call themselves Democrats.
All government is overhead. The absence of government is anarchy. So everyone can agree that we need some government.
What occurs, though, is government forgets that it is here to serve us, not the other way around. Government also attracts those that cannot make it in a competitive market environment. Their skill set is manipulation, obsequiousness and egoism. Not winning they manage the system to make them a winner.
The failure, to my mind, occurred with Teddy Roosevelt’s trust busting. He “solved” a non-problem, but created the belief that government could solve problems. Take a look at the response to the 1920-21 recession. Government did next to nothing, the Fed twiddled its thumbs, and things reset themselves.
Hoover’s and then FDR’s interventionist attitudes are what exacerbated and then extended the Great Depression. I’d like to see a return to the bank clearing house era and an insurance system, strict banking laws for savers (savings banks and credit unions), no government mortgage guarantees or tax subsidies of debt interest, and full responsibility of investors for their investment decisions.
The bubbles we’ve experienced in the latter half of the 20th century to today are a direct result of the Fed making government intervention possible via low interest rates.