Democracy: Cause of Debt Problems

According to this report, USA Inc., America's debt and future obligations total $47 trillion, or $395,000 per household.

Our debt problems did not happen overnight.  They started long before the 2008-2009 recession.  Governments in most democratic countries around the world have been running deficits and debts for decades to fuel fake economies and fake wealth.  According to the above report, the U.S. has been running deficits for every year since 1965 with the exception of five years.

Other nations are not much different.  (Europe's debt crisis is decades in the making.  Canadians tend to feel that they are in a much better position.  However according to that report, the U.S. has a gross debt of 83% of GDP and Canada has a gross debt of 82% of GDP.)

Most people claim that it is the politicians' fault.  It is not.

Why do politicians persistently run deficits?

The simple answer:  If they don't, voters will fire them and replace them with politicians who will.

It's not that the voters want deficits (most voters do not know the difference between deficit and debt anyways).  Voters simply want money, as explained here.

Politicians know this.  Therefore, they are pressured to spend and to keep taxes low.  Spending too much and taxing too little, causes deficits.  Politicians are humans like voters, which means they are motivated to preserve their income or jobs.  Hence, they run budget deficits, year in and year out, to keep their jobs.  Ultimately, voters control what politicians do and get what they want.

Therefore, politicians are behaving as expected, given the "rules of the game".

So, one can argue that it is the voters' fault for these persistent deficits.

Not necessarily.  Every human has a couple of common traits.  Every human wants to:

• Maximize income or wealth
• Minimize expenses

Therefore, voters want politicians to:

• provide many socialist programs:

• free healthcare
• pension
• subsidized education
• welfare
• unemployment insurance
• etc., etc., etc.
• reduce taxes

Therefore, voters are behaving as expected, given the "rules of the game".

However, these voter-demands cause deficits.

According to the above "USA Inc." report, 80% of Americans are concerned about rising deficit and debt, but 60-80% of them are concerned about cutbacks.  In other words, voters are concerned about the debt problem but do not want to help pay to solve the problem.  Hence, the deficits persist.

So, what are the "rules of the game"?  It's democracy.  It's the system.  There are thousands of different types of systems in this world.  Each system shapes and motivates behaviour in different ways.  If you want your sales rep to sell more, you increase his/her commission.  If you do not want people to park on the street, you hand out parking tickets.  The capitalist system motivates people to take risks and start businesses.  The communist system eliminates that motivation.  The democratic system enables voters to maximize their immediate well-being at the expense of the future.  Most people in the democratic system are behaving as expected.

As explained in problem with democracy, we still think democracy is the best system in the world.  This is because it is the most effective in minimizing or replacing corrupt officials in government.

However, the first problem we have is that we urge everybody to vote when many do not care about politics and do not know:

• the difference between deficit and debt,
• how much deficit and debt we have,
• the difference between fiscal and monetary policy,
• how we are making our country poorer in the long run, or
• that we are stealing from children.

We do not allow people to drive a car unless they take lessons, pass tests and get licensed.  We do not allow people to sell stocks unless they take lessons, pass tests and get licensed.  We do not allow people to prescribe medicine, give legal advice or do a lot of things unless they take lessons, pass tests and get licensed.  We do not allow teenagers to drink.  We make senior citizens take driving tests to confirm that they can keep their license.  Yet, we allow any citizen over 18 to vote.  We may not be able to be so draconian as to force voters to take tests before they are allowed to vote, but we should urge voters to get a minimum level of understanding of our finances, fiscal situation, economics and how we are stealing from children, before we urge them to vote.  This should be the first and minimal step that we take to fix the problem with democracy.  Read more about the problem with democracy.

Read more:

Housing, the most manipulated market in the world

Stealing from Children

Fake Economy

Fake Wealth

Socialism versus Capitalism

I.O.U.S.A.

According to documentary I.O.U.S.A. (IMDB), American debt is out of control.

Ron Paul was the only Presidential candidate concerned about Fiscal & Monetary policy, and has been complaining for over 10 years.

Many quantitative thinkers have been screaming, but the politicians aren’t listening to their advice. Paul O’Neill, Bush’s Secretary of Treasury, was fired in 2002 because he disagreed with Bush about the debt problem. This supports our argument that political leaders (Obama and McCain included) are victims of democracy, pick advisors who help them win elections and discard advice related to the long term after they are gone from office.

With these huge debts, one generation is massively stealing from the young.

With a dozen people on the street, the movie asked questions like:

• How much is our debt?
• What does trade deficit mean?
• How does the government borrow money?

They were clueless.

Most people do not know the difference between the deficit and debt, or what fiscal or monetary policy are. This is one of the problems with democracy.

Obama and McCain are offering lower taxes and increased spending, which will drive the country into bigger deficits and debt. This can only be explained by one of the following:

• they care more about short term advice to win the election
• they’re qualitative thinkers and don’t understand quantitative matters

This supports our argument that buying votes (offering lower taxes and increased spending) is an easier way to get votes than by showing how you can improve the economy for the long term, which voters won’t understand. This is the other problem with democracy.

Stealing from Children

We have been running deficits and building up our debt for most of the years since the mid-1960's, spending most of that money on socialist programs and to create fake wealth and fuel fake economies.

When one generation spends like crazy, runs up the debt and then do not repay it, the next generation must pay for it.  Some people euphemistically call this “INTER-GENERATIONAL TRANSFER”.  However, this can be misleading.

Burdening people without their approval or knowledge, is immoral and illegal.  This is what Baby Boomers do when they pass huge debts to the next generation.

Furthermore, "inter-generational transfer" implies that the receiving party agreed to the transfer.  However, the next generation never agreed, nor want to give their money to the previous generation.  They never said:  "Please borrow and spend like crazy and pass the debt to us to pay off."  This is no different than STEALING MONEY from the next generation.  Stealing can be defined as taking something from somebody without that person's approval or knowledge.  This is EXACTLY what we are doing.

Thanks to socialism for the past 40+ years, the Baby Boomer governments in US, Canada and Europe spent like crazy, piled up huge debts and will not be repaying the money that they spent.  The Gen Xers and future generations will have to pay for what the Baby Boomers spent and enjoyed.  This money is STOLEN from Gen Xers.  It is no less than CRIMINAL.

The amount stolen is massive and is now in the TRILLIONS of dollars.  It is by far the largest loot in history.  The heist is so big, that it makes the Romans, Brits (during the British Empire) and Americans (continental US from the natives, Hawaii, etc.) look like boy scouts.  It is also the perfect crime because most of the victims (and perpetrators) do not even know that this crime is happening or how much is stolen from them.  Most people do not know how much debt their government has. 

In fact, many people do not think that the government has a debt because of the years with budget surpluses.  However, surplus years does not mean that there is no more debt.  This is related to the problems with democracy.

Many lawyer-politicians are non-quantitative thinkers and insufficiently educated in finance, economics and math.  Therefore, they will tend to STEAL even more from the young, to use that money to buy votes to win the election.  This is another reason to stop electing lawyer-politicians.

In a true democracy, every person should be able to vote on decisions that affect him/her.  The children whom we are stealing from, never got to vote on our decision to take money from them.  Because of this, we do not have true democracy.

Read more:

Housing, the most manipulated market in the world

Socialism vs Capitalism

Fake Economy

Fake Wealth

Europe's "Stealing from Children" goes into Overdrive

Democracy is a Myth

Debt - Fake Wealth

Most Europeans, Americans, Canadians and Australians did not realize that they have significant government debt, until after the financial crisis in 2008.  Their debts have gotten worse, but it was always significant even before 2008.

In fact, most people around the world, including voters in Western democratic countries, do not even know the difference between deficit and debt.

This debt means that, since the 1960's, people in many countries around the world have enjoyed government spending and borrowing, which will be paid for by future generations.   This is unjust and unethical.  We believe that this debt should be paid off as soon as possible especially by the generation that borrowed the money.

Since it was the previous generation that borrowed most of the money, one of the first cut-backs to help pay off the debt, should be cut-backs to Old Age Pension (Social Security).  If this is not done, there will be no Pension for future generations.

According to the Fraser Institute:

• Canada has a total debt of $2.4 trillion, including federal, provincial and municipal liabilities.  Federal government debt is $457 Billion.
• Approximately 50% of population are taxpayers and each taxpayer still owes $150,211.  This is impossible to pay off in one life-time.  Most couples who spend most of their disposable income on a $300,000 mortgage, would take over 25 years to pay it off.

Because it takes so long to pay off government debt, this means that this money was spent on the previous or current generation and will be paid off by your children or grandchildren.  What we have done is burden people in the future without their approval or knowledge.

If you believe that it is immoral, unethical or illegal to burden somebody without their approval or knowledge, then you would agree that government debts are immoral, unethical and should be illegal.

Ideally, it would be great if we could give/subsidize more to students, welfare recipients, public transportation users, etc., but it's not possible.  It's not even possible to continue spending the way we are.

The problem is that most people do not know or care about:

• how much our debt is
• the difference between debt and deficit
• debt per taxpayer
• math

In essence, by being politically-correct, socialist policies have done something very immoral, unethical and cruel (which should be illegal) and that is to burden taxpayers and future generations without their approval or knowledge.

Canadians are in a false illusion.  We think that Canada is so wealthy and can help every 3^rd world country.  But Canada is not wealthy.  In large part, we're a fake.  Canada, like most Western countries, have fake wealth.

The analogy is like this:   A man borrows $2 Million and buys a mansion and a Mercedes. Everybody thinks he is wealthy.  He even feels wealthy.  He feels like he can provide aid to all of his neighbours.  But he can't. In fact, he doesn't make enough money to ever pay back this $2 Million loan.  Therefore, it will passed on to his children to pay off, which is essentially stealing from children.

According to Statistics Canada, the average Canadian family unit's net worth was $249,300 in 1999.  However, this is skewed by the rich Canadians.  The median net worth was $109,200.  If a family unit has two taxpayers, then that family's share of the Canadian government debt is $300,000.  This means the family is worthless or bankrupt.   From a mathematical and financial viewpoint, Canada is broke.  A country that is broke cannot be a first world country.  The more we go into debt, the more we'll become a third world country.

One of the ways to stop global warming is to raise awareness of the bad things people are doing.  The Ontario government wants to raise awareness of environmentally friendly people by issuing green license plates to small cars.  We need to raise awareness of our debt problem, otherwise we will become a third world country.
(Updated October, 2008)

Wikipedia shows the IMF ranking of public debt by country.

According to this October 2011 report, Capital Economics in London calculated these aggregate debt to GDP ratios (total private and public debt of countries divided by GDP):

• Euro zone and the United Kingdom:  450%
• Japan:  470%
• Canada:  410%
• U.S.:  350%

Read more:

Fake Economy

Housing, the most manipulated market in the world

Stealing from Children

Bubbles - Extreme Maker and Breaker of Wealth

Housing, the most manipulated market in the world