The End Is Nigh

As I’ve mentioned before, we are witnessing the end of the social welfare state that originated in the U.K. post World War II. The breakdown, George Soros observes, is following a similar pattern to that of the collapse of the Soviet Union and its so-called Communist regime.

Billionaire investor George Soros said the disruption to global financial markets since 2008 has implications for Europe and the U.S. that remind him of the final years of the Soviet Union.

“Something similar is happening in the West,” Soros, 81, said in an interview on Bloomberg Television’s “Eye to Eye with Francine Lacqua,” airing today. “You had a financial crisis where the market did actually collapse, but it was kept alive by the authorities. People don’t realize that the system has actually collapsed.”

He is quite right. The “Occupy Wall Street” folks have taken to the streets and parks because they are angry and fearful. They realize that they have been deceived and defrauded by “the 1%,” just as the citizens of the Soviet Union were by the “nomenklatura,” the Party aristocrats. While Wall Street is certainly due its share, they don’t seem to realize that the real culprit is the U.S. “nomenklatura,” the corrupt and self-serving political class. I nearly threw up yesterday listening to Nancy Pelosi, in a prime example of the hypocrisy of the said political class, trying to drape the mantle of the OWS movement about herself. It must be said that this isn’t just a U.S. problem, nor is it exclusively a problem of government corruption. It is about a system of government that has proven to be too costly in terms of lost productivity, but which has maintained the appearance of viability by massive borrowing. The borrowing is reaching its limits – even the minimum payments are too much – and now a painful readjustment must occur. This morning the Belgians are the ones feeling the lash.

What does that tell you? It tells me that when predatory bankers and their complicit government cronies cannibalise the real economy to the tipping point, then regime change is just a matter of time. Politicians are acting like bankers are their only paymasters. In reality the bankers are just the noisiest and most demanding paymasters – until the people rise up in anger.

This morning the 11 million people of Belgium have woken to find themselves the 100 percent owners of a bankrupt and unprofitable retail bank at a cost of 4 billion euros, and guarantors of a further joint 122 billion euros in liabilities with France and Luxembourg. The shareholders and bondholders will be grateful, and the markets are accordingly delighted, but pity the poor Belgian taxpayer. The CEO and Chairman of Dexia have admitted that the bank operated as a hedge fund, and yet they are given serial bailouts at the taxpayers’ expense. The Belgians have already thrown out their government, so now what do they do?

Juggernaut is rolling. Attempting to recapitalize banks – Dexia, for example has already been bailed out once before, in 2008 – is futile when the excess credit creation that must be reversed through deleveraging is hundreds of percent of GDP. Transferring that level of debt to taxpayers is futile – they can’t pay (and wouldn’t, anyway) either. The collapse of the communist Soviet Union took several years, and so will the collapse of the socialist system in the West. The good news is that we will all, ultimately, be much better off as a result.

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